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Late claim leaves out Chapter 13 secured creditor

Kentucky residents facing financial challenges may be able to get relief under a Chapter 13 plan, but some debts can survive the plan without being discharged. In a 2017 decision, a bankruptcy court offered protection to a couple's assets, but it also denied a creditor's inclusion in the payment plan due to a late filing.

Unsecured creditors must file a proof of claim to gain recognition by the trustee and inclusion in the payment plan. If they fail to do so after acknowledgement of Chapter 13 proceedings, the debt will not be addresed. Secured creditors are not bound to file a proof of claim to gain recognition, but they must file a claim to be included in a payment plan. The creditor in this case failed to file in a timely manner and was barred by the judge from inclusion.

The lien on the couple's home is held by the creditor, and this remains throughout the bankruptcy case. The couple received debt relief and protection of their home until conclusion of the case. At that time, the holder of the lien can again pursue the debt owed by the couple.

Some debts have a protected status under Chapter 13 bankruptcy, yet others may be discharged in full or part by the courts. In any case, those facing financial challenges could reduce interest payments on their debt and establish manageable payment plans with court protection and foreclosure or repossession of certain assets. An attorney versed in bankruptcy law may review finances and answer questions about possible outcomes under a Chapter 13 filing.

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