Lindsay Lohan’s Mother Dismissed from Chapter 13 Bankruptcy

Dina Lohan filed a petition for Chapter 13 Bankruptcy in September 2018.  But on the eve of Christmas, she received a lump of coal from the presiding bankruptcy judge in the form of a dismissal of her case.

The mother of the infamous actress, Lindsay Lohan, filed for Chapter 13 relief in an attempt to save her Long Island mansion from being sold in a foreclosure auction.

Her case was dismissed for a variety of reasons including failure to file required documentation of her income and tax returns with the bankruptcy court.  But one of the most important reasons for the dismissal of Lohan’s case was the lack of sufficient income to fund her Chapter 13 case.

How Much Income is Required to Qualify for Chapter 13?

There is no set amount of income required by the Bankruptcy Code in order to qualify for Chapter 13 relief.  However, the relief available under this Chapter is for folks who have a regular and ongoing source of income and that income is sufficient to fund a feasible Chapter 13 plan.  Certain debts must be paid in full through a Chapter 13 plan.

Let's use an example of the balance of a debt on an automobile the debtor proposes to keep.  If the debtor does not have sufficient income to pay off that balance on the car through the term of the repayment plan, then the debtor will be unable to propose a feasible plan and the Chapter 13 case will be dismissed by the Court.

This appears to be the largest problem for Dina Lohan, as she reported having only $27,000 in yearly income.  It is unlikely that she would be able to propose a feasible Chapter 13 plan to catch up mortgage arrears and pay the regular monthly mortgage payments on a Long Island mansion with this little income.

Can Dina Lohan Refile for Chapter 13 Bankruptcy Relief?

Unless the bankruptcy judge entered an order barring Ms. Lohan from refiling, then the answer is yes when it comes to refiling for Chapter 13 relief.

Refiling is not the issue.  For Ms. Lohan, the issue will be proving she has the necessary income required to fund a feasible and workable repayment plan. If Ms. Lohan has not had a material change of circumstances to the good, then a refiled Chapter 13 case is likely to end in the same way as the first, a dismissal.

In addition, when a Chapter 13 case is refiled within one (1) year of the dismissal of the last case, the automatic stay will only be in effect in the newly filed case for thirty (30) days unless a hearing is held and the stay is extended by the bankruptcy judge.  The automatic stay is the order of the bankruptcy court that protects the debtor from collection activity once the case is filed.

The motion to extend the automatic stay must be supported by facts showing a material change in circumstances since the dismissal of the last case.  If Ms. Lohan cannot convince the bankruptcy judge in a newly refiled case that her circumstances have materially changed for the better, she could lose the protection of the automatic stay and again be subject to the foreclosure of her home, even while the second bankruptcy case is still pending.

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