CHAPTER 7 is a bankruptcy generally
used as a means for individuals to completely wipe out most
debts in a legal proceeding conducted under the jurisdiction
of The U.S. Bankruptcy Court. There is a small percentage of
Chapter 7's wherein a Trustee, usually an attorney, is
appointed by the U.S. Trustee Office who will sell off
non-exempt property of an individual(s) or liquidate a
business for the benefit of creditors. As a general rule,
most Chapter 7's are no asset cases wherein creditors do not
receive any money as payment for those debts listed in the
bankruptcy schedules and the debtor is relieved from any
obligation of paying back those creditors. However, there
are certain debts which cannot be discharged in bankruptcy,
including but not limited to: most, but not all government
taxes; most, student loans unless there is undue hardship;
child support; alimony; willful injury to another's person
or property; fraud or misrepresentation in obtaining goods
or services; government fines and penalties and certain
court-ordered restitution; and injury or death resulting
from the unlawful driving of a motor vehicle under the
influence of drugs or alcohol. Under the new bankruptcy law,
effective October 17, 2005, there are number of additional
requirements to satisfy in order to be eligible to obtain a
discharge of your debts in a Chapter 7 Bankruptcy, including
passing a means test or income test. For individuals with
income too high to pass the means test, you will be required
to pay back at least some of your debt in a Chapter 13
bankruptcy. A complete office consultation will be necessary
for an attorney to make that determination.
Go to Questions
2)
What is the importance of the change in New York State
exemption laws?
As of January 22, 2011 New Yorkers have the option of
choosing between two sets of exemptions to protect your
personal property and real property (house, co-op,
condo, land). These choices are important to analyze and
consultation with a competent attorney is critical. You
either choose all of the New York State exemptions or
all of the Federal exemptions. The New York State
changes for real property are listed below:
Under New York exemptions, you may protect $150,000 of
any equity in your PRIMARY RESIDENCE if you either live
in the 5 boroughs of New York or in any of the following
counties: Westchester, Rockland, Putnam, Nassau and
Suffolk.
The exemption decreases to $125,000 if you live in the
following counties: Dutchess, Albany, Columbia, Orange,
Saratoga and Ulster.
The exemption decreases further to $75,000 if you live
in any other county not specified above.
The following will contrast just some of the major
exemptions allowable under federal and state law:
(CAUTION: this information needs to be interpreted by
competent legal counsel)
|
|
Federal Law |
New York State |
|
Automobile |
$3,450 |
$4,000 |
|
Wildcard
|
$11,975
$1,000
(if no homestead exemption is claimed)
|
|
Homestead |
$20,200 |
$150,000, $125,000 or $75,000 |
|
Personal Injury |
$21,625 |
$7,500 |
|
Cash
|
$11,975
$6,000
(includes checking & savings types of
accounts and assuming no homestead is
claimed) |
|
Household Property
|
$11,525
$10,000
(not inclusive of cash)
(inclusive of cash)
|
Qualified Pension, 401(k), Profit Sharing, IRA or other
similar Plans; Also, benefits under an Annuity Contract,
and benefits under an Insurance Contract are generally
exempt. Any recent contributions to an annuity will need
specific legal advice.
(Exempt under both federal and state law)
Go to
Questions
3)
If I
file a Chapter 7, will I lose my personal property,
including my car which I must have for both work and
pleasure?
An analysis must be made
both under federal exemptions and New York State exemptions.
An equity exemption of $3,450.00 in a motor vehicle is
allowed under federal exemptions as well as the potential to
use up to $11,975 of a wild card exemption if the homestead
exemption is not claimed. An exemption of $4,000 is allowed
under state exemptions with a wild card exemption of $1,000
if no homestead exemption is claimed. However, Thus, to
determine your equity, you must subtract any lien (car loan)
attached to the car from the fair market value of the car.
For example, a car with a fair market value of $10,000
(generally determined by Kelley Blue Book or NADA value, or
a professional independent appraisal) with an outstanding
car loan of $3,000 will yield an equity of $7,000, possibly
falling within the allowable exemption under federal law (by
using the wild card exemption). However, the $4,000
exemption under state law may not fully protect the auto
with a equity of $7,000. CAUTION: The implications of this
can only be analyzed by competent legal counsel. The fair
market value is determined generally by the industry's Blue
Book or a current appraisal by a dealer.
Go to Questions
4)
Does filing bankruptcy mean I
lose credit forever?
No, it means your credit will
be substantially hurt if you have good credit going into the
bankruptcy and there will be a notation on your credit
report for a period up to ten years. However, you can take
steps to repair your credit.
Go to
Questions
5)
How can I repair my credit?
One way to assist in repairing your credit is to obtain
secured credit cards. You can generally place a minimum of
$100.00-$300.00 into a savings account and receive a credit
line up to the value of the account or even 150% of the
value of the account, in some cases. Timely payments of
minimums or the timely paying off of the entire balance each
month will demonstrate a new history that will enable you to
better obtain future credit. After a year of timely
payments, that secured credit card may become partially
unsecured, or store cards may become available to you to
further repair your credit history. Continuation of this
disciplined approach to the use of your credit cards will
result in obtaining new unsecured credit cards in a
relatively short period of time. If, and only if, secured
credit cards are used wisely, they may be of great benefit
to you.
Go to Questions
6) Do I have to go to Court
and see a judge?
In a typical Chapter 7
bankruptcy, there is no need to appear before a Judge.
You are required to attend what is called a section
341(a) hearing in front of a Trustee who is not a judge
but an attorney whose job it is among other things is to
review your Petition and your financial status (asset,
liabilities, income, expenses) and determine that you
have complied with the Bankruptcy laws. In the typical
no asset bankruptcy case, the five-ten minute hearing is
generally non-confrontational and the case is closed at
the conclusion of the hearing, provided all necessary
documents have been submitted. You then wait
approximately 3-5 months from the date of your hearing
to receive formal notice in the mail that you have been
discharged from your listed debts.
Go to Questions
7)
Do I have to list all of my debts? I am current on some. I
would love to keep one or two just in case there is an
emergency?
You are required by law to
list all of your debts. Failure to list a creditor may
result in considerable difficulty with respect to
extinguishing that debt. Thus, when your bankruptcy case is
closed or sooner, that unlisted creditor will seek to
collect on that debt. Consequently, it is vital that all
creditors with their proper correspondence addresses be
ascertained and listed. Failure to list a creditor can also
be a double whammy. You will be pursued by that creditor and
you will most probably have your credit card privileges
canceled, if it is a credit card debt. To ensure that all
creditors are listed, we require a current credit report.
Go to Questions
8)
How can I obtain a credit report to protect myself against
creditors?
OBTAINING A CREDIT REPORT: The fastest
and easiest way to get a free credit report is to go to
www.annualcreditreport.com.
Once you're there, select your state, and click on “Request
Report”. Fill out the form with the required information
then click on "Continue". You should choose the "Experian",
"Equifax", and "Transunion" credit reports. You are entitled
to one free credit report from each of the three reporting
agencies.You must go to this site to obtain the free
report. In the alternative, print the application form by
clicking on the following link and mail to the directed
address.
Click here
for your Free Credit Report by Mail or Phone.
Go to Questions
9)
What documents are necessary to gather to bring into your
office to get started?
You will need to bring in at
least 2 months of your most recent pay stubs, if working,
tax returns for the last two years, if available, your
bills, (one for each credit card, store card, personal loan,
medical bill, car loan, mortgage loan, student loan, IRS &
NYS Department of Tax bill(s), and other assorted bills,
your driver’s license or non-driver’s photo identification,
social security card, and $100.00 towards the retainer. It
would be quite helpful if you are able to sort and organize
your bills by eliminating for us all envelopes and
attachments.
Go to Questions
10)
Can you
guarantee me that my bankruptcy will go through?
There is no guarantee in life
about anything, other than death & taxes, they say. Your
creditors have sixty (60) days from the date of the section
341(a) hearing to file an objection through the initiation
of an Adversary Proceeding. It is rare for a creditor in a
typical individual Chapter 7 case to file an Adversary
Proceeding. However, it can occur if there has been "loading
up" (going on a substantial shopping spree or taking
substantial cash advances near the time of the filing of the
bankruptcy with respect to any one creditor), recent
substantial debt consolidation or balance transfers, the use
of new credit cards or obtaining new loans with little or no
repayment to that creditor, or any fraud, or
misrepresentation in obtaining credit cards or loans. These
problems are the extreme exception rather than the rule.
Make sure that you thoroughly discuss with our office if any
of these problems apply to you. Even with these problems
just noted, we will be able to assist you by explaining your
options if you give us full disclosure of your activities.
For most creditors, once this sixty (60) deadline has
passed, creditors are forever barred from collecting on this
debt. There are exceptions to this, such as student loans
and government taxes, which generally survive bankruptcy.
Specific legal advice may be necessary to sort out any of
these issues.
Go to Questions
11)
How are government student loans and private student loans treated differently than
other unsecured debt?
Government-backed student
loans, in whole or in part, are generally not dischargeable.
As of October 8, 1998 student loans are not dischargeable
unless it can be established in a separate proceeding that
there is a legal undue hardship. This is a particularly
tough hurdle to overcome. You must seek specific legal
advice with respect to this. The previous law permitted a
discharge for student loans if seven years had elapsed from
the time the loan went into repayment, excluding any
suspension of repayment periods. This provision has been
eliminated.
Go to Questions
12)
How are tax debts treated differently than other unsecured
debt?
Tax debts are treated
generally as priority unsecured debts, meaning they are not
dischargeable but payable in full at the conclusion of your
bankruptcy case. However, tax debts for years in which a tax
return was filed on time and where there was no fraud or
willful evasion to pay the tax may be dischargeable if three
(3) years has elapsed from the filing due date of that
taxable year. For example, a tax return filed for the 2007
tax year would be due on or about April 15, 2008. Such a tax debt may
be dischargeable if a bankruptcy is filed sometime after
April 15, 2011 (there may be a need to wait several days
after April 15th based upon certain rules of
timing), assuming no fraud or willful evasion exists. There
are other rules relating to late filed tax returns,
non-filed tax returns and tax assessment dates which may
have applicability. CAUTION: Only a careful review of the
particulars of your case would enable our office to
determine the likelihood of discharge for your tax debts.
Go to Questions
13)
How much does it cost to file bankruptcy and can it be paid
out over time?
Our fee for a Chapter 7 is
reasonable. This fee is payable over a six (6) month period.
However, the petition cannot be filed until payment is made
in full. The fee for a Chapter 13 will vary depending upon
complexity but it is significantly more than a Chapter 7
because of the need for at least one appearance before a
judge in addition to the appearance in front of a Trustee,
as well as the substantial time involved in the review of
creditor claims and preparation of motion(s) and order(s)
for the Court.
Go to Questions
14)
Creditors are making my life miserable. They are calling me
7 days a week and even calling my job. What can you do to
help me?
Once you have come into our
office, brought in the requested documents and a $100.00
retainer, you may direct creditors to contact our office to
confirm or verify that we have been retained to file a
bankruptcy on your behalf. We will provide you with our own
office identification number for you to provide to your
creditors. You are only required to give our name and
telephone number pursuant to the Fair Debt Collection &
Practices Act, as creditors are prohibited thereafter by law
from calling you at home or work after you have retained an
attorney.
Go to Questions
15) I
just received a garnishment notice (formally known as an
Income Execution Notice) from the Marshal. What is a
garnishment? Can this be stopped or if they started
taking money out of my check, can you stop it? Is it too
late?
A garnishment is a legal
device to enforce a judgment obtained by a creditor. It
allows a Marshal to inform and order your employer to
generally deduct 10% of your gross wages to begin to satisfy
your obligation to pay back that debt. It is never too late
to stop a garnishment. It can be stopped before it gets to
the Marshal, after it gets to the Marshal, or even after it
is actually executed by your employer. Once the bankruptcy
is filed, which means all documents had been brought in and
the entire fee had been paid, notification by our office
will be sent to the Marshal, the Employer (if it is in that
stage), and the creditor's attorney simultaneously on the
same day the petition is filed or the first business day
subsequent to the filing. The garnishment legally stops on
the day of the filing and no future deductions as of that
date may be made from your pay check. Any inadvertent
deductions that occurred will be returned to you.
Go to Questions
16)
What are the requirements of credit counseling and debtor
education?
Before you file a chapter 7
or chapter 13 bankruptcy, you are required to obtain a
credit counseling certificate from an approved credit
counseling organization. Specific information with respect
to the procedures will be provided once you have retained
our office. It is generally done by telephone and involves
a consultation lasting of approximately one hour. After
filing a chapter 7 or chapter 13 bankruptcy, you are
required to complete a debtor education course by telephone
or online for instructional purposes only. There are no
failures involving the course. More specific details shall
be provided once you have retained our office.
Go to Questions
17)
What is the Means Test?
In order to qualify to do a
Chapter 7 under the new law, one must subject one’s income
to a means test analysis as well as to a separate analysis
of current income and actual expenses. As for the means
test, you first need to ascertain your gross income during
the six month window period prior to filing based upon all
sources of income with limited exceptions (social security
income is not countable).{ If you are married and living
together, your spouse’s income is included into the economic
mix even if he is not filing. It is necessary to carve out
the non-filing spouse’s expenses if he is living together
with his spouse for those expenses not accounted for in the
means test.} Additionally, you must establish the size of
your household. Generally, it is deemed the number of
dependents as noted on your tax returns but this issue has
not been settled by the courts. For simplicity sake, an
individual (with no spouse or with a spouse living separate
and apart) with two minor children would be deemed a
household of (3) three. If your income as averaged over the
six month period prior to filing (if you file in January,
you are averaging July-December) known as your current
monthly income (CMI) is under the sum of $68,396 (figures
current as 7/1/11) known as your median family income (MFI,
as determined by Census Bureau statistics, calculated for
each state and varying with family size), then in this
scenario the proposed debtor in bankruptcy would pass the
means test, one of the two tests for eligibility.
For individuals
with above median family income, a second level of scrutiny
is necessary under the means test. The current monthly
income is then reduced by allowable expenses, mainly based
upon IRS statistical tables and some actual expenses to
arrive at a disposable income figure, if any, that would
require one to pay back creditors in whole or in part in a
Chapter 13 bankruptcy, generally over a 36 or 60 month
period. In Westchester County, including but not limited to
Yonkers, Mt. Vernon, New Rochelle, White Plains,
Eastchester, a family size of 1 person has an allowable
expense for housing and utilities in the sum of $2,683. In
Westchester County, including but not limited to Scarsdale,
Tuckahoe, Bronxville, Rye, Harrison, a family size of 3 has
an allowable expense for housing and utilities in the sum of
$3,321. Other expenses that reduce current monthly income
include national standards for food, clothing and other
items, transportation, taxes, involuntary payroll
deductions, and other allowable expenses that need careful
analysis by a competent attorney experienced with these
issues.
Even if one passes the means
test, a review of your current income and actual expenses
must be separately analyzed to ascertain if there is any
significant disposable income for pay back to creditors.
Only an experienced and competent attorney should be
consulted to advise you of your options. The new law
requires this more than ever.
Do
you have any questions based on this informational packet?
Please feel free to
contact our office for a free follow-up
telephone consultation or call to schedule an appointment.
BRONX DIRECTIONS:
2525 Eastchester Rd., private
house, white brick with white awning,
BUS:
#26 bus to Allerton Ave., walk south (towards Pelham Parkway
direction) but go only one long block. #31 to
Eastchester Rd. & Mace Ave.
CAR:
Bronx River Parkway, take Pelham Parkway to Eastchester Rd.;
left on Eastchester Rd.; go three blocks and proceed slowly
past Mace Ave., left hand side. If coming on
Hutchinson River Parkway, exit on Pelham Parkway West. Right on
Eastchester Road, go slowly past Mace Avenue, left hand
side.
THANK YOU FOR YOUR
INQUIRY. I LOOK FORWARD WORKING WITH YOU!
