(Last Updated On: March 12, 2023)
Last Updated on: 12th March 2023, 06:03 pm
Bankruptcy is a legal process that allows individuals and businesses to restructure their finances and repay their debts over time.
The most common types of bankruptcy are Chapter 7 and Chapter 13.
Chapter 7 bankruptcy is also known as liquidation bankruptcy. It is the most common type of bankruptcy filed by individuals. In a Chapter 7 bankruptcy, the court appoints a trustee to oversee the case. The trustee’s job is to sell any non-exempt assets of the debtor and use the proceeds to pay creditors.
Chapter 13 bankruptcy is also known as reorganization bankruptcy. It is less common than Chapter 7, but it may be the only option for some debtors. In a Chapter 13 bankruptcy, the debtor proposes a repayment plan to the court. The court must approve the plan before it can go into effect. Once the plan is approved, the debtor makes monthly payments to the trustee, who then distributes the funds to creditors.
Both types of bankruptcy have pros and cons, and it is important to speak with an experienced attorney to determine which type of bankruptcy is right for you.
What is the bankruptcy process
After the filing of a bankruptcy petition, NYC bankruptcy lawyers will file a motion for relief from the stay. The motion for relief from stay is filed by creditors who have secured claims against the debtor. Secured claims are claims that are backed by collateral. In order to obtain relief from the automatic stay, creditors must show that they will suffer irreparable harm if the automatic stay is not lifted. For example, if a creditor has a mortgage on a debtor’s house and the debtor files bankruptcy, the creditor may file a motion for relief from stay in order to foreclose on the house.
After filing a petition in Federal Bankruptcy Court, NYC bankruptcy lawyers will also schedule creditors’ meetings. During these meetings, creditors will have an opportunity to question the debtor about his or her assets and liabilities. After questioning the debtor, creditors may vote to accept or reject the debtor’s repayment plan. A repayment plan is created by NYC bankruptcy lawyers that outlines how much each creditor will receive each month from the debtor’s disposable income. In order for a repayment plan to be confirmed by Federal Bankruptcy Court, it must be approved by at least one-half of all unsecured creditors and must be deemed “fair and equitable” by Federal Bankruptcy Court.
Once NYC bankruptcy lawyers have prepared all of these documents and scheduled creditors’ meetings, they will file them with Federal Bankruptcy Court along with an application for discharge of debtors’ debts. After filing these documents with Federal Bankruptcy Court, debtors will be given an automatic discharge of their debts within 60 days after filing their petition in Federal Bankruptcy Court.
Do your finances have you at the end of your rope? Are you looking for some financial assistance but don’t know where to turn? If so, the team of experienced lawyers that work at our bankruptcy firm may be able to offer you the exact help you need. If you’re considering bankruptcy but have many questions and concerns, you’ve come to the right place. Read below and get answers to some of the most frequently asked bankruptcy questions.
Q. What types of bankruptcy are available?
A. Although there are various types of bankruptcies available, the two most common are Chapter 7 bankruptcy and Chapter 13 bankruptcy. Two other types of bankruptcies are Chapter 11, which is reorganization of a business that has huge debts and Chapter 12, which is for family farmers.
Q. How do I know if I want a New York Chapter 7 or Chapter 13 bankruptcy?
A. The type of bankruptcy you need depends on your financial situation. A Chapter 7 is generally for consumers who have little or no income, cannot pay their monthly bills and have no real assets or equity other than personal property such as clothing or furniture inside the home. A Chapter 13 is for consumers who have an income and own a home that they want to keep.
Q. Is it true that I don’t have to pay my debts if I file bankruptcy?
A. Like the previous question, the answer to this question depends on the type of bankruptcy you file. In a Chapter 13 bankruptcy, you’re typically required to set up a payment plan that allows you to pay off all past due amounts and get the mortgage current. Although some debts may be discharged in a Chapter 13, the mortgage typically is not. In a Chapter 7 bankruptcy, your debts are wiped out and you get a “fresh slate”. A trustee, who is assigned to your case, collects and sells off your non-exempt assets. Our bankruptcy attorneys can go over your list of assets and determine which are exempt and which are non-exempt.
Q. Is one type of bankruptcy any better than the other?
A. The type of bankruptcy you chose is based on your debts, your assets, your income and your ability to repay. If you own property and have income, Chapter 13 will work better for you whereas Chapter 7 will work better if you have debts, limited assets and limited income as well as an inability to repay the debts you currently have.
Q. Do I have to have certain amount of income to file for bankruptcy?
A. While we typically think of bankruptcy in terms of for those without income, this is definitely not the case. To file for Chapter 13, you do need to have sufficient income to be able to make the required mortgage payments and pay the arrears. Chapter 13 does allow you to spread out the arrears over time. Because Chapter 7 allows you to wipe out your debts, you must have little or limited income and this must be documented through a New York means test. Our attorneys can also help you with the means test as it may appear quite complicated at first glance.
Q. Can I file bankruptcy more than once?
A. You cannot have your debts wiped out through a Chapter if you’ve had them discharged within the past eight years or have filed a Chapter 13 within the previous six years. Additionally, if you’ve filed a Chapter 13 in the past two years or have had debts discharged through Chapter 7 in the past four years, you cannot receive a discharge with Chapter 13 bankruptcy.
Q. What does it cost to file bankruptcy?
A. Chapter and Chapter 13 bankruptcies in New York typically cost around $300 in court costs plus any attorney fees you may incur.
Q. Can bill collectors continue to call and harass me when I’m filing bankruptcy?
A. Once the bankruptcy process has begun, the creditors will be sent a notice that you are filing bankruptcy and you will be under an “automatic stay”. Collectors are not legally allowed to contact you from this point on.
Q. Will bankruptcy affect my credit scores?
A. Unfortunately, the thing that leads to bankruptcy is usually the consumer’s inability to pay their bills on time so their credit is usually affected. Bankruptcies can stay on your credit report for up to ten years.
It’s important to realize that the above questions and answers may not apply to every situation. This is why you’ll find it beneficial to meet with one of our bankruptcy attorneys for a consultation. We can answer questions based on your individual and specific financial situation and advise you as to the best way to proceed.
If bankruptcy is indeed the best solution, our attorneys will work with you to help you get through the process as quickly and stress free as possible. If we don’t feel bankruptcy is your best or the only option, we’ll go over the various options available to you.
Frozen Bank Accounts
If you unfortunately have any past debts that are overdue, your financial creditors can legally take the necessary steps to directly collect what they’re owed by freezing your checking or savings account (sometimes referred to as a bank account levy). Your account may still experience negative consequences even if you’re able to get the bank account levy removed. While your account is frozen you can’t access any money in your account. Also, any checks you wrote prior to having your funds frozen will not clear.
The good news is there are some steps you can take in order to avoid the possibility of getting your bank account(s) frozen and to make it much simpler to get the funds released in case it ever does happen.
Ways to Avoid Getting Your Bank Accounts Frozen
1. Talk to Your Debt Collectors
It’s not a wise decision to ignore a debt collector or your debts since it can result in a bank account levy. If you don’t have enough money to pay your debts due to job loss or some other life-altering situation, talk to your creditors about setting up a repayment plan that will allow you to get your financial obligations repaid. Most creditors as well as federal and state taxing authorities are willing to work
Although nearly all creditors require a judgment against you prior to getting your bank accounts frozen, some do not. Some of these include government-based institutions that collect state and federal taxes along with student loans and child support.
2. Direct Deposit Your Government Aid Funds
If a garnishment or attachment order is received by a certain bank, it has to review the said account in order to determine if any direct deposits being made into the account involve any government assistance funding, including unemployment compensation, veteran’s benefits, and social security. The bank itself is prohibited from freezing the prior two months regarding the government aid deposits if they are made by direct deposit. However, this rule doesn’t apply to any funds that were deposited by a check. Therefore, if you get the same aid in the form of a check and deposit it into your account, ultimately the account could be frozen and will remain so until you can prove your right and get the funds released.
NOTE: Change all your government aid funding to direct deposit rather than sent by check.
3. Keep Your Social Security Money Coming to the Frozen Account
Social security income is protected, especially if it’s direct deposited into the account. Even if it’s not direct deposited, it’s still protected. Social security money retains its protection once it’s received. But, it’s your job to prove where funds came from. If you decide to move your social security funds into a different account once you receive it or mingle it with other funds, it’s going to be even harder to prove that the money came from social security. Leave it set up the way it is right now.
4. Exempt Funds: Keep Them Separate and Not Mixed Up with Non-Exempt Funds
If you keep separate accounts for certain funds that you already know qualify for a particular exemption from attachment, it will likely be much quicker and easier to get the account released to you by proving that the said account only has funds that actually qualify for an exemption, if an attachment should occur. If the funds get mixed up with funds that are not exempt, the burden is on you to trace back the deposits and to prove to the authorities that the frozen balance was derived from the exempt money. This process will likely take a great deal of time since it’s so complicated.
5. Never Keep Money in an Account with a Bank You Already Owe
If you owe a certain bank money where you have your checking or savings accounts and you subsequently fall behind on making payments, they have the legal right to access the funds in your account in order to pay the debt that you owe. If you owe money to a bank that’s holding your accounts, they don’t need to obtain a court order or judgment to strip your funds.
As a general rule, it’s usually a good idea to keep your financial lenders and the bank that holds your personal checking and savings accounts separate. Even though it’s a common practice to keep your business accounts at the bank that gave you the initial lines of credit or business loans, you’re not obligated to keep your personal banking accounts there as well. Should your business ever unfortunately fail, it will be less likely for the bank to access your personal funds in order to fulfill personal agreements you may have provided regarding the business loans that were provided to you.
Use a reputable and trustworthy NYC Bankruptcy Law Firm to help you sort out all your financial difficulties and to prevent you from losing any more money.
New York City residents who are considering bankruptcy should become familiar with the means test. This test is required for anyone filing Chapter 7 relief, and involves a precise formula that’s used to calculate debt and income. What is the means test and why is it important? Read on to find out more.
History of the Means Test
In 2005, the United States Bankruptcy Code was amended to prevent consumers who were filing for Chapter 7 relief from abusing the system. Prior to that time, people of all income levels were eligible to file Chapter 7, which works to eliminate as much debt as possible. By passing the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005, Congress hoped to prevent bankruptcy from being used to counteract poor spending habits. It must now be taken before filing a Chapter 7 bankruptcy to determine your eligibility for it.
What does the Means Test Include?
The means test involves a series of questions concerning income, assets, and debts to determine your ability to pay off your debts. The first step involves determining whether your income is more or less than the median income in New York. If your income is less than the statewide median, you have already passed the means test.
If your income is above the median, additional calculations are needed to determine if you are able to pay off your debt. These additional calculations are needed in order to assess whether or not you have “disposable income”, or money left over after your expenses are covered to repay debt with. To do this, the cost of basic living expenses such as rent, food and health care will be figured. The allowable amount is based upon the national standards that are determined by the Internal Revenue Service (IRS).
You will also enter information about your secured and unsecured debts on form 22A. When entering this information, keep in mind that certain debts are not dischargeable in bankruptcy court, including taxes, student loans, child support and spousal support.
Presumption Does/Does Not Arise
Filling out form 22A is much like preparing a manual tax
form. When finished, the numbers will reflect that you either do or do not have enough disposable income remaining to pay your debts with. If calculations determine that “the presumption does not arise”, this means you are not disqualified from filing Chapter 7 bankruptcy. If the presumption does arise, you are ineligible and must consider Chapter 13 or another form of relief.
Means Test Exceptions
Certain individuals are exempt from taking the means test. For example, disabled veterans who primarily incurred their debt while serving on active duty may automatically check the box labeled “the presumption does not arise.”
Members of the Reserve and National Guard components of the Armed Forces who were called to active duty after September 11, 2001 for at least 90 days are exempt during their period of active duty as well as for 540 days after being released. Reserve component soldiers meeting this criteria will check a box marked “the presumption is temporarily inapplicable.” Once the exclusion period ends, service members have 14 days to complete the means test or the presumption will automatically expire.
Deciding to File Chapter 7
Just because you pass the means test does not mean filing Chapter 7 bankruptcy is the right decision. While it can eliminate all or most of your debt, you must also give up any property that is not exempt. Your property will be handed over to a bankruptcy trustee, who will liquidate it in order to pay off as many of your debts as possible. It also does not eliminate student loan debts, and will not absolve you of the responsibility to pay child support or alimony.
Criteria that Makes you Ineligible
You are not eligible to file Chapter 7 bankruptcy if you have previously filed Chapter 7 or Chapter 13 proceedings within the past six years, or have had a bankruptcy case dismissed within the past 180 days because you violated a court order. If allowed to file, you will be prohibited from filing an additional bankruptcy petition for six years afterwards.
At our New York City law firm, we meet people every day who need debt relief, but are anxious about taking the means test. If you’re one of these people, we invite you to schedule a consultation so we can answer your questions and determine if a Chapter 7 proceeding is ideal in your situation.
The Bankruptcy Process
Bankruptcy is a process that not many Americans understand. It has a lot of negative connotation because of its close association with financial distress. In reality, however, bankruptcy is a symptom of underlying financial problems, not a cause. In this article, we will explain the details of the bankruptcy process, how and why it can be beneficial, and why people need to understand it.
When anyone gets into financial distress due to a large debt load, they face a significant problem. They do not have enough income to cover their debts, which means that the debt will keep growing larger due to interest. There are many different kinds of debt that can lead to bankruptcy. A single large debt like a mortgage or car can be just as much of a problem as several smaller debts, like credit cards. In fact, credit cards can be even harder to manage because the interest rates are higher, so the debt grows faster.
When you decide that you are not capable of managing the debt load you have, then it is time to think about bankruptcy. Bankruptcy is a way to protect your assets from creditors, who might otherwise be able to repossesses them as payment of your debt. The bankruptcy process can help you discharge and restructure some of the debt.
What bankruptcy does is that it lets you go to court with a bankruptcy judge and your creditors to discuss a solution. In court, you inform the creditors that you are unable to pay off your debts in their current form. Because your creditors would rather have some money than no money at all, they are willing to work with you to reduce your debt load or extend your deadlines in order to make the debt easier for you to pay off.
In bankruptcy court, you come to an agreement with your creditors about what you can afford to pay and how you can do it. This might involve giving up some assets that are directly tied to the debt. For example, if you have a mortgage that you cannot pay, you might need to give up the house. The same is true for a car. The key is that in bankruptcy, you can manage to protect the rest of our assets from being taken away. You can also arrange for a portion of the debt to be forgiven in order for you to manage to pay the rest.
There are two main categories of bankruptcy for individuals: chapter 7 bankruptcy and chapter 13 bankruptcy. Chapter 7 bankruptcy is meant for people with credit card debt, medical debt, and other debt that does not have collateral. There is also an income requirement: you must make below a certain income to qualify for Chapter 7. Chapter 13 bankruptcy is for people with more money and assets, as well as larger debts. It generally involves working out a payment plan.
Bankruptcy can be stressful, but it is an important part of the process of getting out of debt. Bankruptcy itself is a beneficial process that repackages your debt in a way that you can handle. It is like medicine for debt- it might not be pleasant to go through, but it is the solution to excessive debt.
However, going through bankruptcy is not an easy process. It is a legal procedure that requires the help of an expert lawyer to help you understand what is happening at each stage and protect your assets as much as possible. Like any other legal process, bankruptcy is much easier with a better lawyer.
We are a New York law firm with decades of experience helping people successfully negotiate bankruptcy.
Our clients always feel relieved after our help, because we don’t just mechanically step through the process. We work to protect you and your interests. Our emphasis on our clients comes from our professionalism: we are not simply trying to make money from clients that we already know are in financial distress.
If you feel that you might be losing control of your debts and you do not think you can keep up, the worst thing you can do is ignore the problem. If you let the debt build up, then it will only get worse. Consider getting in touch with us and we can advise you about what you need to do next. It is an uncomfortable process, but a necessary one.
Property and Bankruptcy
If you own property, the prospect of bankruptcy becomes even more serious. You may have people who rely on you for a place to live or for a place to work. If you are under the pressure of having to consider bankruptcy, you need to be aware of all of your options before you make a move with your creditors. After all, you are responsible for much more than just yourself.
– Protecting your Property First and Foremost
Your first concern should be protecting the ownership of your property throughout the bankruptcy process. First of all, you should congratulate yourself on taking the legal step to assume ownership of a piece of property. Simply assuming this responsibility gives you a great deal of leverage over someone who does not own any property; bankruptcy law is written to preserve ownership of property in most cases. Do not believe that you have to give up any of your land or assets just because you are getting pressure from your creditors. They understand that putting this pressure on you may provoke an emotional response that will encourage you to sell your property to them at a huge discount. This is one of the oldest business tactics in the book; however, you do have rights as a borrower that can help you to preserve anything that you have assumed responsibility for.
The law for bankruptcy, especially the law as pertains to property rights, is changing all the time. If you are trying to protect your assets, you likely do not have the time to look up all of the relevant laws and deal with the day to day pressure of keeping creditors out of your pockets and away from your assets. This is something that you should outsource as soon as possible.
You can rest assured that your opposition will definitely have some sort of legal assistance on the case if you have any property of value. The sharks smell blood in the water, and they are trying to capitalize on you in a moment of weakness. You need the same kind of legal assistance that they have on your side so that you can fight their legal moves with a proper and swift legal defense.
– Facing the Problem
Your opposition is going to try everything in order to create an emotional and financial burden that is simply too difficult to withstand. They are looking for you to disconnect rather than to take on your problems headfirst. If you do this with the proper legal defense on your side, the odds are that you will be able to keep most of your property. Even if you end up with a higher interest rate on your payments to your creditors, they have lost if they were not able to obtain what they really wanted in your bankruptcy – your property.
If you have a good legal defense, you also have more time to make things right with your creditors. A great deal of success in the court system is all about having your administration properly managed – there are ways to freeze the process so that you have your time to get together money to pay down some of your debts. This may also be a good way for you to reserve your property if it is being attacked by your creditors in a bankruptcy case. There are no guarantees, but you will never know unless you have someone on your side who knows the process from beginning to end.
– Your Legal Defense
Do not talk to your creditors again without the proper legal defense by your side. Give us a call when you are ready to protect yourself legally and give yourself advantages that you simply will not have without an experienced law firm. We pride ourselves on giving you the upper hand in all negotiations so that you can decide on your best strategy without the emotional and financial pressure of your creditors on your back.
Bankruptcy has quite a negative reputation, and it’s unfortunate that this keeps people from utilizing all the resources available to them. The many myths associated with bankruptcy could be holding you back. Before you turn your back on bankruptcy, take a look at these shattered myths first.
Myth: Everybody is going to know that I filed for bankruptcy.
Fact: Few people are going to realize that you’ve filed. The legal proceeding may be public, but it takes effort to seek out the details. Unless somebody is actively looking, he or she is not going to know. Even if your bankruptcy is published in the paper, chances are small that it will actually be seen.
Myth: Chapter 7 bankruptcy will eliminate all my debts.
Fact: Unfortunately, this is not the case. There are certain kinds of debts that simply cannot be discharged. These include child support payments, student loans and criminal restitution. Taxes often fall into the same boat. You are still typically responsible for paying these off after bankruptcy, but there are some exceptions
Myth: Bankruptcy will leave me with nothing.
Fact: Bankruptcy does not leave you with no belongings. Most people end up keeping their belongings. Homes and cars are yours as long as you can continue making the payments on them.
Myth: I will never be able to have good credit again.
Fact: You can have credit again, though you may have to contend with higher interest rates. You can also begin building credit again with prepaid credit cards and the like. Your credit is not permanently ruined if you turn things around.
Myth: Filing for bankruptcy means that I am irresponsible.
Fact: Filing is actually the most responsible thing you can be doing in some cases. Filing for bankruptcy once is not an abuse, especially if you are trying to deal with unemployment, legal fees, divorce
of something similar. Instead of seeing bankruptcy as “the end,” look to it as a new beginning.
Myth: Filing for bankruptcy is too complicated for me.
Fact: Bankruptcy paperwork really isn’t that complicated. An attorney will help you compile all the necessary documents to make it as simple as possible.
Myth: Bankruptcy isn’t going to do me any good because creditors will continue to harass me.
Fact: Once your bankruptcy has been completed, a creditor is not allowed to contact you. This could be considered harassment, and this is required to stop. This includes snail mail, phone calls and electronic mail.
Myth: I can’t file bankruptcy because I have a job.
Fact: You might have a well-paying job, but this does not mean you cannot file. In fact, filing for Chapter 13 bankruptcy requires you to have a job in the first place.
Myth: I won’t be able to discharge medical debt.
Fact: Just like debt related to credit cards and personal loans, you may be able to discharge medical bills. Of course, your lawyer will have more information about which bills qualify.
Myth: If I am married, my spouse must file with me.
Fact: While a married couple is allowed to file bankruptcy together, it is not mandatory. Of course, you should still defer to your attorney to learn more about which property falls into the bankruptcy estate. You should be well aware of all your options.
Myth: My employer can fire me for filing for bankruptcy.
Fact: According to federal laws, your employer is not allowed to fire you simply because you have filed for bankruptcy.
Bankruptcy may seem intimidating, but this is no excuse to avoid it. You might find that it is the right decision for you. It is always wise to speak to a bankruptcy attorney before making the decision. Your NYC bankruptcy law firm can help you cope with all the stress that accompanies the process.
Should I File Bankruptcy?
When some people hear the term “bankruptcy,” they shirk away. On the other hand, some people prematurely announce they are going to declare bankruptcy, file the paperwork and discover that they really did not need to in the first place. Understanding the seriousness of your financial circumstances will help you to determine if you are the right candidate.
Willingness to Accept the Consequences
Filing for bankruptcy means that you are going to face certain consequences. Speaking with one of our lawyers, and thoroughly reading through paperwork will help you to understand what the specific consequences for your scenario are. For example, you may lack the ability to take out any credit cards for an extended period of time. Therefore, you must recognize what the consequences are and express willingness to accept them.
Willingness to Part with Personal Property
Depending upon the type of bankruptcy you are filing for, you may have to surrender some of your personal property in order to deal with the debt. For example, you may need to move out of the house that you own and into an apartment, or you might have to surrender your vehicle. As a result, you must be prepared to find alternative ways to get to work or another place to live. This situation does not occur every time a person files for bankruptcy. Instead, you should research the details of the specific type of bankruptcy for which you are filing.
Specific Type of Bankruptcy
If you do decide to file for bankruptcy, you will likely file for Chapter 7 or Chapter 13. Generally, Chapter 7 bankruptcy is for people who have little to no income and who need to have all of their debts obliterated. Chapter 13 bankruptcy is for people who do have an income and who will need to pay their bankruptcy bank over time. To decide if you should file, you should know about the specific requirements for each time. For example, it is possible that you will make too much money to qualify for Chapter 7 and, therefore, be eligible only for Chapter 13 bankruptcy.
Legal Troubles with Your Bills
Missing a payment on a bill every so often is not an immediate reason to file for bankruptcy. However, over time, you may find yourself consistently unable to pay your bills. Debt collectors are calling your home, and you are receiving letters in the mail about the issue. After some time legal action may be taken against you. Consulting with one of our bankruptcy attorneys can help you in this process and assist you in realizing the time has come to file for bankruptcy.
Home and Money Taken Away
When you are in serious financial trouble, the entities to which you owe money may begin to garnish your wages. Instead of relying on you to make payments on a regular basis, the entity will take your income. As a result, you can begin to suffer financially in other ways because you will then unlikely be able to pay the rest of your bills. Also, you could be in a place where your home is close to foreclosure because you have not paid your mortgage in quite some time. These are two major reasons to consider filing for bankruptcy.
You also may have been unable to pay the taxes on your property, or you might have experienced trouble with paying income taxes that you owe. Remember, these issues are related to the government, and you may find yourself in a position where you are being threatened with jail time. You can be taken to jail if you do not pay your taxes. On a lesser level, your wages might be garnished for this issue as well. Instead of facing these serious penalties, you can look into bankruptcy.
Understanding Lack of Funds and Bankruptcy
Some people think that they should declare bankruptcy because they do not have any money saved. As tough as it is to face, many people do live paycheck-to-paycheck. However, they are still paying their bills. People should understand when the situation turns into one where bankruptcy can be a solution. If people are unable to pay their bills and have no money saved, then they could be in that place. Also, individuals who are unemployed and do not see a paycheck coming any time in the future are also often candidates for bankruptcy.
Understanding all of the details of bankruptcy without the guidance of a trusted professional is challenging and overwhelming, especially during a period of time that is likely already stressful. Speaking with one of our experts helps you to determine if bankruptcy is the right answer for you and for which type you may qualify. You will have guidance as you walk through this process.