Bankruptcy Law


How many different types of personal bankruptcy are there for individuals?

There are three. They are: Chapter 7, 11 and 13.

What is the difference between chapter 7 and 13?

Chapter 7- a "liquidation and fresh start"- the type of bankruptcy that most clients think about. The end result is a discharge which wipes out most of a person’s debts. What property can I keep after I file for chapter 7 bankruptcy? Either (1) $2,500 of cash and/or bank accounts; or (2) 50,000 of equity in a home. In addition, each debtor can keep up to $5,000 of certain types of personal property, plus one car having equity not to exceed $2,400.00 plus an unlimited pension, IRA or SEP money.
Chapter 13 allows a filer to keep certain assets that they would like to keep such as a car or house that they could not otherwise keep under Chapter 7. In return for being able to keep assets, they have to make payments to a trustee over a three to a five year period.

Do I have to wait until I have no money before I file for bankruptcy? (NY)

No. By consulting with knowledgeable counsel early, you can learn what assets you may be able to keep if you do file for bankruptcy and thereby maximize what you will be able keep. New York Bankruptcy Law sets forth a list of assets that are exempt (may not be taken by creditors) and which, in most cases, a debtor is allowed to keep even after filing for bankruptcy. It is rarely a good policy to wait until all assets are gone before filing for bankruptcy, as assets that normally would be exempt would now be lost. It would be beneficial to consult an attorney to determine which assets are exempt. (Courtesy of the New York City Bar Association)

Will I lose my house if I file for bankruptcy? (NY)

Not necessarily. Many persons that file bankruptcy are able to keep their homes (including condominiums and cooperative apartments). The answer in your case will depend on a number of factors, including, the value of the home, the amount of any mortgages, your ability to make payments towards a mortgage, as well as whether any modification of the mortgage might be available. If the filer can maintain their mortgage and tax payments, in many instances under New York Bankruptcy Law, they can file for bankruptcy and keep the home. (Courtesy of the New York City Bar Association)

Would my credit be destroyed by filing for bankruptcy in New York?

Not necessarily. The effect a bankruptcy has on one’s credit is greatly dependent on the filer’s ability to pay their bills both prior to filing for bankruptcy and the debts, it any, remaining after the bankruptcy case has been completed. Therefore, bankruptcy may have little to no net affect on a filer’s credit rating. However, a bankruptcy will remain on a credit report for 10 years. It is also important to bear in mind that debtor's often receive credit card solicitations in the mail following filing for bankruptcy. Creditors recognize that the debtor will not be able to file another bankruptcy, in most instances under New York Bankruptcy Law, for up to 8 years, and the debtor's past debts are about to be wiped clean. Many creditors would rather loan money to someone free from debt without the luxury to file for bankruptcy again for some time, than to someone is in debt and able to file for bankruptcy tomorrow. (Courtesy of the New York City Bar Association)

I own a small cooperative apartment. If I file for bankruptcy, will I lose my apartment? (NY)

If the fair market value of the apartment you live in, after deducting any mortgages, is less than $50,000 singly, or $100,000 for a married couple filing jointly, the apartment would be exempt under the bankruptcy laws in New York and you should be able to keep it.

Can Con Edison stop electric service if I file for bankruptcy owing them money? (NY)

No, however, it is probable a security deposit would be required for a continuation of service.
(Courtesy of Association of the Bar of the City of New York)

If my ex files for bankruptcy, would he be able to stop making child-support payments? (NY)

No, under New York Bankruptcy Law a spouse liable to child-support payments does not relinquish this liability by filing for bankruptcy. (Courtesy of Association of the Bar of the City of New York)

Is there any way that I can get bankruptcy relief from my student loans? (NY)

It is unusual for one to obtain bankruptcy relief from student loans. However, there have been exceptions for people who have a displayed desperate hardship. These exceptions are very rare under New York Bankruptcy Law.
(Courtesy of Association of the Bar of the City of New York)

Can I go to jail if I file for bankruptcy under New York Bankruptcy Law? (NY)

New York does not have debtor prisons. Debtor's prisons in the US have been illegal since the 1800's.
(Courtesy of Association of the Bar of the City of New York)

How does the new "means test" affect my chances of filing a bankruptcy petition under New York Bankruptcy Laws Chapter 7? (NY)

If it is applicable and one is unable to pass the “means test” under New York Bankruptcy Law, there is a presumption that the filer is too eligible to file a liquidation bankruptcy, (Chapter 7). It is very important to meet with a knowledgeable attorney to determine if the “means test” is applicable, whether or not you “pass” the means test”, and if you do not pass, the viability of success for a rebuttal of a presumption of ineligibility in court. Even if a person is not eligible for a Chapter 7, they may still be eligible to file under Chapter 13 and obtain that type of relief in bankruptcy.

My wife and I missed the October 17, 2005 deadline to file bankruptcy under the old bankruptcy laws in New York. I make $35,000 per year and my wife makes $12,000 working part time and we have about $32,000 in credit card debt. I understand there are new bankruptcy laws with more stringent requirements for filing for Chapter 7 bankruptcy. Would we be eligible? (NY)

It is true there are more stringent requirements to file for Chapter 7 under the new bankruptcy laws. New York Bankruptcy Law now requires those filing to first obtain a credit counseling certification prior to actually filing. New bankruptcy laws also stipulate one must now complete a financial management course after filing the case. However, for a household of two persons that earns below the median income in New York of $57,902, the “means test” formula would not be applied. Therefore “eligibility” for a Chapter 7 filing under those circumstances should not be problematic.

I earn over $60,000 per year, live alone in Manhattan, and have accumulated over $45,000 in credit card debt and student loans. My rent is over $2,000 per month, I have telephone and other utility bills of about $400 per month, and I take home about $3,500 per month. Can I still file for Chapter 7 under the new bankruptcy laws? (NY)

An income over $60,000 per year is in excess of the median income in New York, for a family size of one, thus, under New York Bankruptcy Law, the means test will apply. This is to ensure the Chapter 7 filing is not abusive. However, based on IRS standards for housing and utilities in Manhattan ($2936 per month for housing and $611 for utilities), there should be no difficultly in passing the means test, as it also includes expenses allocated for transportation ($302), personal living expenses ($691 per month food, clothing etc) and a variety of !¡±other necessary expenses!¡L (such as internet, medical/dental and taxes). It should be noted that even where the debtor actually spends less than the IRS standards, the debtor has been entitled to use the IRS standards, excepting the other necessary expenses category.

I am a consultant in New York and my income varies. In some periods, I make about $5,000 per month while at other times I make about $3,000 per month. My wife, who makes about $5,000 per month, and I are separated and no longer live together. I own a cooperative apartment with my wife, which has about $90,000 in equity. I have over $50,000 in debt. Under the new bankruptcy laws can I file for Chapter 7 bankruptcy? If I do file for Chapter 7 bankruptcy would I risk losing my cooperative apartment in New York? (NY)

The means test is based on the average of the last six months income of the filer prior to filing for bankruptcy. If the filer does not live with their spouse, the spouse’s income is not included. Otherwise, under New York Bankruptcy Law, the spouse’s income would be included even if the spouse did not file. Under such circumstances filing for bankruptcy after a period of time in which the filer was making less per month would be the most prudent course of action, provided the median income generated from the means test would be less than the median income in New York. Under New York Bankruptcy Law, establishing the filer’s income fluctuates on a regular basis might provide a special circumstance that can be utilized to rebut the means test presumption of abuse. In the case of the cooperative apartment, under the new bankruptcy laws the exemption has been increased in New York to $50,000. A cooperative apartment owned jointly by the filer and a non-filing spouse may entitle the filer to one-half the total equity in the cooperative apartment, (the non-filing spouse should be able to keep her share of the residence). If this equity (value less mortgages and liens) is less than the $50,000 exemption allowed under New York Bankruptcy Law the filer would not risk losing your apartment. A new appraisal of the cooperative apartment’s value should be obtained prior to filing bankruptcy in New York to make sure that you are using the correct values.

I lived in Los Angeles until about 18 months ago when I moved to New York City, where I was making about $6,000 per month. I was recently laid off and now receive unemployment compensation. I am over 62 and also receive about $1500 per month in social security and a pension of about $1,500 per month. My debts include credit cards and medical expenses of about $45,000. I have a few assets and I want to make sure these are exempt if I file for Chapter 7 bankruptcy under the new bankruptcy laws. I had to use a cash advance of about $1,500 last week to pay my living expenses. Do I qualify for Chapter 7 under New York Bankruptcy Law? (NY)

To file for Chapter 7 bankruptcy under New York Bankruptcy Law the filer must generally have resided in New York for the past six months. If you have lived in New York for less than six months, you should review your situation with an attorney. I f you have lived In New York for less than tow years, you should consult with a knowledgeable attorney about whether, or how it will affect the exemptions that you would be entitled to.
When filing for bankruptcy after recently being laid off, it might be wise to wait in filing since income for the “mean test” is determined by viewing income generated in the last 6 months prior to filing. Social security and some unemployment compensation are both not included as part of income for purposes of determining whether the filer’s income exceeds the median income in New York based on family size. New York Bankruptcy Law states any cash advance made within 70 days prior to filing in excess of $7825 would be presumed to be non-dischargeable. It is advisable to wait until this 70 day period expires, preferably a little longer, prior to filing for bankruptcy in New York.

Can creditors sue me after I file for bankruptcy?

No. Once a person files for bankruptcy, the “automatic stay” prohibits creditors from contacting you, suing you, garnishing your wages, or restraining your checking or savings account.




 
 

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