- New York belongs to the federal court system's Second District. To apply for Chapter 13, you download bankruptcy forms and instructions from the U.S. Courts website, then apply to whichever of the district's 10 bankruptcy courts covers your part of the state. The website provide addresses for all 10. You'll also have to submit a complete account of your income, expenses, debts and creditors with your bankruptcy form. If you omit any details, that can give the court grounds to reject your petition.
- Bankruptcy law recognizes three classes of debt in Chapter 13. Priority debts, which cannot be discharged include alimony, back tax debt, student loans and child support. Mortgages and auto loans are secured debts, because they involve a lien, or claim on your property. Chapter 13 does not discharge secured debts. Unsecured debts such as medical bills, credit card bills and payday loans will be wiped out at the end of the plan after you've done your best to pay them off.
- If you make below the median income for New York state, you'll spend three years paying down your unsecured debts with disposable income; if it's above the median, the payment plan will run five years, the U.S. Courts state. Disposable income is what you have left after budgeting for living expenses and priority and secured debts. If you're behind in your mortgage or car loan payments, you can catch up on your back debt as part of the payment plan until you're current again.
- If you complete the payment plan, the court will wipe out your remaining unsecured debts. If circumstances outside your control make it impossible to carry out the payments you agreed to (illness that leaves you unable to work, for example), you can request that the court give you a hardship discharge. The U.S. Courts website states this is acceptable if your creditors have received as much money as they would have had you liquidated your assets to pay them off.
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