Understanding Chapter 13 Bankruptcy

The topsy-turvy economic climate of these past few years has made it increasing tough for individuals and families to maintain their financial footing. Unforeseen circumstances (accidents, medical issues, repair bills, etc.) can wreck havoc on even the most carefully prepared budgets. What’s worse is that things like late fees, hiked interest rates or legal troubles can make getting financially back on track seem nearly impossible. Truth be told, sometimes a person really does need a second chance to take control of his or her financial situation.

For those who do not qualify for a Chapter 7 bankruptcy under the means test or with assets they want to prevent from liquidation, finding a Chapter 13 bankruptcy attorney and filing for Chapter 13 bankruptcy in New York may provide a responsible way to curb mounting debts. Sometimes referred to as debt adjustment, a Chapter 13 filing allows the debtor to submit a plan to a bankruptcy court which details how she or he will go about repaying their outstanding debts. The payment plan can be a small percentage of the total debt all the way up to 100% of the debt. The percentage varies depending on the total amount owes as well as the client’s income and expenses. Once approved, such a plan usually unfolds over a three to five year period. During this time, a person’s various outstanding debts are grouped together into one monthly payment. Interest will stop to accrue on most debts, such as credit card debts, as soon as the Chapter 13 bankruptcy case is filed.

Why File for Chapter 13 in New York?

One of the advantages of hiring a New York Chapter 13 bankruptcy lawyer and filing for Chapter 13 bankruptcy is that creditors are required, by law, to halt any efforts on their part to repossess items or otherwise demand payments from the debtor. Furthermore, opting for Chapter 13 bankruptcy can, in certain circumstances, put a stop to or put a hold on foreclosure proceedings. Chapter 13 bankruptcy in New York also gives homeowners the opportunity to repay their past due mortgage payments over a 3 or 5 year period through a court-ordered payment plan. In addition, if the debtor’s home has no equity (the first mortgage balance exceeds the current fair market value of the home), the debtor may have the ability to remove second mortgage in Chapter 13 bankruptcy proceeding (a lien strip). Removing a second mortgage is typically done through an adversarial proceeding in the bankruptcy court. If the homeowner is successful the proceeding, the court will order that the second mortgage be removed from the property. Upon removing the second mortgage, the debt will be treated like any other unsecured debt.

People who find Chapter 13 bankruptcy lawyers and successfully file for Chapter 13 in NY often end up paying back less than they owe. While secured loans — loans that are guaranteed by the pledge of an asset such as a car or a house —must be paid back in full, unsecured loans, such as credit card debt, may be eligible for a significant reduction of the amount owed. Only a bankruptcy court can legally compel a creditor to accept a reduction in the total sum of the amount due. For that reason, it is especially useful to have a legal representative assist you with your filing so that you can maximize your chances for a beneficial outcome. In addition, all creditors must comply with the terms of the court-ordered Chapter 13 plan.

A person who files a successful claim under Chapter 13 bankruptcy is able to retain all property categorized as exempt. Examples of exempted property can be found in our Exempt Property article.

When Should I file for Chapter 13 in NY?

Chapter 13 bankruptcy in New York  is utilized by individuals who do not qualify for Chapter 7 bankruptcy under the Means Test or who have too many assets. Chapter 13 bankruptcy is also utilized by homeowners who need some time to pay back past due mortgage payments through a court-regulated payment plan. The Chapter 13 Bankruptcy can also stop a foreclosure proceeding.

We at the Law Offices of David I. Pankin are ready to answer any questions you might have regarding the ins and outs of declaring bankruptcy. Our Chapter 13 bankruptcy lawyers can help you to craft a repayment plan that will serve your best interests. Please contact our office by phone at 888-529-9600 to arrange for a free, initial consultation with a New York Chapter 13 bankruptcy attorney.

We have 3 convenient locations in Midtown Manhattan, Downtown Brooklyn and Melville, Long Island. We have helped clients from all five boroughs, Westchester, as well as Nassau and Suffolk counties.

Remember,“bankruptcy is not the end it’s a new beginning.”

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