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Why would you want to file a Chapter 13 bankruptcy?

On Behalf of | Aug 16, 2022 | Bankruptcy

At first glance, a Chapter 13 bankruptcy might not seem like an attractive alternative to a Brooklyn family in financial trouble.

For one, Chapter 13 bankruptcy lasts longer. A typical payment plan runs for 3 to 5 years. While the plan is ongoing, you will have to make a sizeable payment to a bankruptcy official called the Trustee every month.

Creditors prefer Chapter 13s for this reason. When all is said and done, the plan usually lands more money in their pockets.

Some New Yorkers may only file a Chapter 13 because they make too much income to try the more common Chapter 7 bankruptcy. For them, the only alternative to Chapter 13 is trying to work things out with their creditors.

Chapter 13 offers several advantages to eligible debtors

 If you are in financial distress, you may want to choose to file Chapter 13 because it offers you an advantage.

For example, you may have fallen behind in your house payments and want to protect your home from foreclosure. Chapter 7 bankruptcy can only do this in the short term. Eventually, the bankruptcy will conclude, and the bank may go forward with foreclosure.

On the other hand, a Chapter 13 allows your family to make catch up payments as part of their court-approved plan. If you make all these payments and keep up with the mortgage otherwise, you can save your home from foreclosure permanently.

Depending on your situation, Chapter 13 may offer other benefits as well. The bankruptcy will not stay on your credit report for as long as would a Chapter 7. On a related point, a person legally does not have to wait as long to file another bankruptcy after a Chapter 13.

A Chapter 13 may be the best option for some New York City families facing financial problems. I can help you consider this option and other alternatives.