Chapter 13 bankruptcy enables individuals to protect personal property, albeit through costly repayment plans. Should one find themselves unable to maintain payments, our esteemed Rockland County Chapter 13 Bankruptcy Lawyer can assist you in identifying what is in your best interest. 

How Does Chapter 13 Work?

Chapter 13, alternatively termed a “wage earner’s plan” or reorganization bankruptcy, represents a legal recourse available to individuals possessing a consistent income. It facilitates the restructuring of personal finances and the repayment of outstanding debts over a period ranging from three to five years. The duration of the repayment scheme is contingent upon the individual’s income relative to the median income in New York: a three-year term is instituted if the income falls below the average, whereas a five-year term is applied if the income exceeds this threshold.

This option garners significant favor due to its distinction from Chapter 7, as it precludes the liquidation of assets. Consequently, individuals are relieved from concerns regarding the seizure and sale of their assets to satisfy outstanding obligations. A trustee is designated to supervise your case, tasked with collecting payments and disbursing them to creditors in accordance with the established plan.

What Are My Options if I Can’t Afford My Chapter 13 Payments?

If you find yourself unable to afford your Chapter 13 payments, it’s crucial to act quickly, as ignoring the issues can result in serious consequences. For personalized guidance and advocacy, contact a Rockland County bankruptcy attorney. They can evaluate your financial standing and advise on the optimal approach for your specific needs. Prompt action ensures a wider range of solutions to prevent the situation from escalating. The following are some possibilities your attorney might explore:

  • Payment Plan Modification: In some cases, you can modify your payment plan to reduce your monthly obligations. This will require filing a motion with the bankruptcy court, demonstrating a change in your financial circumstances.
  • Temporary Suspension or Deferral of Payments: If your inability to make payments is temporary, you may be able to request a temporary suspension or deferral of payment from the trustee assigned to oversee your case. This usually falls under the trustee’s discretion.
  • Hardship Discharge: If you have suffered a significant and ongoing financial hardship that goes beyond your control, like a job loss or a serious medical condition, a hardship discharge may be granted. To be eligible, you need to prove that creditors have received at least what they would have received in a Chapter 7 case, that the hardship was unavoidable, and that your financial position is unlikely to improve.
  • Case Conversion to Chapter 7: Bankruptcy: When you can no longer make your Chapter 13 payments, you may be able to convert your case to Chapter 7. However, this is only the case if you meet the necessary eligibility requirements, including passing the means test. Although this will stop payments, it also means that your non-exempt assets can be seized and sold to satisfy outstanding debts.

For more information, please don’t hesitate to contact an attorney at The Lauterbach Law Firm. Our legal team is prepared to help you if you are struggling with your Chapter 13 payments. Connect with our firm today to schedule a consultation.