The decision to file for bankruptcy can be a challenging, confusing time. Arriving at the decision can involve a great amount of stress, and then facing the many decisions involving bankruptcy - including what property you can keep as well as your credit future - can only add to that. However, when it comes to bankruptcy, you do have a weapon against this anxiety: information.
Bankruptcy law is not a simple matter. There are many chapters that provide different guidance for entities with varying details involved in the decision. Additionally, there is the decision to file under New York state guidelines or federal guidelines. For most individual consumers, however, the only chapters you should be concerned with are Chapter 7 and Chapter 13. Though both are meant for individuals filing for bankruptcy, there are some very important differences between the two.
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Chapter 7 bankruptcy in New York allows for two different circumstances. The first is that all of the debtor's property that is non-exempt may be sold through a bankruptcy trustee to pay your creditors. What qualifies as exempt property is extensive, but includes:
• Up to $21,625 in personal property used as residence or burial plot
• One vehicle valued up to $3,450
• Up to $11,525 total in personal or household items with no item above $550
• One each of appliances like refrigerators, televisions, computers, and stoves
• Up to $1,450 total value in personal jewelry
• Right to receive certain benefits, like social security
• Domestic animals up to $1,000 in value
The second circumstance Chapter 7 bankruptcy allows for in New York is a no-asset case where all property qualifies for exemption and you receive a full discharge of your debts with the creditors receiving nothing. Some debts, however, are non-dischargeable and must be repaid. These debts usually involve legal obligation and include:
• Student loans
• Debt from loans against pension or other qualified plans
• Taxes
• Current or past domestic support, such as child support
• Punitive government fines or penalties
Additionally, in order to qualify for a Chapter 7 bankruptcy in New York, you must pass a means test. If your case qualifies under the New York means test and is a no-asset case, you could have your debts discharged in as little as three months after filing.
Chapter 13 bankruptcy is more of a debt consolidation plan in New York. Participants in Chapter 13 bankruptcy don't immediately discharge their debts. Instead, New York debtors repay all or some of the debt over the course of three to five years according to a repayment plan filed with the court. The plan details what amounts will be paid to each creditor through the bankruptcy trustee in order to settle and discharge the debt. Chapter 13 bankruptcy can be appropriate and/or advantageous for the following situations:
• Debtors have regular income
• Debtors who own significant non-exempt assets
• Debtors who fail the Chapter 7 means test
• Debtors who are behind on their mortgage
• Debtors with cosigners or other third parties who need protecting
Giving careful consideration to your situation and your desired future are an important part of choosing which chapter of bankruptcy to file under in the state of New York. An experienced Chapter 7 and Chapter 13 bankruptcy attorney can help you sort through the necessary details and guide your case through the process.
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