Some New York homeowners who are struggling to make ends meet or facing a foreclosure may choose to file for bankruptcy. The advantages of doing so are that people can reorganize their debt and, in some cases, even have unsecured debt discharged. With a Chapter 7 bankruptcy, unsecured debt such as credit card balances can be written off and people are not required to pay any additional money to creditors. However, if someone does not meet the requirements for a Chapter 7 filing, often due to making to much money, a Chapter 13 filing may still help debtors keep their homes under certain circumstances.
A Chapter 13 bankruptcy generally allows debtors to renegotiate the way they pay off their obligations. They are assigned a court appointed trustee, and the trustee will work with the individual to set up a payment plan as well as accepting and distributing these funds to creditors on a monthly basis. While people are given a greater amount of time to pay off loans, they will need to make their current payments as well as putting money towards missed payments.
This can become burdensome, even if the home has been refinanced. Debtors in this position may be able to change their filing to a Chapter 7 if their income has been reduced or their situation changed.
For people to be able to maximize the benefit of a bankruptcy filing and ensure that they are able to keep as much of their property as possible, it is important they understand the filing process. A bankruptcy attorney may be able to help a client determine whether either Chapter 7 or Chapter 13 is appropriate.
Source: FOX Business, “Can I walk away from home in bankruptcy?“, Justin Harelik, December 11, 2013by