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If you are considering filing for Manhattan bankruptcy, we recommend you to contact a Manhattan Bankruptcy Attorney who will review your situation, present you with your options, and help you decide which one of them fits you best. The article outlined below is provided by our Manhattan bankruptcy attorney. |
Should I consider Chapter 13 as an alternative to Chapter 7 when filing for Manhattan bankruptcy?
The answer is yes, you should consider all of your Manhattan bankruptcy options. In fact, if your income is high, you may have no choice: you may not be able to file under Chapter 7. Filing under Chapter 13 bankruptcy, commonly known as a wage earner plan, is in many cases a good alternative to a straight Chapter 7 liquidation Manhattan bankruptcy.
A Chapter 13 wage earner plan is a reorganization of your financial affairs, where you make monthly payments to deal with your debts. It can allow you to stop foreclosures, repossessions, wage garnishments, tax levies, and IRS seizures. As part of your Chapter 13 plan you can set up a court enforced repayment plan to restructure secured debts including mortgage arrears on your home, and unsecured debts, including taxes, thereby reducing monthly payments to an affordable amount, and allowing you to keep your property. Payment plans will generally run over a three to five year period depending on your circumstances.
In most cases, filing Manhattan bankruptcy under the Chapter 13 plan immediately stops interest charges on unsecured debts, and it may even be possible to protect most co-signers from any action by your creditors.
Here’s a simple example of how a Chapter 13 plan may work, for a fictional resident of New York:
Mr. Smith is $7,000 behind on his house payments, the mortgage company has commenced a foreclosure, and he owes the IRS $5,000 and they are garnisheeing his wages. He also owes various credit card debts and personal loans totaling $20,000. He is paying $600 per month just to service his credit cards. If he just pays his regular living expenses (house payments, utilities, food, etc.), he has $500 per month left over, but that doesn’t include any payments to the IRS, personal loans, credit cards, or leave anything to catch up on his mortgage arrears.
If Mr. Smith were to file for Manhattan bankruptcy using the Chapter 13 plan, he could make payments of $475 monthly, which would be used to catch up the past due payments on his home, repay the IRS in full, and pay all the credit cards and personal loans. As soon as the Chapter 13 plan is filed, the foreclosure and IRS garnishment would be stopped and none of his creditors would be allowed to take any action to collect the amounts owed. It may even be possible to have the principal balances of his credit cards and personal loans substantially reduced.
The key to a Chapter 13 plan is knowing what you can afford to repay each month, so a proper budget is essential. The Chapter 13 plan is complicated, so the advice of a competent Manhattan bankruptcy attorney is also very important.
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