Filing Bankruptcy in New York – Frequently Asked Questions

WHAT IS BANKRUPTCY?

Bankruptcy is a legal process in which an individual who is facing financial hardship can seek relief. An individual’s right to file for bankruptcy is provided by federal law, and as such all cases are brought forward in federal court.

HOW CAN FILING BANKRUPTCY IN NEW YORK HELP ME?

  • One of the most advantageous benefits of filing bankruptcy is that gives an individual a fresh financial start by either discharging in part or all of the filer’s unsecured debt.
  • Where all of the debt is not discharged, bankruptcy can create an affordable payment plan to pay a percentage of the debt.
  • It prohibits creditors from contacting you directly and protects you from any legal action that they may try to impose.
  • It can prevent or stop foreclosure on your home, as well as the repossession of a car, or any other property.
  • It gives you the opportunity to challenge fraudulent creditors or those who are trying to collect more than you owe.
  • It will enable the restoration of any utility service.

WHAT ARE THE DIFFERENT TYPES OF BANKRUPTCY?

The law provides several types of bankruptcy. Four of the most common are:

  • New York Chapter 7 bankruptcy is known as liquidation. It is the process whereby a debtor is required to give up non-exempt assets which are then sold to pay creditors.
  • Chapter 11 bankruptcy of code facilitates bankruptcy filing for partnerships and corporations through reorganizations. Individual debtors whose debts are very large may also file under this code.
  • Chapter 12 bankruptcy is reserved for the agricultural industries.
  • New York Chapter 13 bankruptcy also known as debt adjustment allows a debtor to file a payment plan to settle their debts. A Chapter 7 bankruptcy and Chapter 13 bankruptcy are the most commonly filed, and may be filed individually. Married couples may file jointly.

HOW DOES CHAPTER 7 BANKRUPTCY IN NEW YORK WORK?

Once you have provided your documents, paid your fees, and taken your first credit counseling course, your attorney will prepare and file your bankruptcy petition. About thirty days later, you and one of our qualified attorney’s will attend your Section 341 Meeting.  At this meeting an attorney appointed by the Court called the Trustee will ask you some questions to confirm the information in your petition. In the majority of cases the trustee finds that there are no assets to administer and files a report of no assets. Sixty days after the Trustee files this report, the Court can enter your discharge order and close your case.

HOW DOES CHAPTER 13  BANKRUPTCY IN NEW YORK WORK?

Many people fall behind on their mortgages and end up with their New York homes in foreclosure. For these people Chapter 13 bankruptcy may be the only option that allows them to keep their homes. The New York Chapter 13 bankruptcy payment plans allow many homeowners to make monthly payments to get caught up on their mortgages and save their homes. The plans typically last from 3 to 5 years. The Federal Judiciary recommends that you consult an attorney to determine the proper treatment of secured debts in your Chapter 13 bankruptcy plan.

Other people simply have too much income or property to file a Chapter 7 bankruptcy without running into serious issues. Chapter 13 bankruptcy plans allow these people to make payments on a percentage of their debt. Once their plan is completed, any of the dischargeable debts that were incurred prior to filing will be wiped out. Like Chapter 7 bankruptcy, filing for Chapter 13 has many benefits to help people struggling with debt. Filing for Chapter 13 bankruptcy will automatically put a stop to almost all attempts by your creditors to collect on your debt. Filing for Chapter 13 bankruptcy can potentially halt wage garnishments on salaries. Those who are having their salaries reduced can hope for some relief. Filing for Chapter 13 bankruptcy can stop lawsuits. Filing for bankruptcy can effectively halt impending lawsuits from creditors. Also, there are additional benefits of filing Chapter 13 that are not available in Chapter 7 bankruptcy. Chapter 13 bankruptcy gives the filer a greater ability to potentially modify and in some cases eliminate entirely certain liens against their property. Furthermore, Chapter 13 bankruptcy can offer assistance with debts such as student loans and certain taxes, that otherwise may not be dischargeable under Chapter 7 bankruptcy.

SHOULD I FILE UNDER CHAPTER 7 BANKRUPTCY OR CHAPTER 13 BANKRUPTCY IN NEW YORK?

CHAPTER 7 BANKRUPTCY IN NEW YORK

Chapter 7 bankruptcy is a liquidation bankruptcy that is designed to eliminate debts that are unsecured, such as medical bills and credit cards. You must have little to no throwaway income to be eligible. In the event that you make too much money, a Chapter 13 bankruptcy might be the better option.

You are assigned a trustee when you file for bankruptcy. The trustee will administer your case. The trustee’s job in a Chapter 7 bankruptcy is to sell your nonexempt property in an effort to satisfy debts to your creditors. If you own no nonexempt assets, then your creditors will receive nothing. It’s an ideal situation for those who cannot pay their debts down but need to erase their obligations and start fresh.

CHAPTER 13 BANKRUPTCY IN NEW YORK

Chapter 13 bankruptcy is designed for those who can pay back some part of what they owe. The payment method generally involves a repayment plan. This is sometimes the only option that you have if you cannot file for Chapter 7 bankruptcy in New York due to the amount of money you make. Some people choose to file for Chapter 13 bankruptcy in New York because it offers certain benefits that Chapter 7 does not (such as the opportunity to catch up on past due mortgage payments or to strip unsecured liens from your house).

You get to keep all of your assets in a Chapter 13 bankruptcy, so you have no fear of losing anything to your creditors. You are, however, tasked with paying back all or a portion of your debts through a payment plan. The total amount you have to pay can depend on several factors including your income, the types of debt you have, the value of your assets and your expenses. Our attorneys can provide an analysis of how your payment would be determined.

Chapter 13 bankruptcy is a good option for debtors who can afford to make payments on a monthly basis. Chapter 13 bankruptcy can actually help people catch up on missed mortgage or car payments, and even pay off debts that are not dischargeable, like alimony or child support.

CAN I BE FIRED FOR FILING BANKRUPTCY IN NEW YORK?

No. Your employment is protected by federal law. According to Section 525 of the Bankruptcy Code, no governmental unit of private employer may fire because you filed for bankruptcy.

HOW WILL BANKRUPTCY AFFECT MY CO-SIGNERS?

If you apply under Chapter 7, the automatic stay applies only to you. Creditors may pursue co-signers for compensation. You can protect your co-signers by voluntarily paying off your debt after the bankruptcy. Co-signers receive more protection from creditors under Chapter 13 co-debtor stay, which prohibits Creditors from seeking payment against a co-signer of a person who has filed for bankruptcy.

WILL BANKRUPTCY WIPE OUT ALL OF NEW YORK MY DEBT?

Yes, however there are exceptions. Bankruptcy will not eliminate:

  • Money outstanding on alimony or child support.
  • Loans obtained by giving out false information to a creditor.
  • Any debts incurred from “willful and malicious” harm.
  • Student loans.
  • Some taxes, including property taxes and school taxes.

Also see: New York Bankruptcy Non-Dischargeable Debt

HOW FREQUENTLY CAN I FILE FOR BANKRUPTCY IN NEW YORK?

The number of times you can file for bankruptcy and receive a discharge not only depends on the outcome or type of any previously filed cases, but also when you filed your case. If you filed under the Chapter 7 code and received a discharge, you are only eligible to file and receive a discharge on another Chapter 7 case after eight years. If you received a discharge on a prior Chapter 13 filing, and wish to receive a subsequent Chapter 13 discharge, you can only do so six years later. The law forbids you from receiving a discharge under the Chapter 13 code if you were granted a discharge under a Chapter 7 case filed in the past four years, or a Chapter 13 file put through in the last two years.

However, if you did not receive a discharge on any previous bankruptcy filing, depending on the reason(s), you may file as many times as you wish provided that the Court did not dismiss your case with prejudice.

CAN MY STUDENT LOANS BE DISCHARGED?

Under special circumstances, student loans older than seven years were dischargeable. However, an appropriation bill removed this provision in October 1998. Student loans can only be discharged if it is not guaranteed or insured by a non-profit organization or governmental unit, or funded in a way or form by a non-profit organization or governmental unit.

It may also be discharged if “undue hardship” will be imposed on the “debtor and the debtor’s dependents.”

It is important to note that an exception may be considered on a case to case basis and might be also be influenced by local court decisions. Despite the fact that a student loan might fall within these parameters, it is not subject to an automatic discharge. Additional paperwork will be required. Generally, it is extremely difficult to get a total discharge of student loan debt.

HOW WILL MY UTILITY SERVICES BE AFFECTED?

Public utility services may require you to pay a deposit for future service, as well as for services after you file for bankruptcy if you are behind on your payments. However, they are prohibited for discontinuing services simply because you filed for bankruptcy. Also, the deposit should not be more than twice your average monthly bill, and your past due amounts are dischargeable. Our attorneys will work with your utility companies to ensure your rights are protected.

IF MY EX-SPOUSE FILES FOR BANKRUPTCY, WHAT EFFECT WILL IT HAVE ON OUR SETTLEMENT?

Support, alimony and maintenance are all non-dischargeable debt. Rules pertaining to bankruptcy in divorce settlements are covered by 11 U.S.C. Section 523(a)(15). These debts can only be discharged if:

“(A) the debtor does not have the ability to pay such debt from income or property of the debtor not reasonably necessary to be expended for the maintenance or support of the debtor or a dependent of the debtor and, if the debtor is engaged in a business, for the payment of expenditures necessary for the continuation, preservation, and operation of such business; or
(B) discharging such debt would result in a benefit to the debtor that outweighs the detrimental consequences to a spouse, former spouse, or child of the debtor.”

WILL CREDITORS STOP CALLING ME IF I FILE FOR BANKRUPTCY?

Yes. Upon filing for bankruptcy, the Automatic Stay goes into effect immediately. Creditors are prohibited from calling you and taking any debt collection action against you.

WILL I STILL BE ABLE TO GET A CREDIT CARD IF I FILE FOR BANKRUPTCY IN NEW YORK?

Yes, you may have a few options. Although you may not be able to obtain an actual credit card, you may use a debit/bank card which can function as a credit card. If your creditor allows you to, you may able to keep the credit card that you have. A third option is obtaining a credit card which is secured by your bank account.

IF I’M MARRIED, DOES MY SPOUSE HAVE TO FILE WITH ME?

No, you do have the option to file for bankruptcy by yourself. However, that does not mean that your spouse will not be liable for any joint debt. Filing together will enable you to double your exemptions. Circumstances in which only one spouse has non-dischargeable debt, or when only one spouse has incurred debt, it is a better option if only that spouse files. In the case of joint debt, any discharged debt will appear on both spouses’ credit record.

IF I FILE FOR BANKRUPTCY, WILL I LOSE ALL OF MY NEW YORK PROPERTY?

When you file bankruptcy, there is certain property that you do not have to surrender. This is referred to as “exempt” property. Exemptions laws are state specific.

HOW WILL FILING BANKRUPTCY IN NEW YORK AFFECT MY BUSINESS?

Even though you might be struggling as a small business owner, filing for Chapter 7 bankruptcy might be the key to saving your business, or at least provide an easy way to dissolve it. In addition to business help, a Chapter 7 bankruptcy can also provide relief from personal liability for company debts.

IF I AM AN UNDOCUMENTED IMMIGRANT IN NEW YORK, CAN I FILE FOR BANKRUPTCY?

Yes. You do not have to be a U.S citizen or a legal resident to file for bankruptcy relief. If you live, own property or have a business in the United States, you may file for bankruptcy. However, you have to able to prove your identity to the court. A Social Security number or any other government issued identification will suffice. Please note that a bankruptcy filing record is public information and can be accessed at anytime. It is advisable to consult with an immigration attorney as a bankruptcy filing may have a negative effect on your immigration status.

AM I LIABLE FOR DEBTS THAT ARE BUSINESS RELATED?

Your liability for business debts depends on the formation of your actual business. If you are the sole proprietor of the business that means you’re the only owner of the business. In this case you are personally responsible for all business debts. When you file for bankruptcy in this situation you are actually filing for a personal bankruptcy.

If your business was created as a limited liability company (LLC), partnership, or corporation, there are more factors to consider when determining liability. If your company is an LLC or a corporation then you in most cases are not liable for business related debt unless you personally guaranteed the debt. If you’re in a partnership then you can be held liable for your business debts if you are a general partner, but not if you are a limited partner.

If you have more questions about bankruptcy in New York, please fill out and submit the form to the right of this page. A bankruptcy professional will revert you.