If you have already filed for bankruptcy, you may be wondering if you can add debt to your Chapter 13 plan in New York. Although not ideal, it isn’t uncommon for New York residents to accumulate new debt during Chapter 13 for a variety of reasons.
At Grady BK, PLLC, we understand how unique everyone’s financial situation is. That is why we prioritize a one-on-one approach, treating each of our clients as though they were our only client. In this article, we will discuss whether or not you can add new debt to your Chapter 13 repayment plan in New York.
What Debts Are Included in a Chapter 13 Plan?
One of the reasons why so many people choose Chapter 13 bankruptcy is that it includes all debts that are existing when you file. Because Chapter 13 is a repayment plan type of bankruptcy, all of your debt is added to a personalized repayment plan that lasts 3 to 5 years, allowing you to catch up on outstanding balances.
At the end of your repayment plan, the most essential debts should be settled, and some of the remaining obligations may be discharged (wiped away). Examples of dischargeable debts include things like credit card balance balances, unpaid utility bills, medical bills, personal loans, etc.
Your repayment plan will also help you to stay on top of your recurring debt obligations, such as a mortgage or car payment.
Can You Add New Debt After Filing?
As a general rule, you cannot add additional debt to a current Chapter 13 repayment plan once your case is confirmed.
The Legal Side of Borrowing During Chapter 13
When discussing new debt during Chapter 13, it’s also important to understand the legal side of this. Anyone who files for Chapter 13 and gets a repayment plan is not permitted to borrow or use credit during the duration of their plan above a certain amount. If you need to get credit above the threshold (i.e. need to purchase a new vehicle) you have to request written permission from either the bankruptcy judge or the trustee.
So, if you obtain new debt without going through the correct process, you risk losing your Chapter 13 plan due to noncompliance.
Options If New Debt Becomes Unmanageable
In rare cases where the court approves new debt in a Chapter 13 plan, there are still some risks. You may find the new debt to be unmanageable, especially long-term, and if your monthly payments have gone up.
So, if you’re struggling financially to keep up with the terms of your plan, you have a few options. Firstly, you can request a plan modification with evidence showing that you cannot feasibly pay the required monthly amount. If approved, the court will lower your monthly payment to reflect your financial situation.
A secondary option is to have your bankruptcy plan converted to a Chapter 7 plan. For this to be an option, you must meet the Chapter 7 bankruptcy requirements.
Additionally, you could request to have your Chapter 13 plan dismissed; just keep in mind that this can leave you exposed to creditors.
Best Practices for Avoiding New Debt Issues
The best course of action after filing for Chapter 13 bankruptcy is to simply avoid collecting new debt above a certain threshold. You will want to obtain a minimal amount of new credit after you file so that you can start rebuilding your credit. However, having credit lines does not mean you have to use the credit. After all, the purpose of bankruptcy is to give you the time you need to address debt so that you can have a better financial future. So, it’s counterproductive to take on new debt after bankruptcy unless absolutely necessary.
Here are some realistic things you can do to avoid going into more debt during your repayment plan:
- Create a thorough budget that includes all of your necessary expenses.
- Be completely transparent about your financial situation, including the type of debt you have.
- Quickly request modifications anytime your financial situation changes.
- Build an emergency fund with any additional financial resources you have.
FAQ:
Can I include a new credit card balance in my Chapter 13 plan?
Any new debt, including a new credit card balance, is not included in an already present Chapter 13 plan.
Can I take out a loan during Chapter 13?
Yes, but only if you have gotten court approval; otherwise, you risk violating your Chapter 13 plan.
New York’s Top Compassionate Bankruptcy Attorney
Requesting a Chapter 13 plan modification in NY can be confusing, especially if you are doing this because of new debt. At Grady BK, PLLC, we are here to help provide clarity and simplify this process so that you can proceed with confidence. We provide individualized legal assistance so that you know what your options are and the best solution to fit your financial needs.
At Grady BK, PLLC, we can help you with the entire bankruptcy process, from start to finish, including addressing any additional debt you take on. So, don’t hesitate to reach out if you have any questions or concerns about your Chapter 13 repayment plan.
Contact us today at 315-299-9005 to discuss your situation with a bankruptcy attorney in New York. Our team at Grady BK, PLLC, is here to address all of your bankruptcy needs.
