BANKRUPTCY INFORMATION
Summary of Topics:
Chapters 7 or 13:
In a Chapter 7, the individual will obtain a discharge of all debts, except for certain debts. This means that the individual will no longer be legally obligated to make payments of principal and interest on debt. The typical debtor will mostly have credit card debt and few, if any, assets. The few assets may be protected if they are exempt. In the event that the individual has non-exempt assets, the court-appointed trustee will distribute them after payment of expenses. Under the new law if the individual's net income exceeds the applicable state median income, the prospective debtor must determine his eligibility to file Chapter 7 by applying a "means test".
in a Chapter 13 filing, the individual will be making payments under a plan, which provides for periodic payments of his disposable income after expenses over a period of time. This may result in the debtor paying substantially less than the full amount of his debts. This is preferable to Chapter 7 in a number of instances, for example, where there are co-debtors or where the value of a house or other property has substantial equity, which would be put at risk in a Chapter 7 filing. The filing stays claims against co-debtors and permits arrears on mortgages to be paid under a plan.
the debtor must be able to rely on a steady stream of income such as a salary to make payments under a plan.
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Assets:
The individual must declare all of his assets on the bankruptcy schedules including his cash, bank accounts, home, automobile, stocks and other assets. Some of these assets may be exempt from the claims of creditors.
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Effect of Filing on Credit
If individuals have not been current with payments to his creditors this is likely to affect their credit history. The bankruptcy filing can remain on your credit history for ten years. Even after filing, credit may still be obtained or even a mortgage. After obtaining a discharge of your debts, you cannot file for bankruptcy for eight years.
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The Automatic Stay
Upon the filing of a bankruptcy, with certain exceptions, there is an automatic stay as to all claims of creditors. This covers lawsuits, foreclosures, restraining orders, garnishments, and attempted repossessions. If a lawsuit has been started against you, the lawsuit cannot be continued while you are in bankruptcy. If your bank account has been frozen, the filing should unfreeze it once the creditor's attorney and bank become aware of the filing. If the mortgagee has commenced a foreclosure proceeding, this will be stayed. Garnishments and attempted repossessions will also be stayed.
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Debts:
The debtor must set forth all of his debts. The debts will fall into three categories: priority debts such as taxes which are due in less than three years, secured debt such as mortgages on a home or cooperative apartment or condominium or liens on purchases of household items, and unsecured debts which would include most credit card debt. Priority and secured debts generally have to be paid in full despite the bankruptcy filing.
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Exemptions:
In a bankruptcy filing in New York, the exemptions available to New York State residents under New York State law are applicable. Among other things, there is a $50,000 exemption for real property (the homestead exemption), $2,400 for an automobile, cash for a debtor not claiming the homestead exemption of $2,500, all wearing apparel and furniture, and assets invested in a pension, IRA, Keogh and 401 (k) plan.
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Discharge:
Once a debtor receives a discharge creditors will have no right to assert claims; however certain debts are not dischargeable, some of which, are listed below:
Chapter 7 Cases: - Student loans unless there is a showing of undue hardship
- Alimony, maintenance and child support
- Credit cards charges or cash advances over a certain amount witin 90 days or within 10 days respectively.
- Debts not included in your schedules of creditors unless the creditor had actual knowledge of the filing
- Debts stemming from the debtor's driving while intoxicated
- Debts arise from restitution for conviction of a crime
- Fines, penalties
- Debt arising from fraud or false financial statement
Chapter 13 Cases: - Alimony, maintenance and child support
- Student loans
- Debts arise from restitution for conviction of a crime
- Debts stemming from the debtor's driving while intoxicated
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