When New Yorkers need relief from their debts and are considering bankruptcy, it is important for them to understand the different chapters, the requirements and what type is best for their individual situations. Some people want to file for Chapter 13 bankruptcy, but not everyone will be eligible to do so.
Chapter 13 bankruptcy allows people to keep their property rather than having it liquidated to pay their debts. Instead, people must make payments to creditors over a three- to five-year period pursuant to a court-approved repayment plan. Not everyone can choose Chapter 13, however, as people must have a regular source of income so that they can make the required payments under the plan.
In a recent case, a couple tried to convert their Chapter 7 bankruptcy petition to a Chapter 13 petition by filing a motion with the bankruptcy court. They wanted to do this because they didn't want the trustee to sell a piece of property they owned to pay their creditors. The court denied their motion, however, because the couple did not show evidence of having a sufficient income to make payments under any proposed plan.
The case demonstrates that not everyone can simply choose to file for Chapter 13 bankruptcy. People who are interested in filing for Chapter 13 because of overwhelming credit card or medical debt may want to get the advice of a bankruptcy attorney who can explain the eligibility requirements for the chapter. If they are not eligible, the attorney may instead help them to file under Chapter 7 or see what other forms of debt relief may be available.