How Flexible is Chapter 13 Bankruptcy?

Before filing for bankruptcy, it is crucial to understand all the facts. Since you may not be an expert in bankruptcy law, the questions you might have about the process have answers that are anything but clear. Not only are there different types of bankruptcy, Chapter 7 and Chapter 13, but there are also significant differences between the two.

One of the most common questions about Chapter 13 bankruptcy is what happens if your financial situation changes during the duration of the plan? After all, a Chapter 13 plan typically runs between three to five years and there are a lot of things that can happen in that period of time. What happens if you or your spouse lose a job, get sick or in an accident and incur medical expenses, or have a change in family size?

Fortunately, Chapter 13 bankruptcy offers a great deal of flexibility in the event of a change of income or expenses during the duration of the plan. Many times the court can agree to modify your plan to make it work. This often involves a lowering of monthly payments which debtors are obligated to pay.

Other times, the changes may need to be made even before a first payment is sent. Sometimes debtors are still unable to pay their mortgage even with the restructuring of their debt in Chapter 13. In cases like this, a modification is necessary. If the situation that you are experiencing is only a short-term problem, the court may grant a moratorium in payments if it will allow you an opportunity to recover from an illness, one-time expense, or some other temporary cash flow problem.

If your situation changes significantly for the worse, Chapter 13 has what is called a “hardship discharge”. This happens when a Chapter 13 plan is confirmed but circumstances come up that prevent the debtor from completing the plan. However, there are stipulations to a hardship discharge which make it available only if: the failure to pay comes from circumstances beyond the debtor’s control, creditors have received at least as much money as they would have received under Chapter 7 where assets are liquidated, and if modification of the plan is impossible.

Bankruptcy can be complicated, which is why you need an atto
ey who can get things right the first time. A lawyer who works exclusively on bankruptcy and keeps up with the newest trends in the industry can put that knowledge to work for you. Let’s face it, unemployment, garnishments, and repossessions can happen to anyone. When bad things happen to good people, and you are filing for bankruptcy in NY, the bankruptcy atto
eys at Doyaga and Schaefer are here to help. Stop the harassment, the worry, the financial stress. For a free same-day consultation, call 718-488-7500 or 516-656-7500, or visit our website at bigapplebankruptcy.com for more information.