Filing Bankruptcy When You’re Behind on Mortgage Payments in New York

Filing for bankruptcy in New York can be a daunting experience, especially if you’re behind on mortgage payments. Understanding how bankruptcy works in New York and its implications on your mortgage situation is crucial for making informed decisions about your financial future.

When you are facing difficulties in making your mortgage payments, it’s essential to know that bankruptcy may provide relief in certain situations. In New York, the two primary types of bankruptcy individuals might consider are Chapter 7 and Chapter 13.

Understanding Bankruptcy Options

Chapter 7 Bankruptcy: This type of bankruptcy, often referred to as "liquidation bankruptcy," allows you to eliminate unsecured debts, such as credit card debt or medical bills. However, it is important to note that Chapter 7 does not directly provide a solution for mortgage arrears. If you are significantly behind on your mortgage payments and wish to keep your home, Chapter 7 may not be the best option.

Chapter 13 Bankruptcy: On the other hand, Chapter 13, or "reorganization bankruptcy," allows you to create a repayment plan to catch up on missed mortgage payments over a three to five-year period. This type of bankruptcy might be more advantageous for homeowners who want to retain their properties while reorganizing their debts.

How Bankruptcy Affects Your Mortgage

When you file for bankruptcy, an automatic stay goes into effect, which temporarily halts foreclosure proceedings. This gives you breathing room to develop a strategy for dealing with your debts. During this period, you can decide whether to reaffirm your mortgage, surrender the property, or negotiate with your lender.

Additionally, Chapter 13 allows you to make up missed payments through your repayment plan, which can make keeping your home more feasible. It is crucial to continue making your regular mortgage payments during this time to avoid further complications.

Eligibility for Bankruptcy

To file for Chapter 7 or Chapter 13 bankruptcy in New York, you must meet certain eligibility requirements. For Chapter 7, your household income must be below the state median for your family size. If your income exceeds this limit, you may need to file for Chapter 13 instead.

Furthermore, you should take the means test, which evaluates your income and expenses. Understanding your financial situation will help you determine the most suitable bankruptcy option for your circumstances.

Seeking Legal Guidance

Filing for bankruptcy involves complex legal procedures and paperwork, making it highly advisable to consult with a qualified bankruptcy attorney in New York. An attorney can help you navigate the process, advise you on the best course of action for dealing with your mortgage, and protect your rights throughout the proceedings.

With appropriate legal counsel, you can better understand your options for keeping your home and resolving your financial obligations. This professional support can significantly impact the outcome of your bankruptcy case.

Conclusion

While being behind on mortgage payments can lead to stress and uncertainty, filing for bankruptcy in New York offers a potential path toward financial relief and stability. By understanding the types of bankruptcy available and consulting with an experienced attorney, you can make informed decisions that could help you retain your home and reclaim control over your financial situation.