Whether you should file for a Chapter 7 bankruptcy or a Chapter 13 bankruptcy depends on your specific situation. In many circumstances, a Chapter 13 bankruptcy might be a more favorable option than a Chapter 7 bankruptcy. If you have fallen behind on either a business or mortgage payment and would like to keep your property at the end of the bankruptcy filing, then a Chapter 13 bankruptcy is the route to pursue. A Chapter 13 bankruptcy will enable you to catch up with overdue payments and may allow you to reinstate your initial mortgage agreement. In sum, if there is any valuable property not covered under the New York State Exemptions that you wish to keep, a Chapter 13 bankruptcy might be the best option for you. The Chapter 13 bankruptcy code is also best for those filers who earn too much or have a large amount of non-dischargeable debt. However, for those New York residents who would like to completely wipe out their debt, a Chapter 7 bankruptcy is the most attractive choice.
Reasons to File for a Chapter 13 Bankruptcy in New York
- If you do not meet the requirements to file a Chapter 7 bankruptcy under the Means Test, then you have no option but to file for a Chapter 13 bankruptcy. According to the Means Test, a debtors average income for the past six months prior to filing cannot the exceed the average median income for New York.
- If you prefer to pay back your debt. In many cases, debtors may want fulfill their obligations to creditors. When you file for a Chapter 13 bankruptcy, you have to propose a payment plan to the Court in which debtors have to be paid over a 3 to 5 year period. The Chapter 13 payment plan must also indicate how much of disposable income will be available to contribute to the payment plan. Under a Chapter 13 bankruptcy, creditors must be paid at the very least as much as they will receive under a Chapter 7 bankruptcy. Under a Chapter 7 bankruptcy, it is very unlikely for a debtor to be able to keep their home if he or she has missed mortgage payments.
- If you would like to prevent your vehicle from being repossessed. By filing for a Chapter 13 bankruptcy, you can stop your vehicle from be repossessed by repaying both the arrearage and the debt in the Chapter 13 bankruptcy payment plan. If the vehicle was purchased at least two years prior to filing bankruptcy, the amount that has to be repaid on the loan might be reduced by a “cram down.”
- If there is any non-exempt property that you wish to keep. In a Chapter 7 bankruptcy, the New York Bankruptcy Trustee can sell any non-exempt property and use the proceeds to pay debtors. If you file for a Chapter 13 bankruptcy, you will not lose any non-exempt property provided that unsecured creditors receive just as much as they would have under a Chapter 7 bankruptcy.
- If you owe debts that cannot be discharged in a Chapter 7 bankruptcy. Certain debts that cannot be discharged can be repaid over time in a Chapter 13 bankruptcy.
- If you have a co-debtor. Co-debtors are protected under a Chapter 13 bankruptcy provided that the filer is able to keep up with the payments on the Chapter 13 bankruptcy payment plan. If there is a balance remaining on the debt once the plan has ended, the creditor may attempt to seek relief from the co-debtor. On the other hand, a co-debtor is not protected from being liable for the debt even though it has been discharged on by a Chapter 7 bankruptcy.
Reasons to File for a Chapter 7 bankruptcy in New York
- If your income is not high enough to file for a Chapter 13 bankruptcy. If you cannot prove to the Court that you will have sufficient disposable income to contribute to the Chapter 13 bankruptcy payment plan, you have to file for a Chapter 7 bankruptcy.
- If majority of the debts owed are dischargeable, it may make more sense to file under a Chapter 7 bankruptcy.
- A Chapter 7 bankruptcy is relatively quick and straight forward to file. Generally, if there are no discrepancies, a Chapter 7 bankruptcy case is usually concluded between 60-9o days.
- If you do not own a significant amount of property. When you file for a Chapter 7 bankruptcy, the Trustee may sell any non-exempt property to pay creditors. If you do not own any valuable property, then a Chapter 7 bankruptcy may be a better option.
- If you want to eliminate all of your debt and start afresh. Filing for a Chapter 7 bankruptcy “wipes out” almost all unsecured debts and will give the the opportunity to start a fresh financial slate.