Filing for bankruptcy can provide much-needed financial relief for individuals and families struggling with overwhelming debt. However, many people considering bankruptcy in New York have questions about the costs involved, including potential monthly payments. This guide will explore the various factors that determine bankruptcy costs and monthly payments in New York, as well as provide valuable information on the bankruptcy process.
Factors That Can Affect Monthly Payments in New York Bankruptcy Cases
Several factors can influence the monthly payments in a New York bankruptcy case.
Type of Bankruptcy Filed
Chapter 7 bankruptcy does not involve monthly payments, and its filing costs are paid during the filing process only. Meanwhile, Chapter 13 bankruptcy entails a repayment plan spread out over three to five years, which means the debtor will make monthly payments.
Income and Expenses
The filer’s income and allowable expenses play a significant role in determining disposable income, which directly affects the monthly payment amount in a Chapter 13 plan.
Types of Debt
Certain types of debt, such as mortgage arrears, car loans, recent taxes, and child support (collectively classified as priority debts), must be paid in full through the Chapter 13 plan. This can increase the monthly payment amount.
Length of the Repayment Plan
Chapter 13 plans can last from three to five years. A longer plan may result in lower monthly payments but a higher total cost due to additional interest and trustee fees.
Value of Non-Exempt Assets
If a filer has significant non-exempt assets, they may need to pay more through the Chapter 13 plan to keep those assets, potentially increasing the monthly payment.
Local Bankruptcy Court Rules
Each bankruptcy court district in New York may have specific local rules that can affect plan payments and requirements.
Chapter 7 Bankruptcy Costs in New York
For those who qualify, Chapter 7 bankruptcy typically does not involve monthly payments. Instead, the costs are generally paid upfront or before filing. Here’s a breakdown of the typical costs associated with Chapter 7 bankruptcy in New York:
Court Filing Fee
The current court filing fee for Chapter 7 bankruptcy is $338. This fee is paid directly to the bankruptcy court when filing the petition.
Attorney Fees
Attorney fees for Chapter 7 bankruptcy in New York can vary widely depending on the complexity of the case and the attorney’s experience. According to recent data, the average cost for a Chapter 7 bankruptcy attorney in New York ranges from $1,500 to $3,000.
Credit Counseling and Education Courses
Before filing bankruptcy and before receiving a discharge, individuals must complete mandatory credit counseling and debt education courses. These programs typically cost between $20 and $100 each.
Total Chapter 7 Costs
Adding up these expenses, the total cost for a typical Chapter 7 bankruptcy in New York can range from approximately $1,900 to $3,500. Note that these costs are generally paid upfront or before filing, rather than through monthly payments.
Chapter 13 Bankruptcy Costs and Monthly Payments in New York
Chapter 13 bankruptcy involves a repayment plan, which results in monthly payments to the bankruptcy trustee. The costs and monthly payments for Chapter 13 bankruptcy in New York are more complex and can vary significantly based on individual circumstances.
Court Filing Fee
The current cost to file for Chapter 13 bankruptcy is $313. This fee is typically paid when filing the petition.
Attorney Fees
Attorney fees for Chapter 13 bankruptcy in New York are generally higher than those for Chapter 7 due to the increased complexity and duration of the case. The average cost for a Chapter 13 bankruptcy lawyer in New York ranges from $3,500 to $5,000 or more.
Credit Counseling and Education Courses
As with Chapter 7, individuals filing Chapter 13 must complete mandatory credit counseling and debt education courses, typically costing between $20 and $100 each.
Trustee Fees
In Chapter 13 cases, the bankruptcy trustee receives a percentage of the payments made through the repayment plan. This fee is typically around 10% of the total plan payments.
Monthly Plan Payments
The monthly payments in a Chapter 13 bankruptcy plan are determined by several factors:
- Disposable income
- Value of non-exempt assets
- Types and amounts of debt
- Length of the repayment plan (three to five years).
To calculate the monthly plan payment, the court considers the filer’s disposable income (income minus allowable expenses) and the total amount of debt that must be repaid through the plan. This amount is then divided by the number of months in the plan (36 to 60 months) to determine the monthly payment.
For example, if a filer has $30,000 in debt to be repaid through a five-year plan, the base monthly payment would be $500 ($30,000 ÷ 60 months). However, this amount may be adjusted based on the filer’s disposable income and other factors.
Total Chapter 13 Costs and Monthly Payments
The total cost of a Chapter 13 bankruptcy in New York, including attorney fees, court fees, and trustee fees, can range from $4,000 to $6,000 or more. However, some of these costs are typically included in the monthly plan payments rather than paid upfront.
Monthly payments in a Chapter 13 bankruptcy can vary widely, from as low as $100 to $3,000 or more, depending on the individual’s income, expenses, and debt obligations. It’s important to work closely with an experienced bankruptcy attorney to determine the most appropriate and affordable payment plan for your specific situation.
The New York Means Test and Its Impact on Bankruptcy Costs
The means test is a crucial factor in determining eligibility for Chapter 7 bankruptcy and can impact the costs and monthly payments in both Chapter 7 and Chapter 13 cases.
How the Means Test Works
The means test compares the filer’s average monthly income (in the six months prior to filing) against the median income for a household of the same size in New York. As of May 15, 2024, the median annual income limits for New York are:
- One-person household: $69,135
- Two-person household: $87,550
- Three-person household: $105,435
- Four-person household: $131,389.
In the event that the petitioner’s income falls below the median, they are immediately eligible for Chapter 7 bankruptcy. If, on the other hand, their income exceeds the median, they must do the full means test, which determines whether there is disposable income available to pay off debts.
Impact on Chapter 7 Costs
Passing the means test allows individuals to file for Chapter 7 bankruptcy, which typically has lower overall costs and does not involve monthly payments.
Impact on Chapter 13 Costs and Monthly Payments
If a filer does not pass the means test for Chapter 7, they may need to file Chapter 13 bankruptcy. The means test results can also affect the required length of the Chapter 13 plan and the amount of debt that must be repaid, both of which influence monthly payment amounts.
Strategies for Managing Bankruptcy Costs in New York
While bankruptcy costs and monthly payments can be significant, there are several strategies that can help make the process more affordable:
Payment Plans for Attorney Fees
Many bankruptcy attorneys in New York offer payment plans for their fees, allowing clients to spread the cost over several months.
Fee Waivers
In some cases, individuals with very low income may qualify for a waiver of the bankruptcy court filing fee.
Negotiating with Creditors
Before filing bankruptcy, it may be possible to negotiate with creditors to reduce debts or create more manageable payment plans, potentially avoiding the need for bankruptcy altogether.
Careful Budgeting
Creating a detailed budget can help individuals save money to cover bankruptcy costs and prepare for potential monthly payments in a Chapter 13 plan.
For Important Guidance on Bankruptcy Payments in New York, Call John D’Amato
Navigating the bankruptcy process in New York can be complex, and the costs and potential monthly payments can vary significantly based on individual circumstances. With an experienced bankruptcy attorney, you can better understand your options, determine the best type of bankruptcy for your situation, and develop a plan that balances debt relief with affordability.
Attorney John D’Amato has over 29 years of experience helping individuals and small businesses in New York navigate the bankruptcy process. Providing personalized attention to each client, Mr. D’Amato can strategize with you regarding the potential costs and monthly payments in New York bankruptcy. Our entire team at John D’Amato PLLC is eager to guide you towards the best solution for your financial situation.
If you’re struggling with debt and considering bankruptcy in New York, contact John D’Amato PLLC at (716) 703-9099 for a free and confidential consultation.