How Does Chapter 13 Bankruptcy Work in New York?
Chapter 13 bankruptcy is different from Chapter 7, but has advantages for people in the right financial situation. Chapter 13 is typically meant for people with assets exceed the exemption limits laid out in Chapter 7, whose household income is too high for chapter 7 or for people who have fallen significantly behind on their house or car payments.
Unlike in Chapter 7, a Chapter 13 will require you to pay back some portion of your unmanageable debt. The bankruptcy court will sign off on and then monitor a repayment plan for you that is to be completed in 3-5 years. To qualify for a Chapter 13 you must be earning more per month than your monthly expenses so you will be able to honor the plan or have someone promise to contribute money to your plan.
In our office we generally see 3 sets of circumstances that would have the best results with a Chapter 13 filing.
The first are those individuals who earn too much to qualify for a Chapter 7. Imagine you earn $300 more per month than what is allowable under Chapter 7 guidelines. You would likely pay the bankruptcy trustee $300 per month for 5 years for a total of $18,000. If you have debt well in excess of $18,000, which most of our clients filing under Chapter 13 do, then this would be a beneficial solution for you as well. A qualified attorney will know if you should initiate a Chapter 13 and will also be able to convert a Chapter 7 to a Chapter 13 during the filing process if necessary.**
In addition to high income earners, people that have fallen behind on their home payments, but are trying to save their home, also usually need to file under Chapter 13. Mortgage lenders and banks can be extremely aggressive towards borrowers who have fallen into mortgage arrears. They can make it very difficult for good people to afford to stay in their home even though they may have had a legitimate hardship.
So if you have fallen behind on your mortgage and the bank is not offering you a solution to save your home then filing Chapter 13 is for you. In addition to saving your home you may likely be able to completely eliminate any outstanding credit card debt as well and any second or third mortgages . Since you will be repaying only a portion of your total debt to the trustee you may be killing two birds with one stone, saving your home, dissolving your second mortgage and wiping your credit card debt clean at the same time. **
Finally, if you have significant hard assets you must hire a qualified and reputable attorney to make sure you can protect your belongings. Certain laws in New York, exemptions, will protect different assets in different ways that will allow you to keep heirlooms, car, home jewelry etc. Chapter 13 will allow people to keep their possessions and eliminate other debt as well under a reasonable repayment plan that is protected by the court.**
**IMPORTANT SIDE NOTE: for these reasons above it is of the utmost importance to work with a reputable attorney, not a bankruptcy mill or petition preparation service. A reputable attorney in New York should be known by the bankruptcy court, should have a near 100% track record of chapter 7 bankruptcy discharges, and should easily be able to convert your Chapter 7 to a Chapter 13 or visa versa. Petition preparer services and bankruptcy mills are typically unfamiliar with all the different ways a consumer can be protected, as well as the intricacies of converting filings, not to mention the personal care you should expect from your legal counsel. They may not always have the best reputation with the courts. In New York the bankruptcy attorney you choose will have a big impact on your case, and it’s not about how many filings you push into the court system, but about getting each one right the first time.
If you live in New York and are considering bankruptcy protection please contact the Law Office of William Waldner for a free bankruptcy consultation today. We only practice Bankruptcy Law and are always here to help.
Call 212-244-2882 to arrange a free bankruptcy consultation today. Mention this blog post when scheduling by referencing the promotional code: CHT212 to receive the required 3 bureau credit report, and required credit counseling course, both free with a signed retainer agreement.
This article is intended for educational purposes only. By reading this article no attorney-client relationship has been created.