Realizing that you need to file for bankruptcy isn’t easy. People often deny the seriousness of their financial situation until something extreme happens. Receiving notice of a pending lawsuit or a foreclosure letter from your mortgage provider can spur you into action.
The first decision you have to make after deciding to file for bankruptcy is to choose which kind of bankruptcy you intend to file. Although Chapter 7 bankruptcy can be the fastest route to a discharge, it is not always the best solution for New Yorkers with financial issues. There are at least three situations in which filing Chapter 13 bankruptcy will be a better solution for you.
Your income is at or over the state median for your household size
You may not even qualify for Chapter 7 bankruptcy. Only those whose adjusted income falls below the median income for their household size have the option of choosing Chapter 7 bankruptcy proceedings. If your income is close to the threshold or clearly over the Chapter 7 income limit, then a Chapter 13 can give you the automatic stay and discharge you need.
You feel strongly about making an attempt at repayment
In a Chapter 7 bankruptcy filing, you likely won’t make any more payments to your creditors after you initially file your paperwork with the courts. Unless you have personal property that you have to liquidate, additional payments on the debts eligible for discharge are unlikely.
In a Chapter 13 bankruptcy, you will spend between three and five years making payments on your dischargeable accounts, which means work better with your personal sense of ethics and responsibility.
You have valuable property that you want to protect
Did you inherit your house, meaning that you have hundreds of thousands of dollars in equity and no mortgage payments on it? Do you have collectibles or other assets with significant emotional and financial value?
In a Chapter 7 filing, you have to sell off your property and refinance assets to repay your creditors before the courts will offer you a discharge. In a Chapter 13 filing, since you will make a reasonable effort at repayment before your discharge, there is no obligation to sell your assets. Chapter 13 can help you protect the equity in your home and your other personal property from creditor claims.
Recognizing that Chapter 13 bankruptcy could be the right solution for you may hope you regain control over your finances.