Chapter 13: Top 5 Questions

Whenever considering a bankruptcy, you want to make sure you are completely informed of what you are signing up for. Our Westchester bankruptcy lawyers are here to assist you through these difficult financial times. Here are some of our clients pressing concerns….

1. What if I can’t afford the repayment plan?

A wonderful component of the Chapter 13 Repayment plan is that it can fluctuate with your circumstances. If your income decreases, there are opportunities to petition the court to look at a reduced payment, a refund in a payment, or even a slight suspension in your payments.  But there are times when your payment cannot change. In a Chapter 13, you are required to pay certain debt in full. This includes your mortgage, property taxes, car debt, and income tax liabilities. If you are unable to afford the payments and these are the debts that is being repaid, than you may need to consider giving something back or looking at non-bankruptcy options.

2. What if I make more money during the bankruptcy?

Should your income increase, the Court can require that you repay more to your creditors than originally budgeted. This can also include turning over bonus checks, lottery winnings or tax refunds. There are times when we can ask the court to keep this extra money because expenses have increased or there is some unexpected expense (i.e. medical, home/car repair) that needs to be funded.

3. What if I lose my job or my spouse divorces/passes away during the case?

While an unfortunate circumstance, divorce and death do occur during a bankruptcy. After all, you are in this repayment plan anywhere from 3-5 years.

If a divorce occurs and both of you are in the bankruptcy, we have to consider how to proceed with the case. Should we keep everything the same? Should we separate the case and each of you take your own debt? Can one person stay in the Chapter 13 and the other switch over to a Chapter 7? We will discuss all these options with you should a divorce happen. Just remember, we will work with you and your circumstances to ensure the best resolution to your debt.

If a death occurs, we have to consider if the surviving spouse can afford the payments on his/her own or can we consider re-arranging the case to make it more affordable. There are options while in a Chapter 13 that will match your life and manage your debt.

 4. I haven’t filed my taxes in a few years, is that a problem?

You need to get your taxes filed. The Court will require all tax returns to be filed. However, that also means that we will include any and all tax liability in your Chapter 13 repayment plan. This tax debt will be allowed to be repaid in full without incurring additional penalties and interest.

 5. I have two mortgages on my home, can the Chapter 13 help?

Absolutely. The Chapter 13 repayment plan has an advantage that no other bankruptcy possesses. The Chapter 13 can look to get rid of any junior liens on your property. If your home, like many in our economy, is worth less than what you owe on your first mortgage, the Chapter 13 can look to get rid of the second mortgage….called “stripping the lien”. Keep in mind, you must successfully complete the case; the second mortgage will not officially come off your home until the case is discharged. If your case is dismissed or switched over to a Chapter 7, that second mortgage stays on the home and will be behind in payments; this can result in the second mortgage holder starting foreclosure process.

Please contact our Westchester Bankruptcy Attorneys today at (914) 864-2465 or (845) 628-4301 to discuss which option is right for you. Our Chapter 13 bankruptcy lawyers will work with you to manage your debt and help you through your bankruptcy filing