More Than 20 Years Experience

in Bankruptcy and Foreclosure

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Restructuring Your Debt

Chapter 13 bankruptcy is similar to Chapter 7 in that it offers debt relief to regular people but not corporations. The main difference between the two is that Chapter 13 payment plan is created to restructure and pay back the debt over the course of three to five years. Generally, it is applicable to individuals who have relatively well-paying jobs and enough regular income to pay all of his or her living expenses, as well as the payment plan payments.

With offices in Medford, Syosset and Hauppauge, bankruptcy lawyer John Gonzalez sits down with his clients to determine the best course of action during an initial evaluation of assets and debt. Each individual's financial situation is different, but it all starts by trying to prevent foreclosures and repossessions. The client should be prepared to provide as much information as possible so we can make an accurate and timely determination.

Taking Stock Of Your Assets

Key factors to petition for bankruptcy include the following:

The amount of your current income
The amount owed on your current bills
Determining the value of any significant assets
Any recent transfer of significant assets

Mr. Gonzalez fills out the paperwork for Chapter 13 bankruptcy petition electronically. This temporarily prevents foreclosure and repossessions as well as all other debt collection proceedings. Creditors can object to this petition, but they are legally forced to abide to a ruling by bankruptcy court here in New York. A court appointed trustee oversees the administration of the case on an individual level. As long as scheduled monthly payments are made, there will be no additional problems as long as you do not default. If you do default, a debtor may reinstitute collections.

How Payments Are Structured In Chapter 13

The three- to five-year payment plan prioritizes debt owed with a maximum amount of debt and falls into different categories, including the following:

Secured: Any amount owed for secured debt must be paid in full. Examples of this would be mortgages or car payments and apply to anything that involves collateral that can be recovered.

Priority debt: This debt must be paid in full regardless of whether it is secured or unsecured, although, Chapter 13 does help restructure them.

Unsecured debt: The amount paid back is generally determined by individual circumstances of the debtor. Examples of this include credit card companies, medical bills and other debt that does not involve collateral. At least some of this must be paid back as well.

Non-priority debt: It is not mandatory that this debt be paid back. It can be paid, or partially paid.

After the allotted time where the Chapter 13 debtor repays the secured creditors and priority debts, bankruptcy court then dismisses the case and any remaining debt.