Chapter 13 Bankruptcy in New York City -Top 9 Things to Consider

Chapter 13 bankruptcy protection helps those who have property or income that is beyond the bankruptcy exemptions set forth by the Federal Bankruptcy Code and New York bankruptcy laws.  Instead of the discharge you would receive through Chapter 7, Chapter 13 requires you to pay at least a portion of your unsecured debt through a 3-5 year repayment plan.  It is a more complicated process than Chapter 7, but it may allow you to protect more assets in the long run while still eliminating a large portion of your toxic debt as well.

There some financial situations unique to New York City in which Chapter 13 can be especially helpful.  Chapter 13 can help with:

  1. Saving Rent Stabilized Apartment Leases- Some trustees in New York City are taking advantage of a loophole in bankruptcy law that could allow them to treat your rent stabilized lease as an asset to be sold in bankruptcy.  Filing Chapter 13 will prevent the bankruptcy trustee from selling your rent stabilized lease.
  2. Catching up with Rent or Eliminating/Modifying a Mortgage- The SDNY and EDNY (Southern District New York and Eastern District New York) were the first and are among only a handful of districts in the US with court supervised loss mitigation programs in bankruptcy court.  Since 2009 these LMP’s have forced mortgage creditors to communicate and negotiate honestly with debtors facing foreclosure.  The court sets deadlines, approves settlements and mandates an open line of communication to explore everything possible to save a home in default.
  3. Getting out of all Income Tax Debt- Unlike a Chapter 7 filing, debtors who file for Chapter 13 may be able to rid themselves of all of their income tax debt.  The terms of your repayment plan are final.  The bankruptcy court’s decision supersedes the IRS who cannot object to the terms of your plan or the court ordered elimination of your income tax debt.
  4. Paying Your Domestic Support Arrears- Debtors behind on child support or alimony payments can get caught up through a Chapter 13 repayment plan. Chapter 13 will discharge general unsecured debt like credit cards and medical bills leaving more money each month to go towards domestic support payments while eliminating the most common toxic debts.
  5. Saving All of Your Personal Property- Regardless of your income or assets, filing for Chapter 13 will virtually eliminate any possibility of losing your property through bankruptcy.  Even if you are above the available exemption amounts outlined in the US Bankruptcy Code or New York State Bankruptcy Laws your property will be protected in your court approved repayment plan.
  6. Repaying Your Attorney Fees- The Chapter 13 repayment plan will allow you to repay many of your attorney fees through the 3-5 year repayment plan.  This can help many New Yorkers get the debt relief and fresh start they need more quickly when time is of the essence and the creditors are on your back.
  7. Debt Limits- according to 11 U.S.C. § 109(e). of the US Bankruptcy Code anyone is eligible for Chapter 13 relief so long as their unsecured debts are less than $360,475 and their secured debts are less than $1,081,400.  If you are a married couple you can’t double these limits but on the advice of your attorney you may be able to file two Chapter 13 cases to protect your family even more.
  8. Time Limits- If you have filed for Chapter 7 bankruptcy in the past, then filing for Chapter 13 may allow you to file for bankruptcy again in only 4 years as opposed to the 8 it would take for another Chapter 7 filing.  You could also file another Chapter 13 case in only two years from your original filing date if you have met the terms of your payment plan and satisfied at least 70% of the claims in you Chapter 13 plan.   
  9. Chapter “20”- Here’s a bankruptcy plan most have never considered that has helped our clients in New York City.  First we will file a Chapter 7 and discharge the majority of your bad debt. Since you would normally be responsible for a portion of your general unsecured debt in your repayment plan we can eliminate your toxic credit card and medical debt first in a Chapter 7, and then file a Chapter 13 to save your home addressing any mortgage arrears.  This will make for a cheaper repayment plan while still protecting your home and giving you the benefits of both Chapter 7 and Chapter 13- Chapter “20”.

There are many other benefits to filing Chapter 13 Bankruptcy in New York City, but understanding your best options requires the help of an experienced bankruptcy attorney.  If you are considering bankruptcy protection in New York City and are looking for an attorney familiar with protecting rent stabilized apartments or handling multiple bankruptcy filings please contact the Law Office of William Waldner.  Reach us online or call 212.244.2882.  As of 8/31/16 we have a 99% Chapter 7 Bankruptcy discharge record in New York, and know how to use both Chapter 7 and Chapter 13 to our clients’ advantage.

This article is intended for educational purposes only.  By reading this article no attorney-client privilege has been created.