BANKRUPTCY PROCESS IN NEW YORK: CREDIT COUNSELING, MEANS TEST & REQUIRED DOCUMENTS
Bankruptcy process in New York can be a lengthy process, but it does not have to be a difficult one. Mostly, it requires filling out the paperwork correctly and following the necessary steps. When you file for bankruptcy, your case is overseen by a Court appointed called the New York bankruptcy Trustee. Most bankruptcy filers do not have to appear with the Court and deal mainly with the Trustee. Although a bankruptcy filing may seem more administrative, it is a legal process. Failure to comply with bankruptcy laws and the inability to meet the requirements to file bankruptcy may result in your case being dismissed. When filing for bankruptcy there are a number of steps to be taken within the bankruptcy process in New York order to receive favorable outcome:
- 2005 Bankruptcy Act Credit Counseling: The bankruptcy process in New York indicates that all individuals who file bankruptcy on or after October 17, 2005 are required to partake in credit counseling within six months prior to filing for relief. In addition, you will also be required to complete an instructional course in financial management after filing bankruptcy. This applies for both Chapter 7 and Chapter 13 bankruptcy filers. If you forgo credit counseling, your bankruptcy petition will not be approved.
- 2005 Bankruptcy Act Means Test: The 2005 Bankruptcy Means Test is an important part of the New York bankruptcy process. It is an analysis of your income to determine whether you are eligible to file for either a Chapter 7 bankruptcy or a Chapter 13 bankruptcy. The courts will analyze your average income for six months before filing against the median income for New York. If your average income is less than the median, then you qualify for Chapter 7. However, if your income surpasses the median, additional parts of the means test will be exercised to determine if you may still file for Chapter 7, or if you have to file Chapter 13. (New York Means Test)
- Paperwork Checklist: Having all of your necessary paperwork is an important part of the bankruptcy process in New York. In order to file for bankruptcy, you must provide the following documents as proof of your current financial status:
- Current income sources. Declare any funds that been received in the past six months and also any money that you may receive in the future, how frequently you will receive this money and the source of the income. Your income may be made up of regular working income, income from side jobs, interest and dividends from investments, unemployment compensation. You are also required to disclose any funds provided by friends or family that contribute to the household income. You are not obligated to include income from Social Security.
- Monthly living expenses. Include total amount spent per month for food, rent, utilities, medical expenses, clothing, taxes, child support, alimony and child support. When calculating variable monthly expenses, an average based on the past year’s monthly bills is acceptable.
- Debts, both secured and unsecured. When you are providing information about your debts, be sure to include the current balance, the name of the creditor, the monthly payment towards the debt, as well as any other information pertaining to the debt.
- Assets and property. Include anything valuable such as savings accounts, real estate, stocks, motor vehicles, collectibles and art. You can also include items such as clothing and other personal possessions, especially if they are valuable. Personal possessions are generally protected by bankruptcy exemptions. It is recommended to compile a comprehensive list and check with your Trustee as to what is exempt in your state.
- Documents for any loans.
- Major financial transactions for the past two years. This includes major purchases as well as sales.
- Tax Returns for the past two years. The Court may also accept transcripts of tax returns.
This information is also used to determine which properties are exempt from seizure as per the New York State Exemptions.
Chapter 13 Bankruptcy Requirements
If you choose to file under the Chapter 13 bankruptcy code, an important bankruptcy process in New York is proposing a payment plan to the Court. Furthermore, you are required to indicate to the Court how you will be able to afford the monthly payments towards the plan after basic monthly expenses have been paid. Priority expenses such as domestic support and taxes must be paid in full. Other debt such as credit cards and medical bills can be paid in part. Some unsecured debts may be repaid for only 10 cents on the dollar, however that depends on the details of your case.
Chapter 13 Bankruptcy Payment Plan Requirements
- The plan must be delivered in good faith.
- Creditors must be paid just as much as they would have received in a Chapter 7 bankruptcy
- All disposable income must be used to contribute towards the payment plan for a minimum of three years, or five years for those filers who do not meet the requirement in which you are obligated to pay creditors just as much as a Chapter 7 bankruptcy.
Once you have filed a Chapter 13 bankruptcy, you have to make your monthly payments to the Court as the the bankruptcy process in New York. Either you or your attorney can make arrangements to have the amount deducted from your wages.
Chapter 7 Bankruptcy Requirements
In order to be eligible to file under a Chapter 7 bankruptcy, you have to meet the following requirements:
- You have to earn moderate to low income. This is determined by which state you live in, your cost of living, as well as what deductions are taken out of your paycheck.
- You need to owe a significant amount of debt. The amount of debt you owe does not have to reflect a predetermined number as each person’s financial situation is different.
- You cannot own a substantial amount of property. It is generally believed that assets will be sold off to pay creditors. However, this is not always the case. Assets will only be liquidated and sold off to pay creditors if its value exceeds the dollar amount set out by State and Federal bankruptcy exemptions. In most Chapter 7 bankruptcy cases, the Trustee finds that there are no assets to administer. As such, Chapter 7 bankruptcy filers may not lose valuable assets.
Filing Bankruptcy With or Without an Attorney
Many individuals choose to file bankruptcy pro se or without the help of an attorney. Whether or not you require the assistance of an attorney to file your bankruptcy case depends on its complexity. If you do opt to file bankruptcy pro se, it is essential to understand the bankruptcy process in New York pertaining to the following:
- The different types of bankruptcy codes available. Bankruptcy codes are designed to cater for a wide range of individuals. It is important to understand which bankruptcy code is best suited for your situation. Not everyone qualifies for the same bankruptcy code.
- Pre and post credit counseling requirements. Failure to complete this requirement correctly may result in your case being dismissed.
- The bankruptcy exemptions for the state in which you reside. Not having a clear understanding of state exemptions
- The New York bankruptcy means test. Errors in calculating your median income may result in you filing under the incorrect bankruptcy code.
- Filling out the petitions, schedules and other documents. If the Trustee finds that your documents are not filled out properly, it may severely delay your case.
- Discrepancies that may arise during your bankruptcy case. At any point during the bankruptcy case, your Trustee has the authority to demand that you clarify possible discrepancies in your case. It is important to understand how to handle such discrepancies.