What is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy is a form of debt relief intended to help hard working individuals who are behind on payments, such as their mortgage. Unlike chapter 7 bankruptcy, which dissolves unsecured debt, Chapter 13 bankruptcy reorganizes a person’s debt with a repayment plan, allowing them to repay some, or all of their debt over a period of 3 to 5 years. Once the repayment plan is completed, the debtor will receive a discharge of debts and will be able to keep his or her property. Chapter 13 bankruptcy is ideal for individuals who have a regular source of income and have substantial equity in secured assets such as their home or vehicle. Chapter 13 bankruptcy may be ideal in several instances, such as preventing foreclosure on a home, helping make up for missed payments (on a mortgage, rent, or a car,) halting interest from accruing on tax debt and helping people repay back taxes.
Should I File for Bankruptcy?
Chapter 13 bankruptcy may be an ideal form of debt relief if you have a regular income but are struggling to stay on top of your debts, such as mortgage payments. The best way to determine if chapter 13 is a viable option for you is to schedule a free consultation with William Waldner, a reputable NYC bankruptcy attorney who is vastly experienced in filing chapter 13 and chapter 7 bankruptcy.
During your free consultation with William Waldner you can discuss if filing chapter 13 bankruptcy is the best strategy for debt relief.
Potential Benefits of Filing Chapter 13 Bankruptcy
- Save your home from foreclosure
- Stop repossessions of valuable assets
- Keep all of your property
- Stop interest from accruing on tax debt
- Petition court for a loan mortgage modification
- Strip off a second mortgage
- Eliminate unsecured debt such as credit card debt or medical bills
- Protect your co-signers from collection efforts
- Lower your payments and amount of debt you owe
What is a Chapter 13 Repayment Plan?
When filing for chapter 13 bankruptcy a debtor must submit a repayment plan to be approved by the court. Repayment plans are complicated and require the expertise of a qualified NYC bankruptcy lawyer to ensure your repayment plan is approved by the courts and that your plan provides you with the most advantageous repayment schedule possible.
Repayment plans propose scheduled payments, typically monthly payments, paid directly to a court trustee. The trustee then distributes the payment to your various creditors in accordance with your repayment plan’s directives. Depending on your income, the repayment plan spans 3 to 5 years. Once the repayment plan is completed, any remaining debt is discharged.
How much does bankruptcy cost in NYC?
How much your Chapter 13 Bankruptcy costs depends on several factors: filing fees, fees for court-mandated education courses, fees for acquiring the necessary information for filing (such as credit reports) and preparation/representation fees of a NYC Bankruptcy Lawyer.
A court mandated credit counseling course and a debtor education course add to the overall cost of filing for chapter 13 bankruptcy in NYC.
Debtor Education and Credit Counseling courses cost between $0 to $500, depending on where the course is taken. Some chapter 13 filers take free online courses, however some bankruptcy attorneys in NYC are known to charge unsuspecting clients up to $500 for these courses by including the course fees in their overall fee. At the law offices of William Waldner, clients are offered various options for taking these courses, most of which range between $15 to $25 per course.
An extensive credit report is critical when preparing a chapter 13 bankruptcy petition.
Many attorneys try and save money by using a basic 2-bureau credit report. This is risky because simple credit reports leave out important debts that must be included in the paperwork for filing chapter 13 bankruptcy. To ensure clients receive the most helpful credit report for filing bankruptcy, William Waldner provides an ultra-comprehensive 3-bureau credit report as well as a thorough public records search. A thorough report is critical, but can be a very expensive. Mr. Waldner does not charge clients for this service and individuals who are represented by him receive this extensive credit report free of charge.
The bankruptcy cost associated with representation and preparation depends on whether you file pro se (without an attorney,) with a bankruptcy attorney, or hire a bankruptcy petition preparer.
If you are looking for the least expensive way to file for chapter 13 bankruptcy, you can file pro se or without an attorney. You can also prepare your own paperwork. If you hire a petition preparer to prepare the extensive paperwork required by the court, your case will not be free, but may seem less expensive than hiring a NYC bankruptcy lawyer.
Hiring a NYC Bankruptcy Lawyer may save you thousands of dollars in the long run.
Ironically, people who file for bankruptcy without a lawyer or hire a “Bankruptcy Petition Preparer” usually encounter unforeseen costs and higher repayment plans that cost more money than it would if they had hired a bankruptcy attorney.
The cost of hiring a NYC bankruptcy attorney depends on the lawyer. There are low cost bankruptcy attorneys in NYC who offer exceptional service at affordable prices. An additional advantage of filing chapter 13 allows you to pay your attorney fees through your repayment plan. This enables you to pay for your bankruptcy lawyer in installments, allowing you to receive the debt relief you need right now.
Chapter 13 Bankruptcy Process ;
How to File Chapter 13 Bankruptcy in NYC
With a reputable bankruptcy lawyer, filing chapter 13 may be an ideal form of debt relief allowing you to keep your home, vehicle, and other valuable assets while you repay part of your debt to your creditors under a manageable repayment schedule.
Filing for bankruptcy, especially chapter 13 bankruptcy is a complicated legal process. You must fully comply with the various requirements of the court or your case may be denied. Hiring a bankruptcy lawyer is essential to successfully filing for bankruptcy. Filing without a lawyer or hiring a bankruptcy petition preparer is very risky. At the very least, people who file for bankruptcy without a lawyer typically incur higher payments in their repayment plan, having to pay back more of their debt than they would have if represented by an attorney during this complicated legal process. Even worse, pro se filings or petitions constructed by bankruptcy petition preparers often fail to meet the strict criteria demanded by the court, resulting in the denial of the bankruptcy case.
Before an individual files for chapter 13 bankruptcy they must complete credit counseling from a court approved agency. If you retain William Waldner as your bankruptcy attorney he will connect you with a reputable, low cost credit counseling agency.
The credit counseling course is designed to inform and individual about their various financial options. Typically a counselor will evaluate an individual’s income, expenses, and debts and propose a repayment plan.
To declare chapter 13 Bankruptcy, your attorney will file a petition with the bankruptcy court in your jurisdiction. Along with the petition, your bankruptcy attorney will submit:
- Bankruptcy Forms that list your assets and liabilities, income and expenses, a list of your debts and creditors, and your various financial affairs.
- A repayment plan
- A certificate you receive after completing a required credit counseling course.
In New York, the various paperwork and information, (bankruptcy petitions, forms, and schedules) typically make up a 40 to 100 page legal document. This document must be prepared correctly and requires the acumen of a skilled NYC bankruptcy lawyer.
The stay on collection efforts typically includes:
- Utility shutoffs
- Lawsuit judgments
- Wage garnishments
- Repossession of a vehicle
- Other type of collection efforts
The court appoints a trustee to your case. This trustee will oversee your case and will act as an intermediary between you and your creditors. When you make payments according to your repayment plan, you will pay the trustee. The trustee distributes your payment to your various creditors according to the directives laid out in your repayment plan. The trustee also acts as an intermediary between you and the court. The trustee facilitates the bankruptcy process and offers recommendations to the judge during the hearing.
You need to make your first payment, as proposed in your repayment plan, during the bankruptcy process. This payment is typically due approximately 30 days after filing your petition for chapter 13 bankruptcy with the courts. You will submit your payment to the court trustee.
You are required to attend a meeting of creditors which typically takes place 30 days after filing for chapter 13 bankruptcy. Your creditors are invited to attend this meeting, but most do not. During the meeting you will be placed under oath and asked questions by the trustee and possibly your creditors, regarding your financial affairs and the terms of your repayment plan. During, or shortly after the meeting of creditors, any concerns regarding the repayment plan will be resolved.
This meeting sounds more intimidating than it really is. Most meeting of creditors is brief and informal. As long as you have a good bankruptcy lawyer to prepare you for the questions you will be asked, your meeting with the creditors should be a simple and relatively stress free experience.
You will be required to show your original social security and and a form of New York State ID.
Once you have completed the meeting of creditors, the court will schedule a confirmation hearing that evaluates your repayment plan. This hearing typically takes place 2 to 4 months after filing for chapter 13 bankruptcy. The judge will ask the trustee if he or she recommends your repayment plan to be approved by the court. Your creditors may voice objections to your proposed repayment plan. However, this is unlikely if you are being represented because your bankruptcy attorney will address any concerns your creditors may have prior to the confirmation hearing
Before the court will discharge your chapter 13 bankruptcy, you must complete a financial management course. This course is also known as “debtor’s education.” It is designed to prevent a person who has filed for bankruptcy from falling into unsustainable debt in the future. Debtor’s education typically covers topics such as:
- financial management
- budget preparation
- consumer protection resources
- dealing with unforeseen financial crisis
Your repayment plan lasts 3 to 5 years. Once you have completed your repayment plan and a mandatory financial management course, the court issues a formal discharge, releasing you from any liability towards the debts listed in the repayment plan.
Can I qualify for Chapter 13 Bankruptcy ?
In order to file chapter 13 bankruptcy in NYC an individual must meet specific qualifications laid out by the state of New York. Many individuals file for chapter 13 bankruptcy when they do not qualify for a chapter 7 filing. Disqualifications for chapter 7 bankruptcy include:
- Assets exceed the exemption limit for chapter 7
Household income is too high to qualify for chapter 7
There are also debt limits that determine an individual’s eligibility for filing for chapter 13. To qualify for chapter 13, the amount of debt of an individual, even if they are self employed or operating an unincorporated business, cannot have:
- Unsecured debts more than $394,725.
Secured debts more than $1,184,200.
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 further protect your family.
Lastly, to qualify for chapter 13 bankruptcy your monthly earnings must exceed your monthly expenses or you will need a third party to help pay for your case. This ensures the court you are financially capable of making the monthly payments proposed in your repayment plan.
Chapter 13 Bankruptcy FAQ
If you are considering bankruptcy, your credit is probably poor to begin with. Still, the negative impact bankruptcy may have on a credit score is a common concern for individuals considering chapter 13. There are negative ramifications that bankruptcy can have on your credit score. But don’t believe that filing for bankruptcy will ruin your credit score or forfeit your chances for obtaining credit in the future. This is one of the biggest myths surrounding bankruptcy. In many cases, the credit score after filing for bankruptcy is better than the credit score prior to filing for bankruptcy.
When you file for chapter 13 bankruptcy it will become public record and your discharge will be recorded on your credit report. Besides your creditors, typically the only way people find out you declared bankruptcy is by telling them yourself. Usually, friends and other people you interact with in your community never find out.
No. A big advantage to filing Chapter 13 over Chapter 7 in New York City is that the negative effects chapter 13 has on your credit score will go away much faster than with a Chapter 7 case.
In order to qualify for Chapter 7 Bankruptcy, a debtor must pass the means test. The test is a two-step income and expense analysis that is very complicated to calculate. Our office will evaluate your situation to determine if you qualify for Chapter 7 Bankruptcy Protection. If you do not qualify for Chapter 7 Bankruptcy, we will research other alternatives, such as Chapter 13 Bankruptcy, to help you get the relief you need!
Yes. But don’t. It’s important to a hire a good bankruptcy lawyer with experience representing both chapter 7 and chapter 13 bankruptcy cases. The consequences of representing yourself, hiring a petition preparer, or retaining an inadequate attorney can be financially devastating if your case is not properly handled.
One of the best tips for finding a good bankruptcy lawyer for filing chapter 13 is to hire a law firm or lawyer who specializes in bankruptcy. You want a firm or a bankruptcy lawyer that dedicates its practice solely to the area of law you need help with.
No. Even if you feel like you cannot afford a bankruptcy lawyer, do not use paralegals or bankruptcy mills to file for chapter 13. Yes they seem cheaper at first, and of course people who are in a financial situation that requires debt relief seek out the cheapest way to file for bankruptcy. But paralegals and Bankruptcy Petition Prepares take advantage of this, advertising themselves as a less expensive alternative to a bankruptcy lawyer, but in the long term, paralegals and bankruptcy mills are not cheaper than hiring a capable bankruptcy lawyer. The danger of filing for bankruptcy without a lawyer is not worth the risk it poses to your case and your financial future.. Absolutely do not use a paralegal or budget bankruptcy petition preparer.
Monthly repayment amounts are determined by a means test which considers:
- Your monthly income
- Your monthly living expenses
- The amount of non-dischargeable debt such as priority tax debt or alimony
An important thing to remember when filing for chapter 13 bankruptcy in NYC is that most of your debt will not have to be repaid. Your repayment is limited to your monthly income and the types of debts and the amount you owe. After your repayment plan concludes, the remaining debt owed to creditors is discharged.
When filing for chapter 13 bankruptcy in New York City, foreclosure mediation and loss mitigation can be a part of the bankruptcy process. Both the Southern District of New York and the Eastern District of New York offer foreclosure prevention programs that help the individual filing for bankruptcy avoid foreclosure by negotiating an alternative plan with the creditor. This does not guarantee a mortgage modification, but the lender must work with you and your attorney in a fair and timely manner. These negotiations are court supervised and demand the lender to comply with specific guidelines. Failure on the part of the lender to comply with these guidelines, within the scheduled deadlines, may lead to the modification being automatically granted to you. This is one of the biggest advantages of filing for chapter 13 bankruptcy in NYC. For people underwater on their bills and considering bankruptcy, these programs are often the best way to save a home, co-op, apartment or other residential property while getting a fresh start on your finances.
Under chapter 13 in NYC, the court orders an automatic stay with a provision that protects co-debtors. According to 11 U.S.C. § 1301(a, Unless the bankruptcy court authorizes otherwise, a creditor may not seek to collect a “consumer debt” from any individual who is liable along with the debtor.
Yes. Certain long term debts are not discharged under chapter 13 bankruptcy. These debts typically include:
- Home mortgages
- Child support
- Student loans
- Judgments related to criminal convictions
Possibly. 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 when you file for chapter 13 bankruptcy in NYC.
Most likely. Hiring a bankruptcy lawyer will most likely save you a lot of money in the long term. Not all debt is viewed the same under the law, and the various state exemptions and legal strategies will not be the same for every Chapter 13 case. It is critical to retain a qualified bankruptcy attorney familiar with all the complexities of bankruptcy cases. Filing for a complex bankruptcy without an attorney or through a petition preparation service is rarely successful.
Chapter 13 can help you address tax debts, child support or alimony arrears and even student loans. Chapter 13 allows you to repay many debts, that would not be dischargeable if filing chapter 7, interest free. Debts created in order to repay taxes can be eliminated in a Chapter 13, but may not be discharged in a Chapter 7.