Chapter 7 Bankruptcy New York
If financial setbacks have left you unable to pay your debts and creditors are calling you nonstop, you probably have bleak thoughts about the future. Chapter 7 bankruptcy can give you the debt relief you need to put it all behind you and start over.
Also known as the ‘fresh start’ bankruptcy, Chapter 7 will help you get a clean financial slate by eliminating the following debts:
- Credit cards and store cards
- Bank loans and lines of credit
- Huge medical bills
- Court judgments
- Some tax obligations
While some debts, like child and spousal support, student loans, and federal income taxes, cannot be discharged in a Chapter 7 bankruptcy, you can eliminate enough of your other debts, leaving you with more money to pay off these non-dischargeable obligations.
Who Can File for Chapter 7 Bankruptcy?
Anyone who lives in, does business in, or owns property in the U.S. can file a Chapter 7 bankruptcy case unless one or both of the following circumstances apply:
- They deliberately dismissed an earlier bankruptcy case within the last 180 days OR
- They did not pass the means test
The bankruptcy means test is used to determine who is eligible for debt relief through Chapter 7. It takes into account your household size, income, and reasonable expenses to determine whether you have enough disposable income to repay your debts in a Chapter 13 filing.
What Can You Keep if You File for Chapter 7 Bankruptcy in New York?
Many people fear going bankrupt because they believe they will “lose everything.” This is not true at all. There is an exemption system in place to help you protect most, if not all, of your personal property and possibly even your home.
In New York, you have the option of using state or federal exemptions to protect your personal property. Regardless of which system they choose, married couples filing together double all applicable exemption amounts.
Federal exemptions
If you choose the federal exemptions, the property you can protect includes:
- $25,150 worth of equity in your primary residence (also known as the homestead exemption)
- $4,000 for a motor vehicle
- $13,400 in aggregate for household goods and furnishings, clothing, appliances, animals, books, musical instruments, or crops (Each item must be worth no more than $675)
- $25,150 for personal injury recovery (does not include pecuniary loss or pain and suffering award)
There is also a wildcard exemption that you can apply to any type of property. It is $1,325 plus up to $12,575 of any unused amount of your homestead exemption.
State Exemptions
If you opt for the New York state exemptions, you can protect property such as:
- $85,400 to $170,825 worth of equity in your home, depending on which county you live in
- Up to $4,550 in a motor vehicle
- Up to $3,400 worth of tools for your trade
- 90% of income received within 60 days before filing bankruptcy
The New York state wildcard exemption lets you protect up to $1,150 in personal property (not real estate) of your choice.
At Gershburg Law, P.C., we will work with you to identify which system allows you to protect the most amount of property.
What Can You Keep if You File for Chapter 7 Bankruptcy in New York?
I am a Manhattan Bankruptcy Attorney and am getting this question more and more from people considering filing for Bankruptcy all over New York City. So can someone in Manhattan making more than $100,000 file for Chapter 7 Bankruptcy? Yes. What? Yes.
The first Bankruptcy test you’ll go through in New York, or any state for that matter, is the Median Income test. It is that scary test you keep hearing about. You know, the one your friend tells you about when he/she says “No they have this new test now. If you make over a certain amount, you can’t file.” Like most things your friends say, they are only partially correct. The current Median Income limit in New York for a family size of one is $$46,523. For a family size of two (much different than a joint filing or marriage), the amount is about $57,000.
So New York Bankruptcy Attorney man, how in the world can someone filing for Bankruptcy in New York who earns over $100,000 possibly file for Bankruptcy in New York? The short answer is that Bankruptcy laws allow you to take certain deductions when deciphering if you are qualified to file. You can take standard IRS deductions that your trusty New York City Bankruptcy Attorney knows about. You can deduct certain childcare expenses. Youc an deduct garnishments dealing with taxes. You can deduct your actual mortgage payments. You can deduct vehicle ownership expenses. You can deduct health care expenses. You can deduct food expenses. In other words, if you’re earning more than that median income test, you still absolutely have a shot for filing for Chapter 7 Bankruptcy in New York City.
Rather than explaining each and every deduction (and inadvertently putting you into a coma in the process), I would recommend you speak with a New York City bankruptcy lawyer and he/she, if they are worth their weight, will TAKE THE TIME to sit down with you and explain all of this things to you. This is a great field where attorneys are able to help people in financially stressful situations (and emotionally, physically, etc.) Make sure you are completely confident about your options.
What Can You Keep if You File for Chapter 7 Bankruptcy in New York?
I just came back from a meeting of the creditors…the dreaded “meeting with the trustee.” Most client were represented by a capable attorney. Two clients were not. Instead they filed all of the paperwork on their own or had a company that rhymes with “Schme the Veeple” file it. Guess what happened. The first client, who prepared his bankruptcy filing on his own, had his case dismissed. It wasnt due to the fact that there was any fraud or hidden assets. Instead, it was dismissed because he didn’t file the required paperwork. Why you say? Because he didn’t know what the required paperwork was or where to find that paperwork. The second client fared even worse. The client, who went to “Schme the Veeple” to file the case received some bad advice (even though you’re not supposed to receive any advice there.) Long story short, the client wasn’t aware of the fact that he could only exempt $50,000 in equity from his house if his name is on the dead, regardless of whether he filed for the Bankruptcy jointly with his wife. It will likely end with the client losing his house. Which is sad…and ridiculous. I have said it before and I will say it again, I understand why people don’t want to pay an attorney $1500 if they think they can do it on their own. For some people, that may be ok. However, for most people out there, Bankruptcy is way too complicated to go at it alone. Can you keep you car? Can you discharge unapaid taxes, student loans, etc? Can you keep your home? All of these questions have to be answered by a trained, experienced professional. It really does not make financial sense to save $1000, when you could lose your home, or have your case dismissed. Please make sure you really think about going at it alone, as it may cost you much more than you save.
When Is The Right Time To File For Chapter 7 Bankruptcy In New York?
A question I contuniously get from clients in my New York office is “When is the right time for Bankruptcy in New York”. The question is really a very personal one. It depends on you, your family, and your life situation at the present time. If you’re like many people out there, you may be struggling to make ends meet. If you’re also like some people out there, you’ll have at least some small amount of savings put away. When you begin to realize that you’re using your savings and it’s not doing anything to minimize your debt; that it in fact is simply letting you pay your minimums on your cards and let you “float” for another month, thats a hint that you may want to consider filing for Chapter 7 Bankruptcy in New York. The thing I hate to see most is clients going through their IRA accounts and 401(K) to pay minimums towards cards that they will never repay. It’s a waste of money. Furthermore, if you find at the end of the month that your credit card payments are causing you to be late on your mortgage payments or car notes, that may be a point where you might want to consider Bankruptcy. Lastly, if you’re income is likely to rise shortly (and Mazel Tov to you, because my friend, you’re one of the few) you want to consider filing, as there are certain income limits on when you can file for a Chapter 7 Bankruptcy.
Lastly, I think its critical to discuss the current times we are in, and some lawyers wont discuss this with their clients when talking about Bankruptcy. Look the most realistic picture is that our economy is going to be in a rut for some time to come. Were looking at potential double digit unemployment, salary freezes, declining home values, and the rest. The best (and perhaps only) way to deal with this crisis is to plan accordingly. If you have 50k in debt and about 20k in savings, think long and hard about using those savings to pay the debt down. If you’re in a home you cant afford even WITHOUT paying your credit cards, think hard about the situation your in and try and plan your way out of it. I realize more than many people understand that there is this odd “stigma” associated with filing for Bankruptcy. While I do understand that it seems like a “big step” it may be the only way to actually remedy the financial situation you’re in. We can always help answer your questions. Its simply a personal choice though, as to when to ask.
Will I ever get credit again if I file for Bankruptcy?
Yes, of course you will. Despite what some people may have told you, Bankruptcy is not the end of your credit forever. In fact, most Bankruptcy clients can expect to receive new credit in a very short period of time. Many clients have been able to purchase homes and cars within only a few short years after filing (sometimes shorter).
Should I try Debt Settlement First?
NO! The vast majority of debt settlement plans do not work. The statistics are out there. Further, it can take so much more time to effectively settle all of your debts, which impairs your credit in the interim. Bankruptcy should not be the last step taken if you feel you’re in over your head.
How long does the Bankruptcy process take?
Each case is different, but typically, the process from start (filing) to finish (receiving a discharge) takes approximately 90 days.
Can I file for Bankruptcy if I own a home?
Yes. In New York, the Bankruptcy exemption limits have been raised significantly. You can now exempt up to $150,000 in equity in your primary residence. In plain English, that means you have a very good chance of keeping your home if you file.
Will the creditors keep calling me after I file?
Absolutely not. It’s against federal law for creditors to contact you after you’ve filed Bankruptcy. They could be subject to a lawsuit and penalties. The calls stop once you file.
Is it normal to feel embarrassed or ashamed about filing?
Absolutely. Look, in reality, no one feels good about filing for Bankruptcy. However, once the process is done, many of our clients (in fact, most) say that they feel as if a weight has been lifted. We understand the feelings you’re going through, and that’s why we walk you through the process every step of the way.
Do you offer consultations?
Yes, we offer free 30 minute (we don’t really keep track of time) consultations to discuss your case, both in person and on the phone.
What if I make a lot of money after I file Chapter 7 Bankruptcy?
“What happens if I make a lot of money after I just filed a Chapter 7 Bankruptcy?” is a question our Bankruptcy attorneys get all the time. The answer is-nothing. If your Bankruptcy case has been closed by the Court, you’re free to make however much money you like (provided you didn’t, you know, lie about how much money you actually made during your Bankruptcy filing.) The one caveat is if someone dies and leaves you any money. If that happens within 6 months of your Bankruptcy filing, you MUST tell your attorney or the Trustee, as that money can be considered property of the Bankruptcy estate in New York. Barring that, you can make all the money you like and be totally fine. This is a popular misconception surrounding filing for Bankruptcy in New York. The Courts have no desire to “penalize” you for filing. It’s your right to file. It’s a way to clear out your old debts. There are no tricks here. If you filed Chapter 7 Bankruptcy in New York, and your case was closed, you can go on and be as successful as anyone else.
Can I keep my rent stabilized apartment if I file Chapter 7 Bankruptcy in New York City?
Yes, yes you can.
For a while, Bankruptcy attorneys were on edge because of a case involving a woman who filed for Bankruptcy and had a rent stabilized apartment. The Chapter 7 Trustee tried to claim that the apartment was part of the Bankruptcy estate, and therefore that he could sell the apartment back to the Landlord and kick the tenant out. This scared a number of people in New York. Individuals that wanted to file for Chapter 7 Bankruptcy were scared that if they filed such a case, their apartments (that they could sometimes barely afford) would be taken away and they’d have nowhere to go. Bankruptcy attorneys were similarly scared and didn’t want to file these types of cases for the same fear of having their clients be kicked out of their apartment.
The Court case made it’s round across the New York State Court system, finally ending up at the 2nd Circuit Court of Appeals. The Court of Appeals ruled in favor of the tenant, and stated that the rent stabilized lease was in fact a public benefit and therefore exempt as property of the estate. You can read much more about the court decision here (Alex please cite my blogpost where I wrote about this-Evernote won’t let me.)
So, if you’re wondering whether or not you have to fear losing your apartment if you file a Chapter 7 Bankruptcy in New York City, the answer, for all intents and purposes, seems to be no.
Can the Bankruptcy Trustee take my IRA, 401k or Pension?
If you’re filing for Bankruptcy in New York City, you’re inevitably going to fear the Trustee taking your retirement funds. You worked your entire life and you want to make sure that those monies are protected if you do in fact file for Bankruptcy.
Good news. They are.
Under the New York Exemptions, there is no limit to the exemption you have for your pension and retirement plans. You’ll find this under Debtor & Creditor Law Section 282(iii)(2). If you go looking for that, please do not call our office (kidding…kind of).
If you’re filing under the Federal Exemptions (Sections 522(d)(12) and 522(b)(3)(c)), there is, again, no limit to the exemption you have in your pension and retirement plans so long as they are in a fund that is tax exempt.
Again, it’s important that you speak to a Bankruptcy attorney about this before filing. Why? Although this seems straightforward, there can be instances where you take money out of your IRA right before you file and put it into your bank account (to pay bills, etc.) That money may not be protected under the Bankruptcy Code and could go straight to the Trustee. A Bankruptcy attorney in New York will be able to evaluate your situation and ensure that you know the amounts you’ll be able to keep.
Student Loans in Bankruptcy
Contact a NY Chapter 7 Bankruptcy Attorney Who Cares About Your Future
The clients who walk through the door at the Manhattan offices of Gershburg Law, P.C. are from all different walks of life. They are single, married with children, retired, blue-collar, white-collar, and everything in between. What they have in common is a large amount of debt and a desire to get out of it and obtain a fresh financial start.
We offer all new clients a free 30-minute consultation. During this case review, we go over your financial situation and help you determine whether Chapter 7 is the best way to put your debt troubles behind you. If it is, and you wish to proceed, we will provide you with honest and trustworthy legal advice from the time you file until your case is closed. For more information, call 866-554-8082 or contact us online.