Hanna & Vlahakis Law Offices

Bankruptcy

Filing for Bankruptcy in NYC? Know the Difference Between Chapter 13 and Chapter 7

Hanna & Vlahakis Law Offices

Filing for bankruptcy can be a daunting experience, not to mention it can be embarrassing for those who have to do it. Many people fear what people around them might think if they find out they had to file for bankruptcy. People fear judgment. Many people fear that they will lose their assets and any properties held in their name. Fortunately, there are options for people who are facing having to file for bankruptcy, which I will give the details of below.

What is involved in filing under Chapter 7?


With a bankruptcy filing under chapter 7 of the New York bankruptcy law, your trustee collects, or seizes, all of your assets, including properties and sells any which are not exempt. Upon doing this, your trustee will sell the assets and pay you any amount that is exempt from your bankruptcy claim by New York bankruptcy exemption laws. This will ensure you have a clean slate where your financial debts are concerned; however, it does not allow you to keep any of your assets.


Once your assets have been taken and sold, your trustee takes the money accumulated from the sales and uses it to pay off your debts to creditors.
On some occasions, you are allowed to keep assets such as your car, your furniture, and your house. However, this is only possible upon you signing a voluntary “reaffirmation agreement.” This means that you will not be able to file for bankruptcy – to wipe out your debts – again for eight years. The reaffirmation agreement stipulates, you still owe that debt for those assets and must continue to make your payments just as you were before you filed for bankruptcy.

What is involved in filing under Chapter 13?


Chapter 13 Of the New York bankruptcy code is much more lenient in the sense that those who file under Chapter 13 can keep their assets upon devising a 3-5 year repayment plan to your creditors. Chapter 13 filings make it possible to prevent house foreclosure, pay back taxes, make up for a missed house or car mortgage payments, Valuable property, and assets that are not considered to be exempt.


Much of the time, with a chapter 13 filing, people can pay off less than what they owe by sticking to their repayment plan. Once the term for payment is over, any outstanding debts will be wiped clean.


When it comes to figuring out how much a person must pay during the repayment plan, the state usually takes into consideration many factors. Some of the factors they look at are: What are the debtor’s annual income as well as any disposable income, has the debtor filed for bankruptcy before and were they successful in paying off their debts?


One of the stipulations for filing under chapter 13 in New York is that the amount paid to creditors must at equal, if not surpass, that which would have been paid if the debtor had filed under chapter 7.


When you go to file under Chapter 13, you need to have a steady income of some sort and have disposable income that can be applied to repaying what you owe.

What is the Difference Between the Two Types of Filings?


The difference between a chapter 7 filing and a chapter 13 filing is that a chapter 7 filing is what is considered a “liquidation.” Liquidation means that people who owe money – that they can’t afford to pay off can eliminate their debt using the assets that are already in their possession by selling them and using the money to pay off the money they owe. Chapter 7 is the better option for people who want to have that dark cloud of debt eliminated, but they lack financial resources to be able to pay their debts off, even over the longer-term.

Chapter 13 differs significantly from chapter 7 and is probably the best possible option for people who want to keep any valuable properties or assets that they own. This is because chapter 13 allows debtors to reorganize their finances to pay off debts owed, rather than having to sell off everything they own.

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