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If you have spent months, maybe even years, worrying about your mounting personal debts, then it may be time to consider bankruptcy. While some people associate bankruptcy with personal failure, in reality it is about providing a safety net and giving people a fresh start freed from the crippling burden of insurmountable debts.
At the Law Offices of Scott J. Goldstein LLC, we can offer you legal advice and assistance during this difficult period. Scott J. Goldstein is an experienced New York personal bankruptcy attorney that has helped many individuals such as yourself who are unsure about how to even begin the bankruptcy process. Bankruptcy can seem overwhelming at first, and it does involve a complex series of rules and procedures, but the important thing to remember is that there is light at the end of the tunnel.
How Bankruptcy Works in New York
Bankruptcy is governed by federal law in the United States. The Bankruptcy Code provides for a court-supervised process of administering the financial estate of a person who is unable to pay their debts. Put another way, if the amount of money that you owe exceeds your available assets to pay, you can file for bankruptcy.
You can initiate the bankruptcy process by filing a petition with a federal Bankruptcy Court. The petition essentially details your current financial situation. Critically, you need to list all of your known creditors–the people and businesses that you owe money to–and how much you owe them. The Bankruptcy Court will then appoint a person known as a bankruptcy trustee to review your petition and any related filings.
Once you file for bankruptcy, an automatic stay takes immediate effect. This stay means that your creditors must cease all collection activity unless and until the Bankruptcy Court directs otherwise. The bankruptcy trustee takes charge of your case and deals with your creditors during the bankruptcy process.
Upon successful completion of bankruptcy, the Bankruptcy Court can issue a discharge, which eliminates your legal responsibility to pay your creditors moving forward. Not all debts are dischargeable in bankruptcy. For example, you cannot use bankruptcy to get out of a child support or spousal support obligation. But most of your unsecured debts can be discharged, meaning you can emerge from bankruptcy free of those obligations.
The Two Types of New York Personal Bankruptcy
New York personal bankruptcy cases fall into two categories: Chapter 7 and Chapter 13. These refer to specific parts of the Bankruptcy Code. While both chapters can ultimately lead to a discharge order, they impose a different set of obligations on you as the debtor.
Chapter 7 Liquidation
Chapter 7 is commonly known as a “liquidation” bankruptcy. Basically, the bankruptcy trustee will gather your available assets and liquidate them to pay back your creditors as much as possible. Any remaining debts can then be discharged by the Bankruptcy Court.
Now, not all of your assets are subject to liquidation. After all, the purpose of bankruptcy is to help get you back on your feet, not leave you with nothing. For that reason, both federal and New York State law provide a series of exemptions, i.e., property that you can keep and that is not subject to creditor claims during or after your bankruptcy. There are differences between the federal and state exemptions, and in New York you are free to choose the set that works best for you. In many cases, all of a person’s assets may be fully exempt, in which case they can keep all of their property and still receive a Chapter 7 discharge.
Because Chapter 7 bankruptcy often gives the creditors just pennies on the dollar for what they are owed, the Bankruptcy Codes does restrict eligibility for this particular type of bankruptcy. You must first pass a “means test” to prove that your disposable income is too low to support a reasonable repayment plan for your debts. But assuming you pass the means test and can file for Chapter 7, the actual bankruptcy process can usually be completed in just a few months.
Chapter 13 Repayment Plan
Unlike Chapter 7, the goal of a Chapter 13 personal bankruptcy is to come up with a plan to repay your creditors as much as possible over time. If you do not pass the Chapter 7 means test for any reason, you must file for Chapter 13. But even if you are eligible for Chapter 7, you can still choose to file for Chapter 13 if that is in your best interest.
One reason many people elect to file for Chapter 13 over Chapter 7 is that with the former, you can keep all of your property. There is no liquidation. But you must pay your unsecured creditors an amount equal to the value of any non-exempt assets. And you must “catch up” on any missed payments on secured or non-dischargeable debts, such as your home mortgage or car loan.
Chapter 13 bankruptcy also takes a lot longer than the typical Chapter 7 case. A Chapter 13 repayment plan usually lasts between 3 and 5 years. The length of a repayment plan–and the amount that must be paid each month–will vary based on the income, expenses, and debts of the filer.
What Are the Benefits of Filing for Personal Bankruptcy in New York?
Filing for bankruptcy is never an easy decision. This is why it is important to speak with an experienced New York personal bankruptcy lawyer before filing a Chapter 7 or Chapter 13 petition. Some people may only see the potential negative impact of bankruptcy. But there can also be many benefits:
- The automatic stay can put a quick stop to ongoing creditor harassment and collection activities, such as wage garnishment or repossession of personal property.
- If you owe money on your home, filing for bankruptcy can stop a potential foreclosure and buy you time to get current on your mortgage payments.
- If you are eligible for Chapter 7 relief and most of what you owed is unsecured debts–i.e., credit card balances–you will likely be able to discharge most of those debts outright.
- After completing the bankruptcy process, you will be free of most outstanding debts and can have a “fresh start” to rebuild your finances.
It is also important to understand the potential drawbacks of filing for personal bankruptcy. A bankruptcy will have a serious impact on your credit report and can make it more difficult to access credit in the future. You may lose some assets in a Chapter 7 liquidation. As previously noted, there are certain debts that cannot be discharged in Chapter 7 or Chapter 13, which means you will remain legally responsible for those debts even after bankruptcy. And there is also the time and expense of the bankruptcy process itself to consider, especially in a Chapter 13 case that may last several years.
Contact New York Personal Bankruptcy Attorney Scott J. Goldstein Today
Filing for bankruptcy is a major life decision. But for many people struggling to stay afloat financially, it is the right decision. And while the bankruptcy process involves a number of complex rules and procedures, it is not something that anyone has to navigate on their own. By working with a qualified New York personal bankruptcy lawyer, you can help improve your chances of coming through the process relatively unscathed.
Call the Law Office of Scott J. Goldstein Today
If you are thinking about filing for Chapter 7 or Chapter 13 and would like to speak with an attorney, contact the Law Offices of Scott J. Goldstein LLC today at 973-453–2838 to schedule an initial consultation.