New York consumers who are considering filing for Chapter 13 bankruptcy or who are already in the process of one needs to understand the potential consequences of failing to meet statutory requirements. Under Chapter 13, a court approves a new payment plan for the debtor. If the debtor fails to keep up to date with the new payments or misses other obligations, the bankruptcy trustee or a creditor could request that the Chapter 13 status be converted to a Chapter 7 liquidation. The potential to have bankruptcy protection dismissed entirely also remains possible.
To avoid conversion or dismissal, the debtor must meet every payment deadline. A debtor must also file a tax return under section 1308 or risk enabling a request for liquidation by a trustee or creditor. Information requested by the court must also be provided by the debtor within the assigned deadlines. Delays in providing information deemed unreasonable by the court could also trigger a reassessment of the bankruptcy.
Even without an action by the trustee or creditors, the debtor might also choose to request a conversion of a Chapter 13 bankruptcy to Chapter 7. A person might make this choice if financial circumstances make meeting a payment plan impossible.
Many issues need to weighed by a debtor before filing for Chapter 13. An attorney could help the person evaluate the situation and understand options for bankruptcy protection. Goals such as preventing a home foreclosure might be met after filing for bankruptcy. When the choice to file for bankruptcy has been made, a debtor could have an attorney prepare the court paperwork. Additionally, the attorney could communicate with the trustee and advise the debtor during payment plan negotiations.