New York Bankruptcy Help

The past few months have seen a severe uptick in Chapter 13 bankruptcy issues coming to us from Westchester consumers.  Perhaps it’s the high volume of home ownership in Westchester that’s bringing people to an attorney looking for relief.  Maybe it’s the unemployment rate coupled with a high cost of living that’s so prevalent in Westchester.  Regardless, my office seems to be handling more Chapter 13 bankruptcy cases there than in a long while.

Though our office is in midtown Manhattan, lots of people commute from Westchester and are happy to come see us either during lunch or after work.  It seems that the prospect of meeting with an attorney well-experienced in Chapter 13 bankruptcy cases not only from a legal perspective, but also from experience in the local court, is powerful enough to make them miss lunch or risk being late for dinner.  To help our many Westchester clients who are interested in Chapter 13 bankruptcy as a way of resolving their bill problems, I though it would be useful to provide these 9 tips for a successful case.

Do your homework. You’re not a chapter 13 bankruptcy attorney, but that doesn’t mean you should be completely uninformed about the process.  Sites such as Bankruptcy Law Network provide excellent information and background on not only Chapter 13 bankruptcy, but about debt relief options in general.  Also check out the U.S. Court System‘s website for some excellent help.  Take the time doing as much of the legwork as you can so that you’ve got an idea about your options before you go to a lawyer.

Take a look at your budget. Chapter 13 bankruptcy involves a repayment plan that stretches over a 3-5 year period of time.  That time period, as well as the amount you’re going to need to repay, depends in large measure on your income.  Your Chapter 13 bankruptcy attorney will use your income to see the amount of money the court will want you to repay, so it’s a good idea for you to work out your monthly expenses so you’ll be able to tell if the repayment number is realistic for you.

Your payroll deductions count. If your Chapter 13 bankruptcy attorney tells you that your repayment amount will result in your creditors getting less than payment in full of what you currently owe, the Chapter 13 trustee is going to demand that you turn over the majority of your federal and state tax refunds for the entire 3-5 year period of time.  Therefore, you may want to speak with your accountant about what your paycheck would look like if you balance out the scales and don’t withhold more than is absolutely necessary to receive no refund nor owe any money at the end of the year.

Assemble the documents. Most Chapter 13 bankruptcy attorneys are going to ask you for what seems like a ton of paperwork and information in order to assess your situation and see if you’re qualified for Chapter 13 at all.  As I mentioned earlier, Westchester has a pretty high cost of living, which figures into how the Plan payments are figured out.  In my office, I usually ask for your “source documents” rather than asking you to fill out lengthy questionnaires because most of my clients in the past 15 years have found those questionnaires to be nearly impossible to figure out.  Other Chapter 13 bankruptcy attorneys who help Westchester residents do it differently, so you may want to ask that in advance.

Be honest and up-front with your lawyer. I could tell you some scary stories about people in Westchester who filed for Chapter 13 bankruptcy and ended up in a heap of trouble because they weren’t 100% honest.  I could tell you about the criminal penalties, jail time and enormous legal fees that plagued them as a result of omitting some critical fact.  I won’t do that because it will just make you nervous about the process.  So just be 100% honest and up-front when you speak with an attorney.  Trust me on this one – it’s for the best.

Be ready for the first payment. When you file for Chapter 13 bankruptcy in Westchester, your case is filed in the U.S. Bankruptcy Court for the Southern District of New York.  Though some parts of the country require the person filing for bankruptcy to make the first Chapter 13 bankruptcy Plan payment within the first 10 or 15 days of filing, you’ll have to have yours in within 30 days of the date your case is filed..  That doesn’t mean you have to mail it within 30 days – it means the money has the get there no later than 30 days after filing.  So it’s a good idea to have a few dollars in the bank towards the payment.

Payments for Chapter 13 bankruptcy cases filed in Westchester must be sent to Jeffrey L. Sapir, Esq. Trustee, 399 Knollwood Rd., Suite 102, White Plains, NY 10603.  You must send either a bank check or a money order – personal checks aren’t accepted.

Keep paying for the car and home. Some parts of the country handle your new car and mortgage payments through the Chapter 13 Plan.  As your Chapter 13 bankruptcy attorney will tell you, that’s not the case for Westchester filers.  Rather than giving the Chapter 13 bankruptcy trustee that much control, you’re going to be responsible for making direct payments on these debts.  You will be required to make your first payment on the car and the mortgage on time for each and every month of the case, and a failure to do so will lead to the possible loss of the property.  Your Chapter 13 bankruptcy lawyer may help you time the filing of your case to maximize the chances of you being able to make those payments.

Plan ahead for taking some time off. You will typically have to attend two hearings – the first is the meeting of creditors and the second is the Hearing on Conformation – in Chapter 13.  Your Chapter 13 bankruptcy attorney will not only prepare you for the appearances, but will also be there by your side.    They’re pretty simple (especially if your bankruptcy papers are prepared properly) but you will need to be there.  You will find out the dates when your case is filed, so be sure to arrange it with your employer well in advance of time.

Stay focused on the goal. Chapter 13 bankruptcy isn’t a walk in the park – it requires focus and dedication to get through it.  You’re going to be making payments, keeping in constant contact with your Chapter 13 bankruptcy attorney, and trying to make ends meet in Westchester all at the same time.  It’s a daunting task, but working together with your Chapter 13 bankruptcy attorney you’ll have a far better chance of success.

Have you been through Chapter 13?  What sorts of challenges did you come across?

_{»crosslinked«}

You think bankruptcy is for the poor and middle-class, and that the officials you elect are somehow above the problems that plague the rest of us “normal” people.  They walk on air, have special privileges, and would never be in your shoes.

After all, filing for bankruptcy is like losing in the game of life.  Right?  Not so much, it seems.

In a move that proves even the most famous people in town are merely a few calamities away from the bankruptcy court door, the mayor of Surprise, Arizona recently filed for bankruptcy.

How could such a thing happen?  Judging by news reports about the filing, Mayor Lyn Truitt was in debt to the tune of  $464,000 in mortgage, credit card and other debt when he filed his case on December 22, 2010.  The Mayor of the town of just about 90,000 makes $34,000 as mayor (my mother would say, “Don’t spend it all in one place!”) and was apparently doing alright until he was hit with the one-two punch that leads so many people into bankruptcy.

His wife died of pancreatic cancer and the real estate downturn knocked out his side business as a real estate broker.  So not only did he lose the second household income, but the medical bills were overwhelming.

Sound familiar?

“It’s very humbling,” Truitt said. “It’s a pretty major turn around in my life.”  But the experience has perhaps made Truitt more savvy to the problems people are facing every day.

“There are people across this nation that are in exactly the same situation I am through no fault of their own,” he said. “I think they’re going to realize I’m a regular person and affected by this economy just like everybody else.”

By the way, Truitt’s up for re-election this year.  It will be interesting to see how he handles his financial issues as he confronts his opponents.

Photo credit:  City of Surprise, AZ

Many people who need to file bankruptcy have other financial issues swirling around them as well, and taxes seem to loom the largest. Some have outstanding tax debts, whereas others simply haven’t filed tax returns in years. Depending on your mindset, this may or may not be a problem for you.

Income Disclosures In Your Bankruptcy Papers

As part of the Statement of Financial Affairs you’re going to need to account for your income over the past two years. That means you’re going to need to get your hands on that information, and tax returns are typically the fastest place to look. A lack of a completed return will surely make the task more difficult, but that’s easily fixable.

Income Tax Returns In Chapter 13 Bankruptcy

The problem in terms of filing bankruptcy, however, comes if you’re filing Chapter 13. Under the U.S. Bankruptcy Code (11 USC 1308) you’re required to have tax returns filed for all taxable periods ending during the 4-year period ending on the date of the filing of your bankruptcy case – and you’ve got until the day before your meeting of creditors to get it done. So if you’re behind the times, filing-wise, and don’t have everything lined up you’re going to run into some severe problems in a Chapter 13 scenario.

Depending on where you file for bankruptcy, your local rules may also require that you provide copies of tax returns to the trustee assigned to your case. Without those filed returns, the trustee may have a bone to pick with you – and that will ultimately go to the judge.

Income Tax Returns In Chapter 7 Bankruptcy

If you’re filing Chapter 7 bankruptcy then you may have problems if you haven’t filed your tax return for the past year.  Under the U.S. Bankruptcy Code (11 USC 521(e)) you’ve got until 7 days prior to the meeting of creditors to provide the case trustee with a copy of your most recent tax return.  If you’ve been diligent about your obligations this should be a snap, but if you’re sending along a 5 year old return yet showing current income then under  11 USC 521(f) you may be required to file with the court copies of your tax returns that are past due; you may also be required to file them with the court on a going-forward basis for some period of time.

Unfiled Income Tax Returns Mean No Discharge

On a larger scale, when you don’t file your tax returns prior to going into bankruptcy there’s going to be an issue with respect to how those debts are handled in the case.  Not only won’t unfiled tax debts be discharged in a Chapter 7, they won’t be paid out in a Chapter 13.   It’s a better idea to file your returns before walking into bankruptcy court so that your lawyer can help you deal with those potential obligations now rather than having them loom larger later.