Lester and Associates: Bankruptcy Chapter 13, New York
Chapter 13 bankruptcy is sometimes referred to as reorganization bankruptcy. It is considered a wage earner’s plan, as it allows those with regular income to repay all or part of their debts. If you own property that you wish to keep while discharging other debts, this might be the right vehicle for you.
How Does It Work?
In Chapter 13 bankruptcy, you can keep your property, but you are responsible for paying back all or a portion of your debts over a three to five-year period. This is unlike the more traditional Chapter 7 bankruptcy, under which most of your debts are canceled, but you may have to surrender some or all of your real property to pay creditors. Since filing bankruptcy under Chapter 13 allows you to hold on to your property and repay most of your debts over a five-year period, it is often referred to as reorganization bankruptcy.
Who is Eligible?
Chapter 13 is only appropriate for those with a current income, as the rules under Chapter 13 bankruptcy require you to present a plan to repay some or all of your debt. Therefore, you will need to be able to prove to the court that you have a means to afford payment obligations, and if your income is either too low or too irregular, you may be unable to file for Chapter 13.
Your debts cannot exceed total debt burden to qualify for Chapter 13 bankruptcy. The secured debt limit for individuals is $1,149,525 in 2015 and the unsecured debt limit to file for Chapter 13 is $383,175. Secured debts are those backed by property or collateral, such as a house or a car, while unsecured debts, like credit card and medical bills, are not backed by tangible property.
How is Chapter 13 Bankruptcy Filed?
If you determine you are eligible for Chapter 13 filing, you must first receive credit counseling. To do this, you need to locate an agency approved by the United States Trustee’s Office. These agencies do charge a fee for their services, but credit counseling is provided either for free or at a reduced rate if you cannot afford to pay. After completion of credit counseling, you will need to fill out several forms to file for Chapter 13 bankruptcy. You will also have to pay a filing fee.
The Repayment Plan
The repayment plan is the most important part of your Chapter 13 paperwork. Your repayment plan will describe in detail how and when you will pay your debts. Some debts, called priority debts, must be paid in full under Chapter 13. These debts include alimony, child support, wages owed to employees, and certain tax assessments. Your repayment plan must also include regular payments on secured debts, such as a mortgage and car loan, as well as repayment of any amount on which you are behind. These debts do not need to be repaid in full, and some might not need to be paid at all. Illustrating that you will put any remaining income towards repayment satisfies the requirements of a repayment plan under Chapter 13. Once you complete your repayment plan, any remaining debts eligible for discharge will be wiped out. You will also need to prove to the bankruptcy court that you are current on child support and alimony and that you have completed a budget counseling course with an approved agency.
If you would like to learn more about Chapter 13 bankruptcy, call Lester and Associates today at (516) 357-9191 or fill our a contact form now. At Lester and Associates, we have vast experience helping clients with all types of bankruptcy and reorganization plans and are standing ready to help you. If you are in or near Garden City, New York, and are thinking of filing bankruptcy, call today for a free consultation and let us help you review your