What is a 100% Chapter 13 Repayment Plan in New York City?
Most high income earners in New York City that cannot pass the bankruptcy means test will still find relief through Chapter 13. Some filers make well over $200,000 and do not have enough allowable expenses to qualify for anything less than paying back 100% of their unsecured debts to their creditors in a Chapter 13 plan. Clients often wonder why we would even suggest bankruptcy if it won’t automatically discharge their debts, but a 100% Chapter 13 plan does have its advantages.
While the plan technically requires you to repay all of your debt in full, in reality some of our clients end up paying only pennies on the dollar in a 100% Chapter 13 repayment plan. When you file bankruptcy your creditors are given notice and it becomes their responsibility to file a proof of claim declaring what is owed to them. Many creditors forget to do this, so as long as our clients stick to their 3-5 year repayment plan the remainder of their debts will be discharged when the plan concludes. This eliminates vast amounts of bad debt even for wealthy clients in New York City. The plan can eliminate compounding interest charges, penalties and late fees and will combine all of your debt into one convenient payment to the bankruptcy trustee. If you have significant assets or equity the 100% Chapter 13 plan could be an excellent option.
If your primary concern is saving a home through bankruptcy we might suggest a “Chapter 20” filing. It’s not a real bankruptcy chapter, but a play on words combining Chapter 7 with Chapter 13. Filing Chapter 7 first will eliminate all of your general unsecured debts and your non-priority tax obligations. We will then strategically file a 100% Chapter 13 to address the mortgage arrears that have accrued and the priority taxes that have been eating into your wallet.
The 100% Chapter 13 can also be very helpful in protecting against wage garnishment or to shield a valuable personal injury claim that can’t be fully exempted. Under normal conditions a Chapter 7 trustee will take a large portion of your personal injury claim to repay your creditors and will then give you what’s left after subtracting significant administrative fees and a trustee commission. Instead, it usually makes more sense to file a 100% Chapter 13 which will stop all creditors in their tracks, stop wage garnishment and protect your personal injury settlement. Since you are proposing to pay everything back in your plan, the trustee will not take your personal injury settlement. Once your case matures you can have the case dismissed or pay all of your debts back through the monthly payments by using some of your settlement money.
The important thing to remember about a 100% Chapter 13 repayment plan is that it will provide a number of debt relief options even to high income earners. There are numerous advantages for people facing wage garnishment or for those who may be looking at home foreclosure. It is also the least damaging form of bankruptcy to your credit. It’s a sophisticated debt relief strategy with the full power of the law. It can’t hurt to get a better understanding of your debt relief options. If you live in New York City contact the Law Offices of William Waldner online or at 212.244.2882 to arrange a free consultation today. We only practice bankruptcy law and maintain a 99% Chapter 7 bankruptcy discharge record in New York City as of 8/31/16.
**** DISCLAIMER: This article is intended for educational purposes only. By reading no attorney-client relationship has been created. Prior results do not guarantee a similar result for future clients.