New York Bankruptcy Lawyer Blog

A common question we get from our clients and prospective clients in New York City, Nassau. Suffolk and Westchester Counties is whether they will be able to keep their homes if they file for personal bankruptcy.

This is Part II of a two part series on this issue. In Part I we looked at the information we need to answer the question of whether a debtor will get to keep his or home in bankruptcy. In this Part II we will look at different bankruptcy strategies that can be used in different situations.

1. Chapter 7 to Wipe Out Unsecured Debt. For many people considering bankruptcy who own a home, the problem is not that they can’t pay the mortgage, but that all of their debts combined are too much for them to pay. They may have enough to pay their living expenses and the mortgage, but not also make credit card payments. In that situation, assuming that the debtor has equity less than his or her applicable homestead exemption (discussed in Part I), a chapter 7 personal bankruptcy filing may be used to wipe out the unsecured debt. There are specific requirements for chapter 7, and not everyone will necessarily will be eligible for chapter 7. However, even if you own a home there is a still a good chance that you are eligible for chapter 7.

Continue reading "Will I Be Able to Keep My House if I File for Bankruptcy in New York - PART II? " »

A common question we get from our clients and prospective clients in New York City, Nassau. Suffolk and Westchester Counties is whether they will be able to keep their homes if they file for personal bankruptcy.

This is Part I of a two part series on this issue. In this Part I we will look at the information we need to answer the question of whether a debtor will get to keep his or home in bankruptcy. In Part II we will look at different bankruptcy strategies that can be used in different situations.

1. Value of the Home. This is the critical starting point question. It is always surprising how many people considering bankruptcy are not aware of the current fair market value (FMV) of their home (i.e., house, condo or cooperative apartment). Anyone considering a personal bankruptcy case needs to obtain current and accurate information regarding their home’s present value (FMV). Free online home value estimates (such as zillow.com) are not useful because they will not be a trustee or bankruptcy judge as evidence of value. A Broker’s Price Opinion is a good potential starting point However, the best evidence of current market value is a written appraisal report prepared by a licensed appraiser. In NY the current fee for an appraisal is about $350 - 550 depending on the whether the house is a single family, two family or three family house.

2. Debt on the Home. In addition to the current fair market value of the home anyone considering a personal bankruptcy filing needs to know how much secured debt there is on the home. Secured means that the loan has a mortgage on the property (such as a first mortgage, second mortgage, and/or home equity line of credit). A payoff demand from the lender is the best evidence of the current balance of a loan. In addition, any other liens or encumbrances, such as tax liens or judgment liens need to be considered. If the debtor isn’t sure whether or not there are other liens on his or her home a title report may be needed.

Continue reading "Will I Be Able to Keep My House in New York if I File for Bankruptcy in New York - PART I? " »

Many of our clients and prospective clients in Manhattan, Bronx, Queens and other boroughs are facing the difficult situation of a wage garnishment and wonder if a personal bankruptcy filing could help.

Just to review, a creditor with a judgment can garnish the defendant/judgment debtor’s wages. The law permits up to 25% of a judgment debtor’s wages to be garnished in any pay period, not exceeding 10% per year,.

Immediately upon filing a personal bankruptcy petition the automatic stay goes into effect.

Continue reading "Using Bankruptcy to Stop Wage Garnishment in New York" »

1. The Bankruptcy Court is a Court of Limited Jurisdiction.

Upon the commencement of a bankruptcy case the automatic stay goes into effect. The automatic stay is a mandatory injunction of the bankruptcy court that prevents to commencement or continuation of litigation against the debtor (person or entity that has filed for bankruptcy).

The bankruptcy court, however, has limited subject matter jurisdiction. This means that there are certain subject matters that the bankruptcy court does not have jurisdiction over. For example, the bankruptcy court does not have jurisdiction to determine criminal, family law or probate matters, among others.

In addition, the statutory grant of jurisdiction to the Bankruptcy Code provides that the bankruptcy court does not have jurisdiction to enter final orders in personal injury or wrongful death matters. A bankruptcy judge has jurisdiction to make findings of facts and conclusions of law based on the record before the court, and based on this the United States District Court in the district where the bankruptcy case is pending has jurisdiction to enter final orders. In this regard a bankruptcy judge’s jurisdiction is similar to that of a United States Magistrate Judge (the underlying reason for this is the distinction made between judges appointed under Articles III and IV of the Constitution).

Continue reading "What Happens To Personal Injury and Wrongful Death Claims In The The Manhattan Bankruptcy Court?" »

A question that we get from time to time from clients and prospective clients in Manhattan, Bronx, Brooklyn and surrounding counties is whether if they file for bankruptcy some one will come search their house or apartment.

From an attorney perspective this question is always troubling because whether or not someone will actually come search your house or apartment if you file for bankruptcy, the schedules and statement of financial affairs need to be answered completely and truthfully. There are currently many individuals serving time in federal penitentiary who have been convicted of “bankruptcy crimes” -- such as concealing assets in connection with a bankruptcy case.

The bankruptcy trustee has the ability to obtain an order authorizing him or her to search the debtor’s house or apartment with the assistance of the United States Marshall -- and break doors, locks and safes to conduct an investigation. Usually this type of order will be obtained on an ex parte basis -- meaning without prior notice to you to prevent you.

Continue reading "Will they come search my house or apartment if I file for bankruptcy in New York?" »

A question many of our clients and prospective clients in Manhattan, Brooklyn, Westchester and surrounding counties have is why the fees some attorneys charge for consumer bankruptcy cases are much less than others?

Experienced and knowledgeable bankruptcy attorneys who specialize in bankruptcy tend to charge fees that are set fairly close to each other. In part this is because the fees charged by bankruptcy attorneys are not a mystery. Bankruptcy attorneys are required by law to disclose the fees charged to their clients on a statement filed with each bankruptcy petition. Bankruptcy attorneys who regularly practice in the Bankruptcy Court often will see these statements in the course of their practice and know what their colleagues are charging. Generally these fees reflect what the experienced bankruptcy attorney believes will be a reasonable and fair fee to cover the anticipated issues likely to arise in the debtor’s case.

Continue reading " How Much Should I Pay to Hire a Bankruptcy Attorney in New York?" »

A common question we get from our clients and prospective clients in Manhattan, Bronx, Brooklyn and adjacent counties is if the Bankruptcy Court/Bankruptcy Judge will “approve their case”.

In a typical personal bankruptcy case you will not encounter a bankruptcy judge. There will not be a hearing held in the Bankruptcy Court for the Judge to evaluate your bankruptcy petition and approve it or deny it.

In the typical non-business consumer bankruptcy case your only personal contact with the “bankruptcy system” will be at the meeting of creditors at which the chapter 7 trustee or chapter 13 trustee (depending on which chapter of bankruptcy you file) will ask you questions about your income, assets, debts and financial history. However, the trustee is not a bankruptcy judge. He or she does not have the power to “approve” or “disapprove” your case. A denial of discharge or dismissal of a personal bankruptcy case can only be done by a bankruptcy judge. However, a trustee can bring a motion seeking to deny discharge or dismiss a bankruptcy case in appropriate cases.

Continue reading "Will the Bankruptcy Court Approve my Bankruptcy in New York?" »

Whether a debtor gets to keep his or home in a bankruptcy case depends on a number of factors, such as whether or not there is equity in the house, how much of a homestead exemption the debtor is able to claim, if there is a mortgage -- whether the debtor is current with mortgage payments to the lender or not, and finally what chapter of bankruptcy the debtor files (i.e., Chapter 7 or Chapter 13).

For further information regarding chapter 13, please review our prior Blog posts
( Chapter 7 or Chapter 13 Bankruptcy Filing in New York? ), ( New York Chapter 13 Bankruptcy Eligibility Requirements and Issues), and ( What are the benefits of chapter 13 (why file chapter 13 instead of chapter 7)?)

Continue reading "Do I get to keep my home in New York in bankruptcy?" »

By the time many of our bankruptcy clients come to has they have exhausted most of their personal savings, and often their retirement assets. Some people invade these funds -- that are intended to provide income in retirement -- and use them to try make minimum payments on credit cards and cover living expenses. This is a very common scenario we see for people who have lost their job and unemployment has run out.

In bankruptcy, retirement assets, such as I.R.A.s and 401(k) are generally exempt. If someone intends to file bankruptcy and get a fresh start from their debts it doesn’t make a lot of sense to

Continue reading "Should I Cash Out My Retirement Accounts to Pay Bills?" »

A common question we are asked by people living in Manhattan, Brooklyn, Queens and surrounding counties is whether they can leave the state after filing for bankruptcy..

The answer is that there is no requirement that a debtor remain physically present in New York continuously after filing for bankruptcy until his or her case is closed. The debtor (person filing bankruptcy) will be required to attend the meeting of creditors in his or her case that is held approximately 30 days after the case is filed. In a chapter 13 case he or she will also be required to attend the confirmation hearing with respect to the chapter 13 plan held approximately four months after the case is filed. In a chapter 11 case there are various status conferences that the debtor may need to attend.

Continue reading "Can I Leave New York After I File for Bankruptcy?" »

In prior posts we have covered how a wage earner repayment plan (chapter 13 bankruptcy) works. Many people are interested in filing chapter 13 bankruptcy in Manhattan, Brooklyn or Queens, but are concerned about what happens if they are unable to make all plan payments, or if they decide they don’t want to continue to be locked into a long repayment plan, In this post we will look at the options available to a chapter 13 debtor who is unable to make all plan payments, such as because he or she lost his/her job, or because expenses were higher than planned.

1. Conversion to Chapter 7. A debtor in a chapter 13 case has the right to automatically convert the case to chapter 7 at any time. This is done by filing a Request for Conversion form with the Clerk’s Office. Once the case has been converted to chapter 7 the debtor no longer has to continue making chapter 13 plan payments. The debtor can obtain a discharge of his/her dischargeable debt in the chapter 7. An example of a situation in which someone might do this is if they had filed chapter 13 for a very specific reason, such as to try to catch up on car loan payments or home mortgage payments to prevent loss of the car or foreclosure, but they weren’t able to successfully make the required catch up payments and lost the car or house. In that situation it may not make sense to continue to be in chapter 13 and conversion to chapter 7 may make more sense.

Continue reading "What Happends If I Can't Make All Chapter 13 Plan Payments in New York?" »

The purpose of a personal bankruptcy is to get a “fresh start” by obtaining a discharge (wiping out) of debt. To assist debtors in obtaining their fresh start the law allows them to keep a modest amount of property. The property that an individual is allowed to keep in bankruptcy is known as “exempt” property.

New York has opted out of the federal exemption scheme contained in the Bankruptcy Code which means that an individual in New York is only allowed to claim exemptions available under New York law, plus certain federal exemptions other than those contained in the Bankruptcy Code.

Except for the homestead exemption, the exemption scheme in New York has not been updated in a long time and the exemptions are not pegged to inflation or the consumer price index (CPI).

Continue reading "Prebankruptcy Exemption Planning" »

This is a question that we get asked a lot by our clients and prospective clients. The answer is “that depends” – it depends on what chapter (type) of bankruptcy we are talking about.

1. Duration of a Chapter 7 Bankruptcy Case

When someone asks how long will a bankruptcy take, they really mean how long is my involvement as debtor (person filing bankruptcy) going to be. The goal of a personal bankruptcy case is to get a discharge. From the debtor’s perspective that can be viewed as the end of the typical bankruptcy case, although the actual case may continue on without affecting the debtor (as discussed further below).

In the typical chapter 7 case involving an individual there are really only three dates we care about. The first is the date the bankruptcy petition is filed with the Bankruptcy Court because that starts the case (and the automatic stay). The second important date is the meeting of creditors, which is usually scheduled about four week after the meeting of creditors. The third date is sixty days from the date first scheduled for the meeting of creditors. That is the very earliest that a debtor is eligible to get her or her discharge (order wiping out debts). However, in actual practice the discharge order takes the Clerk time to process so that the discharge is routinely entered 70-90 days after the date first set for the meeting of creditors. So this means that the length or duration of a typical chapter 7 bankruptcy case is about 100 - 120 days

Continue reading "How Long Does Bankruptcy Take in New York?" »

Many people considering filing for personal bankruptcy in New York have not hired a lawyer before and are not sure how to select a lawyer. Since they are not familiar with lawyers and how to evaluate and compare one lawyer with another, they focus on the one factor that they understand – the cost. While cost is certainly one factor to consider when choosing a lawyer, it is not the only factor.

1. Bankruptcy Is More Complex Due to the 2005 Changes in the Bankruptcy Law.

In 2005 as a result of credit card company lobbying the Bankruptcy Code was extensively changed by Congress. These changed created new duties for bankruptcy attorneys and made representation of consumer debtors in bankruptcy cases much more complicated than it was before. As a result, those lawyers who only dabbled in bankruptcy stopped taking new bankruptcy cases. Those lawyers who specialized in bankruptcy cases raised their rates to account for the increased cost and complexity of cases after the 2005 changes.

Continue reading "How Much Does Bankruptcy Cost in New York" »

This is the third in a three part series of postings in which we examine preference claims in detail. In prior posts we discussed what is a preference claim (Help I’ve Been Sued by a Bankruptcy Trustee in New York, What Do I Do Now?) and the new value defense to a preference claim (New Value Defense to Preference Adversary Proceeding Filed in the U.S. Bankruptcy Court for the Southern District of New York). In this post we will look at the ordinary course defense.

The ordinary course defense is intended to permit creditors to continue doing business with financially troubled debtors without fear that a bankruptcy trustee will later be able to recover such payments as preferential.

Elements of the Ordinary Course Defense

The ordinary course defense requires that the creditor/defendant show:

a) payment by the debtor

b) to or for the benefit of the creditor

c) made in accordance with the course of dealings between the parties, or

d) made in accordance with applicable industry practices.

The way this works is as follows – image a company in the business of selling machine parts. The company has a course of dealings with the debtor over a long enough period of time, so that there is an established payment history. The company sells machine parts to the debtor on net 30 day terms. The debtor routinely pays the company’s invoices within 30-40 days.

Continue reading "Ordinary Course Defense to Preference Claim in New York Bankruptcy Court" »

We are often contacted by former and prospective clients in Manhattan and other boroughs of New York City, and elsewhere, who are faced with a potential eviction involving a commercial or residential lease and wonder what their bankruptcy options are.

1. Bankruptcy Filing Creates Automatic Stay

A bankruptcy filing by the tenant (whether residential or commercial) creates an “automatic stay.” This is a mandatory injunction that arises by operation of law without the need for a hearing or order of the Bankruptcy Court. The automatic stay operates like a legal “Stop Sign” to freeze a creditor’s efforts to pursue collections, litigation or judgment enforcement. The automatic stay operates to protect the debtor and the property of the debtor’s bankruptcy estate.

In the case of a lease, whether commercial or residential, the critical issue is whether a writ of eviction has already been issued from the landlord-tenant court. There is a significant body of case law from the U.S. Bankruptcy Court for the Southern District of New York and U.S. Bankruptcy Court (covering Manhattan, Bronx and White Plains) and U.S. Bankruptcy Court for the Eastern District of New York (covering Brooklyn, Queens, Staten Island and Long Island) that once a writ of eviction has issued from the landlord-tenant court the interest of the tenant in the lease has terminated.

Continue reading "Bankruptcy and Eviction in New York" »

New York is a destination for many people relocating here for work, school or personal reasons. Many people are surprised to find out how expensive the cost of living is here compared to many other parts of the country. Many people underestimate their costs of housing and other living expenses which causes a lot of problems for their budget.

A common question we get asked is “How long do I have to live in New York before I can file for bankruptcy here?”

The rule is that you have to have lived here more in the past 180 days than anywhere else. So, for example, if someone moved here from Ohio, she would need to live in New York at least 91 days before she could file for bankruptcy here.

Continue reading "Can I File for Bankruptcy in NY City if I Recently Moved Here?" »

If you have past-due tax debt that you owe to the Internal Revenue Service (IRS), New York State Department of Taxation & Finance (NYS Tax), and/or New York City Department of Taxation (NYC Tax) you know that the government authorities can be very aggressive in enforcing back due taxes.

1. Problems & Risk of Owing Past-Due Tax Debts.

If you have past-due taxes the balances continue to grow over time because of interest and penalties. The government can intercept any tax refunds that you are entitled to receive from them and apply the money against your past-due taxes. They can garnish your wages. They can put a lien on your assets. They can seize your bank accounts, car, house and other properties.

2. Bankruptcy Solutions to Tax Problems.

For many people with past-due taxes bankruptcy may be a way to either (a) get their finances affairs in order so they have money to deal with the taxes, or (b) a way to wipe out the taxes.

a) Chapter 7 Bankruptcy Solutions.

In the Frequently Asked Questions (FAQs) on our website Will all my debts get discharged (wiped out) in bankruptcy?) we have provided a general overview of the rules regarding discharging debt in a personal bankruptcy filing. For some people filing a chapter 7 bankruptcy will be a way that they can permanently eliminate their past-due taxes without having to pay them. To figure our whether or not your taxes can be wiped out in bankruptcy you will need to know exactly what taxes you owe and for what years. You can contact the IRS, NYS Tax and NYC Tax and follow their procedures to order copies of your “tax transcript” for each tax year you have an unpaid balance. We have successfully used chapter 7 bankruptcy to help many of our clients permanently eliminate their taxes.

Continue reading "Using Bankruptcy to Solve Your Tax Debt Problems in New York City " »

The purpose of this blog post is to provide information about bankruptcy to the gay and lesbian community in New York City that uniquely affects them.

As a result of the 2005 changes to the Bankruptcy Code, for gays and lesbians considering filing for personal bankruptcy there are certain things they will need to consider. In addition, there are certain provisions of the Bankruptcy Code that may affect the rights of gays and lesbians differently than heterosexuals.

First of all, for consumer debtors (i.e., debtors whose debts are primarily for personal, family or household debts and not for a business), the 2005 amendments to the Bankruptcy Code established means testing (see the Frequently Asked Questions (FAQs) of the Starr & Starr, PLLC website: What is the "means test" for chapter 7 and why is it important? ).

Continue reading "Gays, Lesbians and Bankruptcy in New York City" »

Student Loans Problems in New York City

Many people in New York, and particularly in Manhattan, have large student loans for undergraduate and graduate college education. A student loan debtor (person who owes money for a student loan) can often obtain deferment or consolidation of his or her student loans to delay making payment or lower the payments. However, for people with very large student loans and income that is lower than they had anticipated, student loans can be an enormous problem. This is especially the case for someone who never finished his or her course of study or obtained a degree, or obtained a degree for which there is not much demand in the marketplace. In addition, if someone obtained an expensive graduate degree, such as medicine or law, but but is working in a lower paying field than his or her field of study this is particularly a problem. Finally, the cost of living in New York is one of the highest in the country and people living here have a significantly higher cost of living than in many other states.

Due to changes in the law regarding student loans, there is no statute of limitation for student loans -- meaning the loans do not become unenforceable by the passage of time. This means that long after someone is out of school he or she can still be saddled with high student loans.

Continue reading "Student Loan and Bankruptcy in New York " »

People are often scared about what will happen to their car if they file bankruptcy and whether they will lose their car. This is question we get asked very often by clients in the Staten Island, Brooklyn, Queens, Westchester and Long Island.

In a prior post ( What Happens to My Car in Bankruptcy ) we covered what happens if the car is paid for. In another post ( What Happens If I Am Financing a Car and I File Bankruptcy? ) we covered what happens if a car is being financed,
In this post we cover what happens if the car is being leased.

The discussion regarding the debtor’s equity in the car in our earlier post ( What Happens to My Car in Bankruptcy ) still applies to the equity in a car being leased (if any, such as if there is a $1 buyout option).

Continue reading "What Happens If I Am Leasing a Car and I File Bankruptcy? " »

People are concerned about what will happen to their car if they file bankruptcy. Clients in the Bronx, Queens, Brooklyn, Long Island and Westchester ask us this all the time.

In a prior post ( What Happens to My Car in Bankruptcy ) we covered what happens if the car is paid for. In this post we cover what happens if the car is being financed. In a later post we will cover what happens if the car is being leased.

What Happens If My Car Is Being Financed?

The discussion regarding the debtor’s equity in the car in our earlier post ( What Happens to My Car in Bankruptcy ) still applies to the equity in a car being financed.

With that in mind there are basically three options available to a debtor under the Bankruptcy Code, and fourth option not mentioned in the Bankruptcy Code that may also be possible. The options are:

1. Surrender Option (Give the Car Back). One option is to “surrender” or give the car back to the finance company. The debtor has the option to give back the car and discharge the debt (i.e., wipe out the debt in bankruptcy). Now days, however, many car finance companies are willing to try to restructure the loan with the debtor (see Reaffirmation Option below) because they don’t want the car back.

Continue reading "What Happens If I Am Financing a Car and I File Bankruptcy? " »

This is a very common question we get from clients and prospective clients in Brooklyn, Queens, Staten Island and Westchester (car ownership seems to be lower among our Manhattan clients). The answer, like many things, involving the law, is that “that depends”. Is the car paid for, being financed, or is it being leased?

This is part of a three part series. In the first part we will address what happens if the car is paid for, in the second part what happens if the car is being financed, and in the third part what happens if the car is leased.

What Happens If My Car Is Paid For?

If someone files bankruptcy in New York and he or she owns a car outright the answer is pretty simple. They get to claim an “exemption” in the equity in the car (which currently is limited to $2,400). If the value of the car is

Continue reading "What Happens to My Car in Bankruptcy? " »

A common question I get asked by people from the Bronx, Queens, Staten Island, Brooklyn and Manhattan considering filing for personal bankruptcy is whether they should file chapter 7 or chapter 13.

Chapter 13 bankruptcy is typically used to preserve a valuable asset, such as a house, car, or rental apartment when the debtor is past due on payment and facing a foreclosure, repo, or eviction lawsuit. In chapter 13 bankruptcy the debtor keeps making current payments as they become due and cures the past due portion over time through the chapter 13 plan.

For a debtor with no valuable asset to protect, unless his/her income is above the level where he/she fails the means test , or he/she would like to repay his/her creditors over time, it may make more sense to to file chapter 7 bankruptcy. The means test is based on average income and family size. In a prior blog post we discussed eligilibilty requirements for chapter 13 and issues and in a separate blog post discussed commonly encountered problems in NY chapter 13 cases.

In response to questions we received from clients and prospective clients in New York City, Bronx, Queens, Manhattan and Westchester, in a series of 4 posts we are exploring the most common alternatives to personal bankruptcy for New Yorkers faced with money problems.

A prior post on our blog I Live in New York and Am Considering Bankruptcy -- Should I Try Negotiating with My Creditors First? covered negotiating directly with creditors and/or collectors.

A second post I Live in New York and Am Considering Bankruptcy -- Should I Try Debt Settlement First? addressed so called debt settlement or debt negotiation.

A third post I Live in New York and Am Considering Bankruptcy -- Should I Try Credit Counseling First?
addressed credit counseling as an option.

In today's post we will explore whether doing nothing is a viable option and what it means to be judgment proof.

Instead of Bankruptcy Should I Do Nothing -- Am I Judgment Proof?

Unfortunately many people with financial problems by default seem to select the “Do Nothing” approach. This is the “ostrich approach” (the large bird that can’t fly that sticks its head in the sand when there is trouble). Unlike fine wine, personal financial problems don’t age well (they age more like fish left out in the hot sun).

If you have financial problems and ignore them they are likely to follow a very predictable path – COLLECTIONS followed by COLLECTIONS LAWSUIT followed by JUDGMENT followed by JUDGMENT ENFORCEMENT including wage garnishment and bank account seizures. If you deal with the problem at any early stage you may be able to nip it in the bud before it becomes a collections lawsuit or a judgment. By the time you are faced with collections lawsuits and judgments, doing nothing will usually not help you. Your creditors will not sit back and do nothing — they will most likely move forward in the collections process to try to get judgments against you and to enforce those judgments.

Continue reading "I Live in New York and Am Considering Bankruptcy -- Should I Do Nothing -- Am I Judgment Proof?" »

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 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" »

There is an ongoing problem with a record number of foreclosures taking place this year throughout the New York metropolitan area. Many people in New York, Queens, Bronx, Brooklyn, and Westchester County are facing the prospect of losing their homes in foreclosure and are exploring their options. For many of them bankruptcy may be their best option. In a prior post New York Foreclosure & Chapter 7 Bankruptcy I discussed when and how chapter 7 can be used to deal with foreclosure in New York. Today we focus on chapter 13.

NY Foreclosure & Chapter 13 Bankruptcy

In chapter 13 the debtor keeps his/her property. The trustee does not sell it to pay creditors. Instead, creditors’ claims are dealt with over time. 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 voluntary 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.

In chapter 13 bankruptcy the debtor has the ability to cure arrears (past due portion) of the mortgage over time through a chapter 13 plan -- even if there is a foreclosure judgment as long as sale has not yet occurred. You can file chapter 13 and still try to pursue a settlement/workout/loss mitigation program with the lender at the same time, but most lenders will require that you dismiss your bankruptcy case before they will finalize any deal.

To be eligible for chapter 13 a debtor can’t have secured debt (such as mortgages, judgment liens, or tax liens) greater than $1,010,650 total, or unsecured debt greater than $336,900 total (such as credit card debt, student loans, medical bills, etc.).