Bankruptcy Law

17We understand how stressful life may become when you owe more than you can afford to pay back to your creditors. We help our clients to get a fresh start, free from harassing creditor phone calls, lawsuits, repossessions and garnishments, by utilizing the Federal Bankruptcy Law. Bankruptcy protection is a privilege granted to the debtors under the United States Constitution. The most common bankruptcy cases for individuals are chapter 7 and chapter 13.

Deciding between Chapter 7 or Chapter 13 Bankruptcy is often a difficult decision and requires careful and detailed evaluation which will typically involve the assessment of secured debt versus unsecured debt, amount of equity in property owned by the debtor, amount of assets, available exemptions, income for purposes of a ‘means test’ and many other variable factors. Therefore it is imperative to discuss your options with an experienced attorney to ensure your interests are protected for a successful outcome.

Chapter 7 for Individual Consumer Debtors

Chapter 7, a liquidation proceeding, is the most common and most favored form of bankruptcy as it eliminates, or “discharges” most of a debtor’s unsecured debt (debt not “backed” by collateral). Once you receive a Chapter 7 debt discharge, you no longer owe that debt. However, Chapter 7 does not discharge all of a person’s debt. Certain debts cannot be discharged under Chapter 7, such as:

– Most taxes
– Child support, maintenance, alimony, and most matrimonial settlements
– Debts obtained through fraud or false pretenses

– Court-ordered fines and criminal restitution

– Most student loans

We can help you determine what assets are exempt and which debts are not dischargeable.

In addition, an individual or couple filing for protection Chapter 7 bankruptcy must complete an approved Credit Counseling Course BEFORE a petition can be filed. The Office of the United States Trustee (an arm of the U.S. Department of Justice responsible for overseeing the administration of bankruptcy cases) has established a list of approved providers. In most cases, the course can be completed at home either over the internet or by telephone. For more information about these providers, please contact me. Upon completion of the course, you will receive a certificate of completion which must be filed with your petition.

Document Requirements – Prior to the filing of any petition in bankruptcy, you are now required to provide the Court with a copy of your proof of income for the sixty day period prior to filing and a copy of your latest filed tax return with proof of filing. Proof of filing can be generally be confirmed by providing a tax transcript from the Internal Revenue Service. We can assist you in this regard. If you cannot provide these documents, it may still be possible to file if you can substantiate the reason that you are unable to provide these documents (such as extended periods of unemployment or disability).

The Chapter 7 Process

An initial consultation with your lawyer is of utmost importance in order to evaluate your unique financial situation. Your debts, income, expenses and personal property will be assessed in order to ascertain whether a Chapter 7 filing is the best course of legal action for you. Once we obtain all of your relevant information and documentation, we can start preparing your Bankruptcy Petition and Schedules and subsequently file them with the appropriate court. Shortly thereafter, a bankruptcy trustee will be appointed, to whom you will turn over all non-exempt property (if any such property exists) and who will then convert it to cash for distribution among the creditors. You are entitled to keep a limited amount of property which qualifies as exempt and is protected.

The following are examples of assets which are exempt in New York State:

  • A portion of the equity in your home
  • One car of limited value
  • Most household items such as furniture, TV, radio, appliances
  • Personal property such as clothing or a wedding ring
  • Most Public Benefits such as Social Security, Disability, Veterans Benefits, Worker’s Compensation
  • Alimony, Child Support
  • Qualified Retirement Accounts and Pensions

 

The Trustee is responsible for selling or “liquidating” those assets that do not fall within the allotted property exemptions, in order to repay your creditors.

From the moment your bankruptcy petitions, schedules and related documents are filed with the court, you are granted an automatic stay, which in essence is protection under 11 U.S.C. § 362 of the Bankruptcy Code. From that moment and through the duration of your bankruptcy proceeding, it is strictly prohibited for creditors to harass you. In addition, during this period, your wages cannot be garnished (any current garnishments are lifted) and mortgage foreclosures are halted.

Roughly 30-40 days after your Bankruptcy filing, you will attend a Section 341(a) Meeting of Creditors with the Bankruptcy Trustee. This meeting is brief and the trustee will ask you several questions on the record.

Usually 60 days after your Section 341(a) Meeting of Creditors you will receive a discharge of indebtedness in the form of a discharge notice for all dischargeable debts, releasing you from personal liability for those debts.

Please note that the outline above highlights only some of the major procedural requirements under the present law. There are still a number of basic eligibility requirements that have been carried over from the pre-2005 law – in particular – the determination of exempt and non-exempt assets. Even if you do not “pass” the Means Test, if you wish to retain assets with values above those that may be deemed to be protected, or exempt, under applicable law, you may still be required to file for protection under Chapter 13 bankruptcy in order to protect those assets from liquidation. For more information, please contact me.

Chapter 13 Reorganization

A bankruptcy case under Chapter 13 is often called a “reorganization”, which is also known as “Adjustment of Debts of an Individual with Regular Annual Income,” Chapter 13 provides debt relief for individuals or consumers. Chapter 13 bankruptcy is slightly different from Chapter 7 bankruptcy, as it does not discharge debt completely, however, it does structure it in a way that is manageable. It enables you to keep valuable assets, like a house, while making payments to creditors (through the trustee) based on your disposable income as determined by the means test and future income estimations over the life of the plan, usually over a three to five year period. At a confirmation hearing, the court either approves or disapproves the plan.

Filing under Chapter 13 of the Bankruptcy Code affords you the opportunity to repay a percentage or 100% of your debts under better terms ( i.e. lower or no interest). In essence, a Chapter 13 Bankruptcy involves the restructuring of debts which allows you to use whatever disposable income you may have in the future to pay off your creditors. Filing Chapter 13 Bankruptcy is therefore appropriate for a debtor who has a regular income, and thus can afford to request such adjustments or reductions.

The United States Bankruptcy Code gives you a ceiling of 5 years, within which your creditors must be paid back. While your attorney will safeguard your interests, the entire process is carried out under the supervision of the courts.

While debtors are allowed to keep all of their property, the court approves a new interest-free plan for repayment. A written plan is created giving details of all the scheduled payments that will occur, and the duration of the same. The repayment schedule usually begins within 30-45 days after the case is filed. Usually, monthly payments are made directly to the appointed Chapter 13 trustee who then distributed the money to the creditors pursuant to the plan. Also, as per the law, the creditors must strictly adhere to the repayment plan approved by the court and are in fact prohibited from collecting on any claims from the debtor.

Another advantage of a Chapter 13 filing is that a repayment plan can be confirmed even if creditors are not in accordance with the terms of the plan. The creditors may object, but the court decides if such objections are merit-based. Upon successful completion of the plan, and all required payments having been made to the bankruptcy court, the debtor receives a discharge similar to that received in Chapter 7.

For more information, please contact us.