There have been a lot of questions in the legal world lately about New York City and Chapter 13 Bankruptcy.
If you're feeling overwhelmed by debt, know that you're not alone. Most people who contact us are not only in arrears with credit card debt, but also in arrears with their rent, mortgage or car payments. Others are behind on student loans or owe IRS or state taxes. In such cases, people often turn to Chapter 13 on bankruptcy for help.
Bankruptcy can be confusing to anyone who doesn't know exactly what it is and how it works. Eberhard Advisory has helped a significant number of individuals and families obtain successful court-approved Chapter 13 bankruptcy plans. If you're unsure if you can take advantage of this opportunity, below are answers to 4 frequently asked questions about New York Chapter 13 bankruptcy.
What is New York Chapter 13 Bankruptcy?
Chapter 13 is a type of reorganization where the debtor restructures all debts. Standard practice is to focus on protecting important assets such as your home and car, and unsecured debt is paid off, usually in a small amount based on your other assets and income. In the standard Chapter 13 case, the debtor plans to catch up on mortgage, rent, or car payments, as well as consolidate any other debts such as credit cards, medical bills, and overdue utility bills. After all financial obligations are consolidated, the debtor makes one payment per month on these consolidated debts, usually over a period of three to five years. At the end of a restructuring plan, certain balances, such as unpaid credit card debts, are typically written off and permanently deleted, and the debtor is not obligated to repay them.
When can you consider filing for Chapter 13 bankruptcy?
Debtors use Chapter 13 for many different reasons. Some clients simply want to consolidate their debts in a court-approved, structured and economically efficient manner. They believe that these plans are much more advantageous than other "debt consolidation" schemes, which in practice offer no legal protection and often only cause more problems in the end. Chapter 13 is also a good option for debtors who have too many non-exempt assets and don't want to risk losing them in liquidation bankruptcy. The same is true for someone who is behind on a mortgage or car, or whose income exceeds the eligibility limits. If you are concerned that you may lose your home or car due to financial difficulties, Chapter 13 may give you the time you need to catch up on your payments and in some cases even start rebuilding your credit.
It is very important at this point that it is always best to first consult with an experienced bankruptcy attorney who can help you develop a successful chapter 13 plan.
Are creditors allowed to contact me while I am in Chapter 13 bankruptcy?
Filing a chapter 13 bankruptcy petition stops any pending enforcement and payment of all other debts owed. Once a repayment plan is in place, creditors are generally prohibited from collecting debts directly from the debtor. Instead of paying your debts directly to your creditors, you will pay your Chapter 13 trustee each month. The trustee then transfers this payment and distributes it to your creditors. After the final payment of the Chapter 13 schedule is made, the debtor is effectively discharged from the remaining debt, which is then discharged.
What is the difference between chapter 13 and chapter 7?
There are two main types of personal bankruptcy in New York City: Chapter 7 and Chapter 13. The primary difference between Chapter 7 and Chapter 13 is the model for dealing with the debtor's assets. Chapter 7 bankruptcy offers complete debt relief except for certain tax liabilities, student loans, and child support obligations. Other types of debt are discharged without making any payments to creditors. Unlike the legal process under the model outlined above, Chapter 13 bankruptcy requires the debtor to pay at least part of its obligations over an extended period of time using an approved repayment plan. The important point is that in a Chapter 13 bankruptcy, debts are not fully discharged as in a Chapter 7 bankruptcy.
