Blog

What if you have assets during a Chapter 7 Bankruptcy in Manhattan: Dont be Greedy!

Wednesday, March 3rd, 2010

by:  Daniel Gershburg, Esq.

Lets be real.  No one necessarily wants to file for Chapter 7 Bankruptcy in Manhattan as a first step.  Its obviously a last resort.  You’ve gotten yourself into a ton of debt and there doesnt seem to be a way out.  But you have to take practical steps if you want to move forward during the process if you don’t want any issues.

What am I babbling about?  Well, under the Bankruptcy Code, you have certain exemptions, meaning you can keep a certain percentage of your stuff when you file for Bankruptcy and the creditor and Trustee cannot get their hands on it.  Some examples include $50,000 in home equity in your home, $2400 from a Bank Account, all of your IRA’s, 401k’s etc.  However, lets say you have some cash in the bank above that $2400 and you really need to get this Bankruptcy filed.  Dont hide it or move the money.  Don’t try and be crafty and put it into someone elses account.  Just let it go.  You heard me.  Let it go.

Lets say you had $100,000 in debt.  Not a crazy figure and I see it everyday in my Brooklyn office.  If I told you I could get rid of $100,000 in debt for $5,000, chances are, you’d kiss me (ethically inappropriate under most circumstances.)  However, the problem is many clients will try and save their very last dime from the Trustee, and thats just not a great way to go about doing things.  If you have $7000 in your bank account because you saved a couple of bucks, protect the $2400 and give the rest to the Trustee during the Bankruptcy filing.  The Trustee will be happy, which means less problems, if any, for the Bankruptcy, and for that amount of money you’ve known gotten rid of about $100,000 in debt.

It seems counterintuitive to us.  Why give up money when we can “protect” it.  I get that.  The problem is the amount your protecting as a percentage of the debt you’re being forgiven is minimal.  The trade off is absolutely amazing.  So my advice is not to mess up this amazing tradeoff but trying to keep every last dollar.  It will only cause problems for you and your attorney in the actual case.  Of course, like anything Bankruptcy related, there are many caveats to discuss, but in general I think you get the idea.

Posted in Bankruptcy, Cars in Bankruptcy, Gersh Blog, Homes in Bankruptcy, Jobs and Bankruptcy | Comments

New York City Real Estate Attorney Daniel Gershburg discusses Mortgage Pre-Approvals

Thursday, February 25th, 2010

I constantly here this in my law office: “Im good to get the house because I got a Pre-Approval”.  Congratulations.  That means two things.  1.  The bank has verified you are a human being who is currently alive and 2. You have absolutely no clue as to whether or not you’ll get a loan.

Think Im crazy?  I am.  But ask any people you know who purchased a condo/co-op or a home in New York City in the past year what the process was like.  They will tell you it was pure unadulterated hell.  Banks have no clue what they’re doing anymore.  Absolutely none.  And because of that, what you thought would be a smooth loan process has turned into a loan nightmare.  Therefore, here are some friendly tips from your Manhattan Real Estate Attorney:

1.  Everything on time, all the time, with confirmations of receipt.  If youre dealing directly with a bank, you may be speaking to Jim in Omaha on Monday, and Tyle in Akron on Tuesday.  You want to get a point person whenever possible, because you can verify all the documents the bank asked to be sent, were in fact sent in received.  Absent that, I would ask to always deal with supervisors, as they seem more helpful on most occassions.

2.  Do not believe anything they tell you.  Im serious.  The loan process is fairly simple, but they keep saying nonsense that confuses both client and attorney.  They’ll say “We need your lawyer to close by March 9th” but they wont assign a bank attorney who is required to be present at the closing and to actually clear the file to close.  Once you get any response from them, call your lawyer and tell he/she what the bank said.  I don’t care if they get annoyed, they shouldn’t.  It can delay your closing and your rate can expire.  If your lawyer has to call (we do it all the time), so be it.  Its a crazy market out there and you need someone who knows that and doesnt care.

3.  Bankrate.com .  I dont care if your neighbor told you their mortgage broker got them a free house.  Before you do anything, go to that site.  Completely unbiased and independent and offers you a comparison of tons of banks, their rates, closing costs, and even contact information, plus informative articles.

4.  Aspirin.  Take it a lot during the process because you’ll need it.  I know I’m making this sound so dreary but the reality is that the process has become quite painstaking and can take some time and patience to navigate.  Have a good attorney by your side, always always always follow up with the bank (also have a back up bank in case the first isnt moving quick enough) and youll be fine at the end of the day.

Posted in Gersh Blog, Mortgages, New York City Real Estate | Comments

Filing Chapter 7 Bankruptcy in Brooklyn when you have a small business

Thursday, February 11th, 2010

Many of my New York City clients have a common question:  Can I file for Chapter 7 Bankruptcy in Brooklyn, Manhattan, etc., if I own a small business.  The answers, with some caveats as always, is yes.

If you own a small business, the Trustee will likely ask you for tax returns for the last few years the business filed, as well as 6 months to one years worth of bank statements.

The first thing you need to ask yourself is:  Does the business have any assets that can be liquidated to pay creditors.  Most individuals do not.  You have an office and a few computers, but you likely dont have 20k servers or John Deere machines.  In that case the Trustee wont care at all about the business and likely wont liquidate a thing.  However, keep the type of business you run in mind.  If you have a dry cleaning business, youre likely to have a bunch of materials that can be sold for some money.  Same goes for a grocery store or a hardware store.  Real estate business is more unlikely (unless you have a considerable amount of comissions going in.)

The Chapter 7 Trustee in Brooklyn or wherever will also want to know how much the business has in the operating account.  Remember, unlike personal bankruptcy itself, listing your business in a Chapter 7 personal Bankruptcy doesnt come with any exmeptions.  If you have 10k in your business account, you cant protect a cent of it (unless its spoken for by other creditors or its their money.)  Keep that in mind.

Also look out for incoming monies.  Just because your business is flat broke now doesnt mean the Trustee wont ask about monies coming in.  If for instance you’re a commission based business, and you have $100 in the bank, but a 20k commission coming in, the Trustee is going to ask about it and want it, so be sure to be cognizant of that before you go see a Bankruptcy Attorney in Brooklyn.

Finally the Trustee will ask if you have partners in the business, as the Trustee cant technically touch the partners share.  If the assets in the business are worth 20k but you have three other partners, the Trustee might not touch the assets given the headaches that would come with it.

The bottom line is dont get scared about filing personal Chapter 7 Bankruptcy in New York City if you own a business.  Just make sure to speak to us about it before you file so that we can guide you about the proper way to file.

Posted in Bankruptcy, Business Bankruptcy, Gersh Blog | Comments

Staten Island Bankruptcy Lawyer Daniel Gershburg discusses the inevitability of Bankruptcy

Sunday, February 7th, 2010

Ive handled many Chapter 7 Bankruptcy cases for clients in Staten Island, as well as everywhere across New York.  One of the things that I notice the most when a potential Chapter 7 client walks into my office is that clients emotions.  What I mean by that is whether theyve accepted the fact that it is literally mathematically impossible to pay off the amount of debt they have, and therefore that Bankruptcy may be the only realistic solution for them.  I just wish that many of these individuals were able to discover that sooner, as it could have saved them literally thousands of dollars.

Here is what I mean as an example.  If youre someone who makes about $40,000 a year in gross wages (before tax) and you have approximately $20,000 in debt or more, chances are you will NEVER pay off this debt.  If you havent missed a payment, you’re like paying the minimum on many of these cards since it would be implausible that youd be paying the entire amount of the balance and living on 40k a year BEFORE taxes.  If you’re keeping a balance, youre likely paying a rate of anywhere from 10-20%.  If you’ve missed a payment, that percentage likely went up to 30%.  If you do the math, there simply is no way at all that you could possibly make a dent in this debt while continuing to support yourself.  I understand that there are just so many emotions involved in something like this.  Fear, shame, embarrassment.  In any case, you need to realize that when you made these purchases that you had every intent to pay them back (I imagine).  And many of my clients who have finally come to grips with the fact that they need to file have contacted the creditors, but they are simply unwilling to compromise to payment plans that you can afford.

Also, when you settle a debt, you can be taxed on the amount you save as regular income.  So if you settle a 10k debt with a creditor for 5k, you may be responsible for taxes on the 5k you saved as ordinary income.

Look at the end of the day this area of law has more to do with your emotions than anything legal.  We are able to get the vast majority of people through a Chapter 7 case in Staten Island, Brooklyn, Manhattan or anywhere in New York with little or no problem.  But this issue is an emotional one.  Once you come to grips with the fact that there is no way you could possibly pay back this amount of debt you have, the decision can become a much clearer one for you.

Posted in Bankruptcy, Debt Settlement, Gersh Blog | Comments

Manhattan Real Estate Lawyer and Blogger Daniel Gershburg discusses problems with lenders

Monday, February 1st, 2010

As a Manhattan Real Estate Lawyer I deal with real estate purchases in New York City on almost a daily basis.  And as this recession and literal tanking in the real estate market has occurred across New York it is painfully obvious that lenders have absolutely no idea what they are doing.  Now you may call this a rant, and you are justified in doing so, however I think its absolutely ridiculous to discuss an improving real estate market in the greater New York area without discussing what appears to be this general absurdness that comes with working with lenders these days.

Case in point.  My client is selling a co-op apartment in  Brooklyn.  Again, she is SELLING the apartment in Brooklyn, not buying it.  Weve found purchasers who are paying cash.  We have a closing date.  But we cannot close because the bank is unable to send us the stock and lease (analogous in some respects to a deed for a home).  Weve called in approximately 10 times (not a typo) and have been on hold each time for approximately 30 minutes.  Th bank cannot tell us why they cant send us the stock and lease and state that someone will get back to us within 24 hours or 2 weeks.  Can you imagine if you called a friend and they said they would either get back to you later today, or Mid February.  Unless this was your mother in law where youd be happy to wait the 2 weeks, you would not be pleased.  We were not pleased.  Also the bank cant communicate with the proper department because that department doesnt have phones.  The dept has live people, and computers, but no phones.  Again Id like to emphasize all we are currently looking to do is pay the bank lots of money but the bank is saying “We know, and wed love to take the money, but we cant take the money, we dont know why we cant take it, and we dont know when we could tell you why we cant take it, but someone may or may not be able to tell you why we cant take it within 2 weeks.”

On another closing, the bank appraised a home for a certain sum and said “Youre ok to close.”  They then came back the following week and re-apraised the house for $50,000 less.  Lets again use a real life example.  I come to you and tell you Id like to buy your Mercedes, and that Id be willing to pay you $20,000 for the car and tell you I’d like to meet you the following week to pay you.  You agree.  The following week I show up announced and say “Let me look at the car again” and after looking at the identical car I tell you I will pay you $14.32 right now on the spot.  Absurd no?  Well folks welcome to 2010, the year when the recovery will hit.

In business, companies are always obsessed with bottom lines, and thats normal.  However, when you’re looking to buy a home in New York City and the lender is telling you that they’re telling you that they dont have phones, there is something wrong.  No business can recover financially if they are acting completely irrationally.  You may be reading this and thinking that there is something more to the story.  Something is missing because it doesnt make sense.  I wish there was.  Our firms Manhattan Real Estate practice has shifted in that we now do so much more on a daily basis for our clients than we ever have just to get them into the homes they wanted.  There really should be no discussion of a bottoming of the market in New York City without discussing why we’re stuck here now in the first place.

Posted in Co-Op, FHA, Gersh Blog, New York City Real Estate | Comments