Differences between Filing Chapter 7 or Chapter 13 Bankruptcy in NY

Most of know what bankruptcy is – to an extent. However, when debtors are considering filing, it's important to understand the fundamental differences between filing a Chapter 7 and a Chapter 13 bankruptcy, the benefits of filing in federal court and how long the process takes for each. Our legal expert, New York attorney Elliot Schlissel, provides some insight.

NY Bankruptcy Attorney Elliot Schlissel

Elliot Schlissel, a New York bankruptcy attorney, explained the fundamental differences between a Chapter 13 and a Chapter 7 bankruptcy:

  • Chapter 13: Chapter 13 is generally designed to be a wage-earner’s plan. The reason most people file a Chapter 13 bankruptcy in New York is that they own a house, the house is in foreclosure and they want to keep it or there are some other significant assets besides their house that they seek to keep.
  • Chapter 7: In most other instances, people file a Chapter 7, which is a straight bankruptcy. The benefit of a Chapter 7 bankruptcy in New York is that you’re in and out of it in anywhere from three to six months – and there’s no payment plan. In a Chapter 13 bankruptcy, you’re entering into a repayment plan that lasts anywhere from three to five years.

Benefits of filing in federal court

Bankruptcy is a federal proceeding. According to Schlissel, before you file for bankruptcy, what the attorney normally does is review the situation and see if it is possible to renegotiate your debts. He told us:

Very often, you can work with creditors and they’ll accept lesser amounts of payments outside of bankruptcy. Also, a lot of banks and other financial institutions today that hold mortgages are willing to renegotiate the terms of their mortgages to prevent people from going into foreclosure.

The threat of filing for bankruptcy can sometimes be used as leverage with creditors to make them more reasonable regarding the renegotiation of debts. In addition, some states have renegotiation programs which can also be undertaken.

How long does the bankruptcy process generally take?

While every situation is different, Schlissel says that Chapter 7 bankruptcies take anywhere from three to six months – start to finish – while Chapter13 bankruptcies can take anywhere from three to five years.

If you would like to obtain additional information about filing for bankruptcy, contact an experienced bankruptcy law attorney to discuss your situation free of charge.