If you are overwhelmed with debt, you are not alone. The past few years have hit many individuals, families, and businesses particularly hard. As you explore your options for obtaining debt relief, you may wonder whether filing for bankruptcy can help you obtain the fresh financial start you need to move forward. In New York, there are two major types of bankruptcy: Chapter 7 and Chapter 13. Let’s take a look at some of the most common questions people have about filing for Chapter 13 bankruptcy relief in New York.
What Happens in a Chapter 13 Bankruptcy?
When you file for Chapter 13 bankruptcy relief (commonly referred to as “reorganization” bankruptcy), you agree to repay a percentage of all your unsecured debt over a 3 to 5 year period. Once the period of repayment is over the balance owed on your remaining dischargeable debt will be wiped away. A Chapter 13 bankruptcy will also give debtors time to pay back any arrears on secured loans (mortgage, car, etc.), allowing them to keep secured assets within their possession. To file for Chapter 13 bankruptcy, you will need a regular source of income to apply towards your repayment plan.
How is the Repayment Plan Calculated?
Part of the Chapter 13 bankruptcy filing process is establishing a monthly payment to repay a percentage of the unsecured debt owed over a 3 to 5 year period. How much the monthly payment will be is case-specific – how much debt is owed, the types of debt owed, the amount of secured debt arrears (if any), your income, and more. The bankruptcy court must approve your plan, after which it will go into effect, and you can begin to move forward to a more financially stable future.
Who Should Consider Filing a Chapter 13 Bankruptcy Plan?
Understanding the benefits and drawbacks of the different types of bankruptcy relief can be challenging. In general, there are three circumstances in which filing for Chapter 13 bankruptcy may best serve your needs. If you own a home and fear you may lose it because of financial hardship, or you’ve fallen behind on debt payments, but you just need some time to catch up, Chapter 13 bankruptcy may work for you. Additionally, if you have valuable property that is not exempt, but you can repay creditors from your income over time, consider filing for Chapter 13 bankruptcy relief. Remember, it’s always to your advantage to enlist the guidance of an experienced bankruptcy attorney to help you determine the most strategic path forward to a brighter financial future.