New York Bankruptcy Lawyer Blog

As a result of the changes to the Bankruptcy Code in 2005 many people are confused about whether they are eligible to file personal bankruptcy.

As a result of credit card and bank lobbying, in 2005 Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCA). While BAPCA changed the eligibility requirement for personal bankruptcy, the changes for the most part only affect a small minority of people.

Don’t Believe the Hype in the Debt Settlement/Debt Consolidation Ads

The debt settlement/debt consolidation industry, which is based on extensive advertising and high pressure sales tactics, would have you believe that you are no longer eligible to file personal bankruptcy in NY as a result of the 2005 changes in the bankruptcy law.

Continue reading " New York Personal Bankruptcy -- Am I Eligible to File? " »

As we see increasing amounts of foreclosure throughout the New York metropolitan area, in Brooklyn, Queens, the Bronx, Staten Island, Westchester County, Nassau County and Suffolk County, our office (Starr & Starr, PLLC in Manhattan) get many inquiries about whether bankruptcy can be used to save a home facing foreclosure or deal with an adjustable rate mortgage that has reset to monthly payments that the homeowner can no longer afford.

A recent post on our blog New York Chapter 13 Bankruptcy Eligibility Requirements and Issues addressed the limitations that Chapter 13 bankruptcy has. One very significant limitation is that secured debt can’t exceed $1,010,650. Many condo and co-op apartments and houses in New York (particularly Manhattan, Nassau County, Suffolk County and Westchester County) have debt in excess of this amount based on multiple secured loans and liens, such as first mortgage, second mortgage, and home equity loan (and sometimes also tax liens).

As we also detailed in our prior blog posting, Commonly Encountered Problems in NY Chapter 13 Chapter 13 can’t be used to modified the rights of a lender secured by the debtor’s principal residence. However, Chapter 11 bankruptcy can

Eligibility Requirements for Chapter 11 Bankruptcy:

Unlike Chapter 7 and Chapter 13 there is no eligibility requirement for Chapter 11.

How Chapter 11 Works

The goal of a Chapter 11 case is to confirm a plan of reorganization. That plan, which creditors get to vote on and is subject to Bankruptcy Court approval, details the debtor’s proposed treatment of creditors.

Modification of Loans. In Chapter 11 a debtor can seek to modify loans secured by his/her home (or other property). If the value of the debtor’s home has fallen significantly, the debtor may be able to split a mortgage creditor’s claim into two parts: one that is secured and one that is unsecured.

Continue reading " New York Foreclosure -- Personal Chapter 11 Cases " »

As a result of the current state of the real estate market in New York and elsewhere, we receive many inquiries regarding Chapter 13 bankruptcy from people wondering if they can use Chapter 13 to save a home or investment property. The answer is that Chapter 13 can be used to save a home or investment property, but has its limitations.

Eligibility Requirements for Chapter 13 Bankruptcy:

Secured Debt Limits. A debt is secured if the debt is collateralized by a lien or mortgage. As of the date of this posting, to be eligible for Chapter 13 a debtor can’t have more than $1,010,650 in total secured debt. This means that if a debtor either has a home or apartment with greater than $1,010,650 in mortgages on it, or has more than one property — such as a primary home subject to a mortgage and 2nd investment property subject to a mortgage — with total debt on all properties greater than $1,010,650, then Chapter 13 is not an option. Car loans (but not car leases) also get added in to the total when calculating the secured debt limit.

Unsecured Debt Limits. To be eligible for Chapter 13, as of the date of this posting a debtor cannot have unsecured debt greater than $336,900. A debt is unsecured when it is not secured by a mortgage or lien on property. Typically credit card debt and student loans are unsecured. Tax debt is unsecured unless the taxing authority has filed a tax lien or warrant.

Continue reading " New York Chapter 13 Bankruptcy Eligibility Requirements and Issues " »

Commonly Encountered Problems in Chapter 13

Need to Make Current Mortgage Payments. A debtor filing Chapter 13 to deal with real estate problems, such as a pending foreclosure, needs to be able to make current mortgage payments as they become due and can seek to cure the arrears (i.e., past due part of the mortgage) over time through the Chapter 13 plan. If a debtor is unable to make current mortgage payments as they become due Chapter 13 bankruptcy may still be used as a means to try to prevent a foreclosure and obtain a sale of the debtor’s property (subject to Bankruptcy Court approval). This may be desirable when a debtor has equity in the property that would get wiped out in Chapter 7 bankruptcy and wants to maintain control of the sale process.

Inability to Restructure Home Loan through Bankruptcy. The Bankruptcy Code provides that the rights of a mortgage lender secured by real estate that is the debtor’s principal residence can’t be modified in Chapter 13. This means that we can’t use Chapter 13 to try to modify the loan and, for example, split it into two separate secured and unsecured loans that receive separate treatment. We can do this for investment properties or other properties owned by the debtor that are not the debtor’s principal residence. We can also use Chapter 11 to do this for the debtor’s principal residence. However, unfortunately, the expense and complexity of Chapter 11 puts it beyond the reach of most consumer debtors.