Bankruptcy cases often involve overlapping legal proceedings in state court and federal bankruptcy court, and debtors must take care that their actions do not run afoul of the confirmed Chapter 13 plan. A recent decision by a California court highlights that even when post-confirmation developments raise questions about debtor conduct, a bankruptcy court retains discretion to determine whether those actions warrant dismissal. If you are considering seeking debt relief and you have questions about your rights before, during, and after bankruptcy proceedings, you should speak with a Sacramento bankruptcy attorney as soon as possible.
Factual and Procedural Background
It is reported that the debtor filed a Chapter 13 petition in October 2022 while her residence remained encumbered by a deed of trust in favor of a secured lender. The debtor had previously lived in the property with her then-husband, who was the son of the creditor seeking dismissal. It is alleged that the creditor, who continued residing at the property after the debtor’s divorce, had acquired a judicial lien on the property and was listed in the bankruptcy schedules as holding a secured claim of approximately $185,000. The debtor proposed an initial plan that included efforts to cure mortgage arrears and strip judicial liens, including the creditor’s, as impairing the homestead exemption.