Jeffrey M. Rosenblum, P.C.
A Fresh Start

Some advantages for Chapter 13 bankrutpcy

Many New York residents considering bankruptcy avoid filing for it because they fear that they will lose their homes or other property. However, Chapter 13 bankruptcy helps individuals, even those who are self-employed or own an unincorporated business, adjust payments on their outstanding debt, and the filer may be able to avoid losing some of their assets.

One major advantage of Chapter 13 is that it might allow consumers to keep their homes. It can help the consumer stop the foreclosure process and fix the delinquency over time. Another advantage is that it stretches payments on all outstanding accounts over the entire length of the Chapter 13 plan, which could reduce the total monthly payments. Finally, it allows the consumer to make all payments to a trustee who handles payment disbursement to the creditors.

Under this form of bankruptcy, debtors create a plan for installment payments over a three- to five-year period. If the debtor's income is above the state median, the court generally requires the five-year repayment plan. Debtors whose income is under the state median normally pay for three years unless the court has cause to approve a longer repayment plan. No matter what the debtor's income is, the plan cannot exceed five years, and creditors cannot start or continue collection efforts.

In order to be eligible for the protections, the debtor must go through credit counseling within 180 days before filing, and the consumer must file any debt management plan created during the counseling with the court.

When going through a Chapter 13 bankruptcy, a consumer might consider retaining the services of a bankruptcy attorney. That attorney may be able to provide guidance and representation throughout negotiations with the appointed trustee and creditors.

Source: United States Courts, "Individual Debt Adjustment", September 29, 2014

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