A Chapter 13 Bankruptcy is payment plan bankruptcy. A Chapter 13 Bankruptcy creates a payment plan lasting from 3 to 5 years depending on your situation. There are two main reasons that people choose to pay their creditors through a Chapter 13 bankruptcy.
You are behind on an important bill such as your mortgage or car payment
A Chapter 13 Bankruptcy gives you the ability to get caught up on payments you have missed on important bills, such as your mortgage, property taxes, or car loan. A Chapter 13 Bankruptcy offers you an opportunity to stop a foreclosure on your home and set up payment that allows you to bring your mortgage payments current.
A Chapter 13 Bankruptcy can help you get caught up on a car loan and may reduce the amount that you pay for your car. I have helped people who were behind on both their house and car, and a Chapter 13 let them keep both their house and car when they thought they would lose everything.
Sometimes temporary setbacks cause you to get behind on bills, and your creditors refuse to work with you to let you catch up. A Chapter 13 Bankruptcy creates a payment plan and allows you up to 5 years to get caught up on your bills. While the creditors will review this plan, they cannot refuse to participate in the bankruptcy. If you need to regain control of your finances, please contact me so we can create a plan that works for you.
Your income is too high to file a Chapter 7
People may need to file a Chapter 13 Bankruptcy when they have a high level of income. The Bankruptcy Code requires an analysis of your budget to determine if you can pay your creditors. The review of your budget is called the Means Test. For many people, when I do this analysis, it is obvious they do not have the income to pay their creditors. However, for some people their income is high enough that they are required to file a Chapter 13 bankruptcy to obtain relief from their debts.
For most people I help, the review of their budget is straightforward and simple. However, if your income is close to or over the threshold set up in the Bankruptcy Code, the review of your budget is quite complex. The review requires analyzing 6 months of your household income and comparing it to the income of other New York households of the same size. The figures used to conduct the testing change on a regular basis and numerous other factors impact the result of the Means Test. I have been helping people get the best result out of this process since the introduction of the Means Test in 2005.
Filing a Chapter 13 Bankruptcy due to income concerns does not mean that you have to pay everything back to your creditors. In many cases, creditors only receive 5 to 10% of the amount of the debt and the rest of the debt is eliminated with no payment. Please contact me to ensure that you have a Chapter 13 plan that works in your best interest.