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Jeffrey B.Peltz, P.C.
26 Court Street, Ste. 503
Brooklyn, New York 11242
Telephone: (718) 625-0800

Chapter 13 Bankruptcy


  

Chapter 13 Bankruptcy


Reorganize Your Finances Through a Chapter 13 Bankruptcy

 

    In contrast to a Chapter 7 bankruptcy, in which you may eliminate most or all of your debts, a Chapter 13 bankruptcy requires that you pay some or all of your debts over a period of up to five years.  Accordingly, Chapter 13 bankruptcy is typically looked to for relief only when Chapter 7 is not an option.


     More information on Chapter 13 bankruptcy is below.  If you would like to speak to an experienced bankruptcy lawyer regarding your legal options and whether Chapter 13 is something you should consider, you can call us at 718-625-0800.  We answer questions honestly and promptly, and we always provide you with guidance that fits your best financial interests. 


Is Chapter 13 Bankruptcy Right for You?

 

The following are reasons to file a Chapter 13 bankruptcy:

  • You have too much income to file under Chapter 7.
  • You have fallen behind in mortgage payments and want to keep your home.
  • Your home is in foreclosure, and you want to keep it.
  • You have a second mortgage on your residence that you want to eliminate while continuing to pay your first mortgage.
  • You have property that you could not keep in a Chapter 7 bankruptcy, and you want to keep it.
  • You received a Chapter 7 discharge within the past eight years.
  • You have debts that are not dischargeable in a Chapter 7 bankruptcy, such as student loans and taxes, which you want to pay in a Chapter 13 payment plan.

 Benefits of a Chapter 13 Bankruptcy

  

  When you file a Chapter 13 bankruptcy, an automatic stay is issued by the Bankruptcy Court, which will stop all collection and legal actions against you.  If your house is in foreclosure, the stay will stop the foreclosure action and allow you the opportunity to pay the amount you owe according to a payment plan.  The Chapter 13 bankruptcy must be filed prior to the sale of the home at foreclosure.  If this is your second recent Chapter 13 bankruptcy, you will receive an automatic stay for only 30 days.  To extend the automatic stay requires obtaining permission from the bankruptcy judge assigned to your case.  If this is your third recent Chapter 13 bankruptcy filing, no automatic stay can be granted.


     If you do not qualify for Chapter 7 bankruptcy, Chapter 13 is a good way to repay your unsecured debts such as credit cards, since you get to repay them – interest free – over a period of three to five years.  In addition, depending upon your circumstances, you may not have to repay the entire amount that you owe.  In fact, you may have to pay only as little as 10 percent of those debts. Unlike Chapter 7 bankruptcy, in a Chapter 13 bankruptcy, there are no limits on what assets or property you are allowed to keep.


 The Chapter 13 Payment Plan Explained

 

   In a Chapter 13 bankruptcy, a payment plan is established to permit you to make payments over a period of time, which can be from three to five years depending upon your circumstances.  To qualify for a Chapter 13 bankruptcy, you must have enough income to pay your living expenses and payments required under the plan.  In addition, the amount of debts that can be processed in a Chapter 13 bankruptcy is limited.  As of April 1, 2016, the total amount of unsecured debts, such as credit card debts and personal loans, may not exceed $394,725, and the total amount of secured debts, such as mortgages and auto loans, may not exceed $1,184,200.  These amounts are periodically increased.  If your debts exceed these amounts, you are not eligible for Chapter 13 bankruptcy and must consider Chapter 11 bankruptcy.


An Example of a Chapter 13 Payment Plan


     In a Chapter 13 bankruptcy, your creditors must fair no worse than they would have if you had filed a Chapter 7 bankruptcy.  For example, in a Chapter 7 bankruptcy, you are allowed to keep your home only if you have no more than $165,500 in equity if you live in New York City. If live in New York City, filed a Chapter 7 bankruptcy and owned a home with $265,500 in equity, the trustee would sell the house and have up to $100,000 to pay your unsecured creditors.  As a result, if you instead file a Chapter 13 bankruptcy under the same circumstances, you must pay $100,000 to your unsecured creditors in a payment plan.  Consequently, if the total amount of your unsecured debts is $100,000 or less in this example, your creditors will be paid in full. However, if you owe $200,000 in unsecured debts, your creditors will be paid only half of the money you owe them.  Once the final payment is made under the plan, the remaining debt will be discharged, which means that you will not have to pay it.


     This example has been simplified to provide an idea of how Chapter 13 bankruptcy works. Other factors must be considered.  If, for example, your house was to be sold by the trustee, there would be expenses associated with the sale.  Accordingly, if you are only slightly over your allowed exemption, you may still be able to file a Chapter 7 bankruptcy.


If You Have Questions, We Have Answers

 

    Experienced bankruptcy attorneys at the law firm of Jeffrey B. Peltz, P.C. have helped thousands of clients through Chapter 7 and Chapter 13 bankruptcy.  It is common to have numerous questions at the beginning of the process, which is why we provide free initial consultations at our Brooklyn, New York, office. We are conveniently reached through public transportation and are available on evenings and Saturdays. We also speak Spanish, Hindi, Bengali and Urdu. We represent clients throughout New York City and the surrounding area, including all of New Jersey.


Chapter 13 Procedure and Cost

What to Expect in a Chapter 13 Bankruptcy

  

   Filing for bankruptcy is a big step. It is likely you have questions and lingering uncertainties about whether bankruptcy is right for you, and if so, what type of bankruptcy you can file.  Most people are unaware of what to expect in a Chapter 13 bankruptcy.  With that in mind, below we have laid out the procedures and costs associated with a Chapter 13 bankruptcy. If you have further questions or would like to schedule a free initial consultation to discuss your individual circumstances and goals, call us at 718-625-0800.


The Chapter 13 Bankruptcy Process

 

    Prior to our preparing your bankruptcy petition, you must complete the first required class, which is called Debtor Counseling.  It may be taken either over the internet or by telephone.   The class is also offered in Spanish.   


     Once you have completed that class, we will prepare your petition and file it with the Court. The moment that we file your bankruptcy petition with the Court, an automatic stay will be issued that will stop your creditors from taking any collection and legal actions against you.  As a result, if your house is being foreclosed, your wages are being garnished, or your bank accounts have been frozen, the creditors must stop all such actions.  If any money is taken from you after we file your petition, the money must be returned to you.  


     Once we file your petition, you must begin making your payments under the proposed Chapter 13 payment plan. If you have secured loans, such as for your home or car, you must also make the regular payments as required by those loans. 

 

    Once your petition is filed, you must take your second required class, which is called Personal Financial Management.  You must complete this class before the completion of your Chapter 13 plan.  Again, this class may be taken over the internet or by phone and is also offered in Spanish.

 

    The Meeting of Creditors will take place about one month after the filing of the petition.  The meeting is known as a 341 hearing, because the hearing is called for under section 341 of the Bankruptcy Code.  This hearing, during which you will be questioned by the bankruptcy trustee, has three basic purposes. The first purpose is to determine whether you have committed fraud. The second is to determine what assets you have.  The third purpose is to determine whether your Chapter 13 payment plan is realistic, which involves mostly whether you can afford to make the payments.  Typically, the hearing will last approximately 15 minutes.

 

    We will prepare you for the questions that will be asked and will be at your side during the hearing. If the bankruptcy trustee is satisfied and has no further questions, he or she will "close" the meeting. However, if the bankruptcy trustee has further questions, a second hearing will be scheduled to occur approximately two weeks later. We will accompany you to that hearing as well.


     After the Meeting of Creditors, the Confirmation Hearing will be held, at which, if the bankruptcy trustee and the bankruptcy judge are satisfied with your proposed payment plan, it will be approved.    

  

   You will continue to make your monthly payments to the bankruptcy trustee.  Once you have completed all of your payments under the plan, you will receive a discharge.  The discharge, along with your bankruptcy petition, will be proof that you are no longer responsible for your discharged debts. You should hold on to those documents for at least the next 10 years.


Chapter 13 Costs and Fees 


    During our free consultation, we will review your situation and advise you of your options and of our fees. Our fee for a Chapter 13 Bankruptcy is usually between $3,500 and $5,000.  It is possible that a portion of our legal fee can be paid in the Chapter 13 Bankruptcy Plan.  The exact amount of our fee will depend upon the following factors: 


  • Whether you have previously filed for a Chapter 13 Bankruptcy
  • How much you owe
  • The types of debts
  • The type of property you have
  • Whether you are self-employed
  • Whether you are filing with your spouse. 


     In addition to our legal fee, you must pay $310 for the court filing fee and $40 for a credit report (combined from all three major credit reporting agencies), and $20 for the two required classes discussed below.  During our free consultation, we will tell you exactly what the Chapter 13 Bankruptcy will cost.

 

    If you wish to retain our office with regard to a Chapter 13 Bankruptcy, you must sign a retainer agreement and pay a deposit, also known as a retainer fee, of at least $500.  We will provide you with written instructions regarding the information and documents that you will be required to provide.  Once you have retained our law office, you may tell your creditors that they must call us and not you.  If you prefer, we can call your creditors for you.  After your first payment, you must pay us at least $500 per month until the balance of our fee that is not being paid in the Chapter 13 payment plan is paid in full.


Schedule your Free Initial Consultation Today


Call Jeffrey B. Peltz, P.C., at 718-625-0800 or reach us online here to get a no-cost consultation to discuss your next steps in protecting your financial future.