One of the problems some New York residents have with Chapter 13 bankruptcies is that they take three to five years to complete. The problem stems from the fact that many things in life can change in this time, and debtors may feel locked into the payment plans they agreed to with their Chapter 13 filings.
Chapter 13 bankruptcy law works for debtors interested in maintaining possession of their assets. Following the guidelines of a court-approved repayment plan will allow the debtor to retain asset possession. This is in contrast to Chapter 7 bankruptcies, which require debtors to liquidate assets.
Debtors who are unable to keep up with their Chapter 13 payments still have options. A debtor who stops making payments will have their case dismissed by the court. When this happens, the debtor could then file for Chapter 7. The one drawback for debtors is the loss of the protection against creditors they enjoy with Chapter 13.
A second option is to ask the court for a modification to the repayment plan. The court may be willing to adjust payments in a way that better reflects the current financial state of the debtor if he or she can demonstrate a justifiable reason to do so.
Debtors can also choose to convert a Chapter 13 bankruptcy to a Chapter 7 before the court decides to dismiss the case. But the debtor must first show the inability to make payments on the Chapter 13 repayment plan. This proof is not difficult to provide if the debtor has already stopped making regular payments. A debtor must also show the court evidence of a financial life change. This evidence can be as simple as lower pay or additional bills that the debtor was not responsible for at the start of the repayment plan. The third requirement is the absence of a Chapter 7 bankruptcy on file for the previous eight years.
Bankruptcy regulations include a comprehensive and nuanced area of the law that can be difficult to navigate. Individuals considering bankruptcy may benefit from speaking to an attorney to learn about their options.