Before filing Chapter 13 bankruptcy in New York, you may want to consider debt settlement and debt management vs debt settlement.
Are you struggling to pay your debts and wondering whether bankruptcy in NY is the best option for you? Do you need help developing a debt repayment plan that works for you? If so, filing Chapter 13 bankruptcy in New York might help you eliminate debts you cannot repay for the fresh start you need after a financial crisis.
In sum, the goal of this article is to be the one stop shop for everything related to Chapter 13 bankruptcy in New York. You will learn the following.
Chapter 7 vs. Chapter 13 Bankruptcy in NY
There are two basic chapters of bankruptcy available to individuals in New York. Chapter 7 bankruptcy NY is for individuals and couples who cannot afford to pay their debts. Debtors (individuals who file bankruptcy cases) must meet strict income requirements to qualify for debt forgiveness under Chapter 7. Businesses that file under Chapter 7 must cease operations.
During the Chapter 7 process, a Chapter 7 trustee examines your property to determine if any property may be sold at a bankruptcy auction to repay your debts. Also, Chapter 7 cases generally do not help debtors keep their homes or cars if they are behind on the payments or cannot afford the payments.
On the other hand, debtors who file under Chapter 13 can stop foreclosures and repossessions. Chapter 13 bankruptcy NY reorganizes debts into an affordable monthly repayment plan. A debtor can repay mortgage arrearage (past due mortgage payments) and car payments over a three to a five-year bankruptcy repayment plan.
The Chapter 13 process also allows debtors to repay back taxes and past due domestic support payments (alimony and child support) over time instead of facing wage garnishments and levies. Chapter 13 cases also protect a debtor’s property from being sold to repay debts.
Calculating Chapter 13 Plan Payments in New York
In most cases, a debtor pays just a fraction of what is owed to unsecured creditors through a Chapter 13 bankruptcy in New York. However, some debts must be paid in full through the Chapter 13 plan. Other factors, such as assets and disposable income, can also impact the amount of a Chapter 13 plan.
When calculating a Chapter 13 plan, you must consider:
- The amount of debts that must be paid in full through the Chapter 13 plan. Car loans, past-due alimony & child support, most tax debt, restitution, and past-due mortgage payments must be paid in full.
- The amount owed to unsecured creditors, such as medical debts, credit card debts, and personal loans. Unsecured creditors receive a percentage of the amount owed to them through the Chapter 13 plan.
- Non-exempt equity in assets. Subtracting the allowed bankruptcy exemptions and valid liens from the market value of an asset calculates the non-exempt equity. Non-exempt equity can increase the amount of your Chapter 13 plan.
- Disposable income takes your income and expenses into account. Your Chapter 13 plan payment must include your disposable income.
If you are interested in a Chapter 13 bankruptcy case in New York, use a free Chapter 13 calculator to estimate how much your Chapter 13 plan payment would be if you filed bankruptcy in New York. You can also use the shorter version below:
Means Testing in New York
When you file a Chapter 13 case in New York, you must complete the bankruptcy means test. The Means Test was created when Congress revised bankruptcy laws in 2005.
Chapter 7 means test New York considers your household size and gross household income.
Calculating Average Monthly Income (AMI)
The Means Test calculates your average monthly income (AMI). AMI determines your annual median income. Add all income received during the six months before filing bankruptcy and divide by six to calculate AMI. Multiple AMI by 12 to calculate annual median income.
Your median income determines if you must file a 60-month Chapter 13 plan or you can file a 36-month Chapter 13 plan. If your median income exceeds the New York median income level for a household of your size, you must submit a 60-month Chapter 13 plan.
The figures used to measure median income are adjusted every few months. You can view the median income figures for cases filed in New York on or after May 15, 2022 by clicking here.
Calculating Disposable Income for a Chapter 13 Plan
The Means Test calculates your disposable income. Your disposable income is your AMI less required payroll deductions, allowed retirement contributions, and normal living expenses. Living expenses can include mortgage payments, car payments, food, household supplies, clothing, health care, life insurance, and other normal expenses.
However, some living expenses are limited and are based on the number of people in your household. You can review these expenses on the website for the United States Trustee’s Office. The figures are adjusted periodically, so make sure you review the most current figures available.
If you have special circumstances, such as high health care costs or costs for a disabled dependent, you might want to consult a bankruptcy attorney. You may use these expenses to decrease your disposable income, which could decrease your Chapter 13 payment.
New York Credit Counseling and Debtor Education Courses
When you file Chapter 13 in New York, you must complete two bankruptcy courses as part of the bankruptcy process. The first course is a Credit Counseling Course, which must be completed before you file your Chapter 13 petition. Secondly, is a Debtor Education Course, which cannot be completed until after you file your bankruptcy case.
The United States Trustee’s Office approves agencies and providers for the bankruptcy courses. You must choose a provider that is approved for New York. Most providers offer courses online for a small fee.
New York Bankruptcy Exemptions
Bankruptcy exemptions allow you to exempt certain property from liquidation in bankruptcy.
New York allows debtors to choose between the federal bankruptcy exemptions in 11 U.S.C. §562 or state-specific bankruptcy exemptions.
The Bankruptcy Code has numerous bankruptcy exemptions that cover a wide range of assets, including your home, household goods, retirement accounts, public benefits, vehicles, and personal property. The NCLC has a list of the federal bankruptcy exemptions on its website. However, the amounts are susceptible to change as they undergo periodic revisions.
A careful analysis of both the federal and state exemptions is necessary to ensure that you are protecting as much of the net equity in your assets as possible. As discussed above, non-exempt equity in assets can increase the amount of your Chapter 13 plan payment.
New York Bankruptcy Exemptions
To claim New York bankruptcy exemptions, you must reside in New York for 730 days or more before filing a bankruptcy case. If you did not reside in New York for the past two years, you may have to use federal bankruptcy exemptions or state bankruptcy exemptions. You must follow the state rules in the state in which you resided for the better part of 180 days before the 730-day residency period.
The New York bankruptcy exemptions experience adjustments every three years. The website for the New York Department of Financial Services lists the current dollar amounts for New York bankruptcy exemptions. April 1, 2021 marks the date for the next adjustment in NY’s bankruptcy exemptions.
Special Rules for New York Homestead Exemptions
Article 52 §5206 sets the homestead exemption amounts for properties in New York. The exemption amounts vary by county. According to the code section and the figures from the NY Department of Financial Services, the homestead amounts for cases filed between April 1, 2018, and March 31, 2021 are:
- 170,825 is the homestead exemption for properties located in New York, Kings, Queens, Suffolk, Bronx, Nassau, Richmond, Rockland, Putnam, and Westchester counties.
- $142,350 is the homestead exemption for properties located in Albany, Dutchess, Orange, Columbia, Ulster, and Saratoga counties.
- $85,400 is the homestead exemption for properties in all other New York counties.
NOTE – Federal bankruptcy exemptions limit the homestead exemption a debtor may claim in a home that has not been owned for at least 1,215 days (approximately 40 months).
Regardless of the state exemption, a debtor cannot claim more than $170,350 as a homestead exemption in their home unless they have owned the home for at least 40 months. An exception applies if the debtor owned a home in the same state, sold the home, and used the proceeds to purchase their current home in the same state.
Bankruptcy Courts and Trustees for New York
Because New York has a large population, four bankruptcy districts compose the state:
- Northern District of New York
- Southern District of New York
- Western District of New York
- Eastern District of New York
Each bankruptcy district in New York covers numerous counties. The courts have several divisions and court locations throughout the district. The courts also have Chapter 13 trustees and judges administer the cases within that district.
It is strongly recommended that if an individual chooses to file bankruptcy without an attorney, the individual carefully reviews the information and resources on the court’s website. Each bankruptcy district has local rules and procedures, in addition to local bankruptcy forms, that debtors are required to know about if they choose to file Chapter 13 without an attorney.
You can find the list of New York Chapter 13 trustees on the Trustees website.
The Chapter 13 Bankruptcy Process in New York
The Chapter 13 bankruptcy process in New York is similar for all Chapter 13 cases in the state. As stated above, New York is divided into four districts: Northern, Southern, Eastern and Western. To determine where you would file your case, check the local rules for your county.
- Northern District: Search for “County” on the Northern District Bankruptcy Local Rules
- Southern District: Search for “County” on the Southern District Bankruptcy Local Rules
- Eastern District: Search for “County” on the Eastern District Bankruptcy Local Rules
- Western District: Search for “County” on the Western District Bankruptcy Local Rules
You will see where your case will reside on a screen that is similar to the one below.
In either case, the Chapter 13 process in New York is the same. You need to begin by deciding whether Chapter 13 is right for you, locate a Chapter 13 bankruptcy attorney, complete the bankruptcy forms, and attend your bankruptcy hearings.
Let’s discuss the Chapter 13 bankruptcy process in New York in more detail.
Deciding if a New York Chapter 13 Case is Right for You
Chapter 13 is a reorganization bankruptcy. Debtors who file Chapter 13 can afford to repay some of their debts. The amount of your debt that you must repay depends on several factors, including but not limited to:
- Your disposable income (the money you can afford to pay toward debts each month)
- The amount and types of debts you owe
- Whether bankruptcy exemptions protect all of the equity in your assets
- The length of your bankruptcy plan
- Recent financial transactions
There could be other factors that impact the amount of a Chapter 13 plan. You can estimate how much a Chapter 13 plan payment would be by using a free Chapter 13 calculator.
If you cannot pay your debts and you do not meet the income qualifications for a Chapter 7 bankruptcy case, a Chapter 13 bankruptcy case might be right for you.
Locating a Chapter 13 Bankruptcy Attorney in New York
Even though you are not required to hire a bankruptcy lawyer, filing Chapter 13 without a lawyer is not recommended. Chapter 13 bankruptcy cases are very complex. Calculating a Chapter 13 plan requires a great deal of experience and knowledge. Someone who does not understand Chapter 13 bankruptcy law could pay much more than is necessary to get out of debt.
Also, the court expects you to understand and know the law the applies in your case if you represent yourself. The court will not explain bankruptcy law to you, and it will hold you accountable for the errors you make in your case. Therefore, it is best to have an experienced Chapter 13 bankruptcy lawyer handle your case.
What are the benefits of hiring a Chapter 13 bankruptcy attorney in New York?
- A trusted legal advocate who understands bankruptcy laws
- Determines if you should file under Chapter 13 or Chapter 7
- Calculates the lowest Chapter 13 plan payment allowed by law
- Maximizes asset protection so you can keep all your property, including your home and vehicle
- Completes and files all required bankruptcy forms
- Reminds you of deadlines and hearings in your case
- Guides you through the process by explaining each step and providing support at hearings
- Protects you from aggressive creditors who might want more money than they are entitled to receive
Having a Chapter 13 bankruptcy attorney handle your case means you have someone on your side who can help you avoid mistakes and errors that could hurt your case.
Completing Your Bankruptcy Forms
A typical Chapter 13 bankruptcy package could be 100 or more pages. When you file Chapter 13, you must complete the approved bankruptcy forms and any local bankruptcy forms required by the bankruptcy court. Your bankruptcy lawyer completes the forms and reviews each form with you to ensure accuracy and completeness before the attorney files the forms with the court.
The forms for a New York Chapter 13 case include information about your:
- Real estate
- Personal property
- Bankruptcy exemptions
- Leases and Executory Contracts
The Statement of Financial Affairs is a form with almost two dozen questions about your receive financial transactions. It includes income for the past two years, recent payments to certain creditors and insiders, a list of lawsuits, gifts, contributions, leases, transfers, and other information. Your bankruptcy attorney assists you in gathering information and completing your bankruptcy forms.
Filing Chapter 13 in New York and Attending Court
Your bankruptcy lawyer files your bankruptcy forms and obtains a case number. The bankruptcy court schedules a First Meeting of Creditors and a Confirmation Hearing. In most cases, these are the only two hearings that most bankruptcy debtors attend. Your bankruptcy lawyer prepares you for the hearing and attends the hearings with you.
Once your Chapter 13 plan is confirmed, you continue to pay your Chapter 13 payments until your case is complete. If you have any problems or questions, you contact your Chapter 13 bankruptcy attorney immediately. Your attorney is there to direct and guide you so that you can complete your bankruptcy plan to get a fresh start, free from the debts that are weighing you down and preventing you from achieving your financial goals.
How much does a Chapter 13 cost in New York?
There is a cost of filing bankruptcy in New York. Chapter 13 costs in New York include:
Filing Fee to the Bankruptcy Court
The bankruptcy filing fee for a Chapter 13 case is $310. The fee is paid to the bankruptcy court. The fee is the same whether you file an individual case or a joint bankruptcy filing with your spouse.
Paying for Bankruptcy Courses
There are two bankruptcy courses that you must complete as part of a Chapter 13 case. The first bankruptcy course or Credit Counseling Course must be completed before you file your Chapter 13 petition. You can shop around to find a credit counseling agency in New York that offers the course for the lowest price. Most agencies charge $15 to $50 for the course.
The second bankruptcy court or Debtor Education Course must be completed after you file your Chapter 13 case. Many of the credit counseling agencies offer both bankruptcy courses. Some agencies offer discounts for taking both courses through the agency. The Debtor Education Course in New York can be as low as $10 through some agencies.
Bankruptcy Attorney Fees
The bankruptcy attorney fees for a Chapter 13 case are higher than the fees charged for a Chapter 7 case because there is much more work for the attorney to perform in a Chapter 13 bankruptcy case. However, you do not need to pay all the fees up front. Bankruptcy attorneys generally include all or most of the Chapter 13 bankruptcy fees in the Chapter 13 plan.
Chapter 13 bankruptcy lawyers can itemize their fees, but most charge a flat fee for Chapter 13 cases. The New York Bankruptcy Courts limit the flat fee amounts, which are increased periodically to reflect inflation.
If you choose to file Chapter 13 without an attorney, you will have miscellaneous fees. You may need to pay for credit reports to verify you have listed all creditors on your bankruptcy forms. You are also responsible for the postage for mailing bankruptcy notices and other required forms to creditors and other parties in interest. Throughout your bankruptcy case, you will be required to mail notices or other information to your creditors and parties in interest.
New York Chapter 13 Bankruptcy FAQs
Some common questions that people ask about the Chapter 13 filing process in New York include:
What are the benefits of filing Chapter 13 in New York?
The benefits of the Chapter 13 filing process in New York include:
- Prevent foreclosure to keep your home by catching up with past due mortgage payments over three to five years
- Prevent repossession and keep your vehicle
- Stop wage garnishments, seizures, levies, and debt collection lawsuits
- Stop creditor harassment
- Catch up past-due child support and alimony
- Get rid of unsecured debts for pennies on the dollar
- Resolve tax debts and IRS problems
- Protect property from being sold to pay debts
- You may be able to discharge a second mortgage through Chapter 13
- You may be able to pay less than you owe to satisfy the secured lien on your vehicle
Another benefit of the Chapter 13 process in New York is getting rid of the stress and anxiety of dealing with debt problems. Financial problems can cause an enormous amount of stress, which can cause severe health problems. The Chapter 13 process in New York allows you to take control of your debts and finances to relieve stress and anxiety.
How often can you file Chapter 13 in New York?
Some people go through several financial difficulties during their lifetime. A person could need help from the bankruptcy system more than once. For that reason, bankruptcy cases are not limited to one case per person. You can file bankruptcy again if you need debt relief.
There are no restrictions on the number of bankruptcy cases a person may file. However, there are mandatory waiting times for obtaining a bankruptcy discharge. The bankruptcy discharge is the legal order that forgives your debt. Therefore, filing a bankruptcy case without receiving a bankruptcy discharge is generally a waste of time and money.
If you need to file another bankruptcy case, it is crucial to know the waiting periods for receiving a bankruptcy discharge. The time limits are based on the filing dates of the bankruptcy cases:
- Two Years — You must wait two years after filing a Chapter 13 case to file another Chapter 13 case.
- Four Years — You must wait four years after filing a Chapter 7 case to file a Chapter 13 case.
It is usually best to talk to a bankruptcy lawyer before filing Chapter 13 again. You want to ensure that there are no specific situations that apply in your case that could interfere with obtaining another Chapter 13 bankruptcy discharge. Also, there could be another debt relief option that would work in your situation that could help you avoid another Chapter 13 bankruptcy in New York.
Chapter 13 Bankruptcy Alternatives in New York
Chapter 13 bankruptcy in New York is not right for every situation. Some individuals might benefit from debt settlement or debt consolidation. For example, some people may pursue New York Debt Relief, which helps pair people with a debt negotiation firm that serves New York. Please note that there are pros and cons of this option.
Before filing Chapter 13 bankruptcy in New York, you may want to consider debt settlement and debt management vs debt settlement. If you still need additional information, compare debt consolidation to debt settlement to help you determine whether Chapter 13 is right for you.
Should I Pursue A Chapter 13 Bankruptcy Case in NY?
Deciding whether to file Chapter 13 bankruptcy in NY is ultimately your decision. Understand your alternatives and the costs to help you inform yourself about your decision.