1) What is
the purpose of Chapter 13?
CHAPTER 13
is a bankruptcy designed for individual debtors who have
some regular flow of income seeking an adjustment of
debt. Chapter 13 is used primarily for people with
mortgage and maintenance debt or other secured debt who
wish to keep their assets, yet need time to stretch out
these arrears or back payments in a Plan to deal with
their creditors. The time frame is generally 36 to 60
months. Chapter 13 will stop a foreclosure up until the
day and time of a sale. Depending upon your equity in
the house, some payments to unsecured creditors, credit
card and personal loan debt, may also be necessary.
Chapter 13 may also be utilized to handle debts which
are not dischargeable in a Chapter 7. This may include
back taxes, student loans, child support, and debts that
involve some type of fraud or misrepresentation on the
debtor's part, assuming there is good faith on the
debtor's part. Chapter 13 may also be used to handle
situations in which individuals may wish to retain their
assets, especially real estate (house, condo, co-op,
land, time share), yet pay back their creditors in a
more favorable treatment than allowed by their creditors
outside of bankruptcy. Also, Chapter 13 may be used by
individuals having a cash flow problem, whereby there is
some disposable income available to pay back creditors
in whole or in part, but not a sufficient amount to
satisfy creditors outside of the bankruptcy process. The
debt ceiling for unsecured debt in a Chapter 13 is
$360,475.00 and for secured debt is $1,081,400.00 (as
adjusted for cost of living on April 1, 2010).
A Chapter 13 is also available for those individuals
whose income is too high to pass the means test and may
still wish to file for bankruptcy that will provide some
debt relief. However, some or all of the debt may be
required to be paid back in this situation. A complete
office consultation by competent legal counsel will be
necessary to make that determination.
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Questions
2) What is the importance of the change in New York
State exemption laws?
As of January
22, 2011 New Yorkers have the option of choosing between
two sets of exemptions to protect your personal property
and real property (house, co-op, condo, land). These
choices are important to analyze and consultation with a
competent attorney is critical. You either choose all of
the New York State exemptions or all of the Federal
exemptions. The New York State changes for real property
are listed below:
Under New York
exemptions, you may protect $150,000 of any equity in
your PRIMARY RESIDENCE if you either live in the 5
boroughs of New York or in any of the following
counties: Westchester, Rockland, Putnam, Nassau and
Suffolk.
The exemption
decreases to $125,000 if you live in the following
counties: Dutchess, Albany, Columbia, Orange, Saratoga
and Ulster.
The exemption
decreases further to $75,000 if you live in any other
county not specified above.
The following
will contrast just some of the major exemptions
allowable under federal and state law: (CAUTION: this
information needs to be interpreted by competent legal
counsel)
|
|
Federal Law |
New York State |
|
Automobile |
$3,450 |
$4,000 |
|
Wildcard
|
$11,975
$1,000
(if no homestead exemption is claimed)
|
|
Homestead |
$20,200 |
$150,000, $125,000 or $75,000 |
|
Personal Injury |
$21,625 |
$7,500 |
|
Cash
|
$11,975
$6,000
(includes checking & savings types of
accounts and assuming no homestead is
claimed) |
|
Household Property
|
$11,525
$10,000
(not inclusive of cash)
(inclusive of cash)
|
Qualified
Pension, 401(k), Profit Sharing, IRA or other similar
Plans; Also, benefits under an Annuity Contract, and
benefits under an Insurance Contract are generally
exempt. Any recent contributions to an annuity will need
specific legal advice.
(Exempt under
both federal and state law)
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Questions
3) How
may a Chapter 13 bankruptcy help resolve issues that I
may have with respect to real estate (house, condo,
co-op, land, time share)?
CHAPTER 13 is a powerful tool to
assist someone in financial distress. Depending upon
your specific circumstances, the following tools and
procedures may be utilized and more than one of the
following may be appropriate. These tools and procedures
are not necessarily mutually exclusive.
TRADITIONAL CURE & MAINTAIN
If
you are behind with your mortgage and/or maintenance,
you will be able to repay the full amount of the
mortgage and/or maintenance obligation over a
period of five (5) years. However, you will need to
resume your regular monthly payments subsequent to the
filing of the bankruptcy.
LOSS
MITIGATION/LOAN MODIFICATION
The
United States Bankruptcy Court provides the unique
opportunity to seek the loan modification under the
supervision and monitoring of the court system. There is
no guarantee that you meet the eligibility requirements
to apply for a loan modification nor is there a
guarantee that your application will necessarily be
approved. The court acts only as a facilitator. However,
these efforts can be quite helpful in getting a
decision.
CRAMDOWN-STRIP OFF JUNIOR MORTGAGES ON YOUR PRIMARY AND
NONPRIMARY RESIDENCE
You
may be able to strip off a second and/or third mortgage
if your house is totally underwater. That is, if you
owe more money on your first mortgage than the fair
market value of the property (as evidence by a licensed
appraisal) a separate proceeding may enable you to
modify a secured mortgage into one that
is treated as unsecured with the result that no further
lien would continue on your property, provided you
finished all of your obligations under the Chapter 13
Plan.
CRAMDOWN-STRIP DOWN BUT MAINTAIN UNDERWATER MIXED USE OR
NONPRIMARY RESIDENCE MORTGAGE
You
may be able to reduce or strip down the mortgage balance
of an investment property to the fair market value of
the property (as evidenced by a licensed appraisal).
That is, if you owe more money that the property is
worth, only the fair market value of the property would
ultimately be required to be paid back. The result could
be savings of tens of thousands of dollars. (Not all
courts agree with this analysis).
OBJECTION TO LENDER’S PROOF OF CLAIM
If the Lender submits paperwork that is faulty,
defective, incomplete or outright fraudulent, an
objection may be made in court, challenging the right of
the bank to collect on your mortgage, resulting in
potential benefit to you. Banks may offer loan
modifications on favorable terms to avoid litigation
with questionable paperwork or standing (the legal
ability to enforce its claim through its note and
mortgage).
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Questions
4) What documents are generally needed and what are the
fees to file a Chapter 13?
DOCUMENTATION & FEE STRUCTURE:
You will need to bring in two months of current pay
stubs, if working; tax returns or tax transcripts for
the past two years, if available; your bills, (one for
each credit card, store card, personal loan, medical
bill, car loan, mortgage loan, student loan, IRS & NYS
Department of Tax bill(s), and other assorted bills);
your driver’s license or non-driver’s photo
identification; your social security card; your bank
statements for the past sixty days, a copy of all deeds,
and all mortgage payoff statements; and a $100.00
retainer. It is required for you to sort and organize
your bills by eliminating for us all envelopes and
attachments, and duplicates. We do want to see any
collection letters, attorney letters, and legal notices.
It would be quite helpful if you are able to sort and
organize your bills by eliminating for us all envelopes
and attachments. If you do not have a complete list of
creditors, see information below for generating a free
credit report. The fee for a Chapter 13 varies depending
on the complexity of the case. The fee is payable over a
six (6) month period, if necessary. However, the
petition cannot be filed until payment is made in full.
However, we will deal with your creditors during this
period (see next paragraph). You will receive monthly
bills, providing a payment schedule so that full payment
may be made by the due date. If you have been making
good faith payments and run into a problem, call our
office.
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Questions
5) Is there creditor relief if you retain our office?
CREDITOR RELIEF:
After you have retained our office, you may direct
creditors who call you to contact our office to confirm
or verify that we have been retained to file a Chapter
13 bankruptcy on your behalf. Please provide to your
creditors your own personalized office file number for
easy identification. You are only required to give our
name and telephone number and pursuant to the Fair Debt
Collection & Practices Act creditors are prohibited from
calling you at home or work after you have retained an
attorney.
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Questions
6)
What
responsibilities do I have?
LISTING OF
CREDITORS:
The first major task
after meeting with you and explaining to you your
alternatives is the filing of a Chapter 13 Petition. All
creditors must be listed in your Petition. Failure to
list a creditor will result in the inability or
litigation with regard to receiving a discharge from
that debt. The unlisted creditor will eventually seek to
collect on that debt. Consequently, it is vital that all
creditors with their proper correspondence addresses be
ascertained and listed. Failure to list a creditor can
also be a double whammy. You not only will have to fight
off that creditor, but you will have your credit card
privileges canceled.
OBTAINING
A CREDIT REPORT:
The fastest and easiest
way to get a free credit report is to go to
www.annualcreditreport.com.
Once you're there, select your state, and click on
“Request Report”. Fill out the form with the required
information then click on "Continue". You should choose
the "Experian", "Equifax", and "Transunion" credit
reports. You are entitled to one free credit report from
each of the three reporting agencies. You must go to
this site to obtain the free report. In the alternative,
print the application form by clicking on the following
link and mail to the directed address.
Click here
for your Free Credit Report by Mail or Phone.
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Questions
7) What hearings do I have to attend?
HEARING:
Within approximately thirty days from the date that our
office has filed your Chapter 13 Petition, you will be
required to attend a hearing concerning your Petition. The
hearing is conducted by a Trustee. The Trustee is not a
judge but an attorney whose job it is among other things to
review your Petition for its truth and accuracy. The Trustee
will recommend to the Bankruptcy Judge handling your case
whether you have complied with the bankruptcy law and are
ready for confirmation. An attorney from our office or
representing our office will be there to assist you with the
hearing process which is generally non-confrontational.
CONFIRMATION:
Approximately 1 month after this hearing, you will be
required to attend a Chapter 13 confirmation hearing in
front of a judge or a Trustee. This hearing date is on the
original Notice sent to you by the court. Once again, call
our office three (3) days prior to the Hearing. In order for
your Plan to be confirmed, pay careful attention to the
following:
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Questions
8) What are my payment obligations and responsibilities?
MORTGAGE PAYMENTS:
Once a Chapter 13 Bankruptcy Petition is filed on your
behalf, you are required to make your next regularly
scheduled monthly mortgage and/or maintenance (if you own a
co-op or condo) payment(s). For example, if we file your
petition on the 20th of January, then you will have to
resume your mortgage and/or maintenance payments that would
be due on the first of February, assuming your payment
obligation falls on the first of the month. If you are
delinquent with what we now call the post-petition payments
(those payments due after we have filed your petition), then
your secured creditor(s), the bank and or co-op/condo board,
will through its attorneys request from the Court to Lift
the Automatic Stay which is protecting you from legal
action, to commence or resume a foreclosure action. If you
want to have a successful reorganization of your debts
through a Chapter 13 Plan, post- petition payments to
secured creditors must continue or resume and must be made
on time. If you are having difficulty with those payments,
you must contact our office immediately.
TRUSTEE PAYMENTS:
Additionally, (this paragraph applies to all Chapter 13
petitioners), in order to demonstrate your good faith and
the feasibility of the Chapter 13 Plan, starting no later
than 30 days after your Plan has been filed (generally the
same date your petition has been filed), you need to make
monthly payments to the Trustee. This payment is in addition
to any payments you may be making for your mortgage or
maintenance post-petition. These payments must be made by
MONEY ORDER or CERTIFIED CHECK only. The Case Number and/or
File Number must be on all payments. Payments should be made
out to Jeffrey Sapir, Trustee and mailed to 399 Knollwood
Road, Suite 102, White Plains, New York 10603. Until
Confirmation and only until Confirmation, copies of all
payments made to the Trustee must be made to our office. Do
not send actual payments to our office. We only want to see
a copy of the payments. This is the only way our office can
adequately monitor your progress. Thus, for a four (4) month
period, every time you make out your money order or
certified check, you will send a copy of it to our office.
Your cooperation is greatly appreciated. When a payment is
due right near the time of the Confirmation, call our office
for further instructions.
You need to make the payments to the Trustee each month. For
example, if you file on January 10th, your next regular
payment is due no later than February 10th and the 10th day
of every month thereafter until your Plan payments have been
completed which is usually 36 or 60 payments, that is 3
years or 5 years. Your Plan cannot be confirmed unless you
are current with your payments to the Trustee. Failure to
make these payments will result in a Motion by the Trustee
to dismiss your case and which if granted would place you
out of the legal protection of the Bankruptcy Court and
subject you once again to your creditors foreclosing if you
own a house, condo or co-op or the commencement or the
resumption by your creditors of any other legal action that
they were previously taking against you.
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Questions
9) How do I
repair my credit?
CREDIT REPAIR:
If you would like to assist
in repairing your credit history, one (1) way is to obtain
secured credit cards. You generally place a minimum of
$100.00-$300.00 in a savings account and receive a credit
line up to the value of the account, or even 150% of the
value of the account, in some cases. Timely payments of
minimums or timely paying off the entire balance each month
will demonstrate a new history that will enable you to
better obtain future credit. If, and only if, secured credit
cards are used wisely, they may be of great benefit to you.
Remember, while in a Chapter 13, utilizing credit for more
than $600.00 requires the approval of the Trustee.
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10) What are the expected outcomes?
EXPECTED OUTCOMES:
Assuming no special circumstances, if you are making your
post-petition payments for your mortgage or maintenance, if
any are required, and your are making your regularly
scheduled monthly payments to the Trustee pursuant to your
Plan, and you have provided our office with all requested
documents, you will be ready for Confirmation and you will
be on your own to make payments to the Trustee for the
generally 3 or 5 year period of your Plan in a basic Chapter
13 proceeding. If you are involved in a loan modification,
cramming down a mortgage, avoiding a lien, or objecting to
proof of claims, additional time will be necessary to
conclude your case. Once the Plan is confirmed, you will
still get no monthly bills from the Trustee. It is your
responsibility to make those monthly payments. Once a year
you will receive a printout indicating how your payments
were made to your creditors. You will also be obligated to
provide the Trustee with a copy of your tax returns, each
year that you are still within the Plan. If you get
substantially delinquent, the Trustee will petition the
Court to dismiss your case and no payments made
post-confirmation shall be returned to you and you will be
back where you started with respect to your creditors, less
a credit for any distributions made. At the conclusion of
your Plan period, generally 36 or 60 months, you will
receive a legal discharge of your listed debts.
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11) What are the directions to your office?
DIRECTIONS:
2525 Eastchester Road, private house, white brick with white
awning, diagonally opposite Met Food near Eastchester Road &
Mace Avenue. TRAIN: #5 to Gunhill Road: Seven blocks from
station; BUS: #26 bus to Allerton Avenue, walk south
(towards Pelham Parkway direction) but go only on long
block. #31 to Eastchester Road & Mace Avenue; CAR: Bronx
River Parkway, take Pelham Parkway to Eastchester Road, left
on Eastchester Road, go three blocks and proceed slowly past
Mace Avenue, 8th private house on left hand. If
coming from Hutchinson River Parkway, exit on
Pelham Parkway West. Right on Eastchester Road, go slowly
past Mace Avenue.
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Do
you have any questions based on this informational packet?
Please feel free to
contact our office for a free follow-up
telephone consultation or call to schedule an appointment.
THANK YOU FOR YOUR INQUIRY. I LOOK
FORWARD WORKING WITH YOU!
