Are you in debt and don’t know what to do? In this article we will tell you all the steps on how to file for bankruptcy in New York. Thinking of filing for bankruptcy and don’t know where to start? Keep on reading.
At Ortiz & Ortiz we have New York bankruptcy lawyers who have been serving the community for over 30 years. Our financial and bankruptcy experts are ready to help you with whatever you need. Just contact us and let us know about your case, we look forward to hearing from you!
How To File For Bankruptcy in New York in 2022
Just hearing the word bankruptcy scares many people. If this is your case, don’t worry. In this article we will clarify your doubts and guide you through the process. Therefore, before going into detail on how to go through the process of filing for bankruptcy in New York, we will clarify some key points.
What is filing for bankruptcy?
Filing for bankruptcy is a legal procedure that occurs when a person is unable to pay his or her bills and debts. It is a right protected by federal law. Therefore, every bankruptcy case is handled in federal court.
What does filing bankruptcy in New York involve?
The process to file for bankruptcy in New York involves a fresh financial start.
Specifically, it involves the following points:
- It immediately stops creditors and lenders from being able to collect their debts. In that sense, your legal obligation to pay most or all of your debts is discharged. In other words, debts are forgiven.
- Filing for bankruptcy will stop foreclosure on your home and give you the opportunity to catch up on past due payments. However, bankruptcy does not automatically eliminate unpaid mortgages or other liens on your property.
- It does stop any liens by the creditor, whether on property or a car. Bankruptcy even forces the creditor to return the property after it has been seized.
- It stops wage garnishment, as well as debt collection harassment and other similar actions.
- By filing bankruptcy you can also contest the claims of creditors who are trying to collect more from you than you were originally supposed to pay.
What is not contemplated in a bankruptcy?
In the previous section we saw what is involved in filing for bankruptcy in New York. However, in this section we will discuss what bankruptcy does not do. And, in that sense, it is important to clarify that filing bankruptcy does not solve all financial problems. Bankruptcy has some consequences, such as, for example, weakening your credit score.
Note: Filing for bankruptcy will weaken your credit score. Check here how you can improve your score.
Bankruptcy does not take into account the following points:
- You will not be able to eliminate certain rights held by creditors who are “secured”. In general, when you are facing unpaid debts, a secured creditor may take a mortgage or other lien on property as security for the loan. Through the bankruptcy process, you will be able to force those creditors to accept payments over time. Your obligation to pay additional money if your property is taken as collateral will also be eliminated. However, in general, you will not be able to keep that collateral unless you continue to pay the debt.
- It will not be possible to discharge types of debts singled out by bankruptcy law for special treatment. These types of debts are, for example, child support, alimony, divorce-related debts, student loans, criminal fines, and most taxes, among others.
- You will also not be able to protect co-signers from your debts. This refers to when a family member or friend co-signed a loan with you. If you file for bankruptcy, that co-signer must assume the debt and repay part or all of it.
When to file for bankruptcy?
There is no exact date or ideal time to file for bankruptcy. The only clue as to when you should file bankruptcy is if you can no longer pay your debts. Here you can review how to find out if you have debts in the United States.
At Ortiz & Ortiz we can advise you and evaluate your financial and credit situation to determine if filing bankruptcy is your best alternative.
What types of bankruptcy are there?
In New York there are four ways to file bankruptcy that are protected by law.
- Chapter 7 bankruptcy: This is the bankruptcy that is known as “liquidation”. It refers to the fact that you as the debtor give up all of your property in excess of what’s exempted. And then you liquidate to pay the debts to creditors or lenders. The process through this route can take three to six months from the time the forms are filed until the debt is discharged.
- Chapter 11 bankruptcy: Also known as “reorganization”. It is used primarily by businesses and individual debtors who have very large debts.
- Chapter 12 bankruptcy: This process is used only for “family farmers” or “family fishermen” who have regular annual income. Filing for Chapter 12 bankruptcy allows farmers and fishermen to carry out a plan to repay some or all of their debts.
- Chapter 13 bankruptcy: This is known as the “wage earner plan.” It is a reorganization that allows you, if you have regular income, to devise a plan to pay part or all of your debts. This plan has a term of 3 or 5 years.
Although there are four avenues through which it is possible to file for bankruptcy, most are under Chapter 7 and 13. In fact, of all the bankruptcy proceedings that begin under Chapter 13, two-thirds end up becoming a Chapter 7 bankruptcy.
Whether it is Chapter 7 or 13, both types can be filed individually or jointly. The only way that allows it to be jointly is that you must be a legally married couple.
Note: In our article “Different types of bankruptcies” you can learn more details about the different types of U.S. bankruptcies. Also, check here for the differences of filing for Chapter 7 or 13 bankruptcy.
How often can I file for bankruptcy?
If you are evaluating filing bankruptcy and have already done so before you will have to wait a few years.
Let’s look at some cases:
You want to file for Chapter 7 bankruptcy now, but you cannot do so if:
- in the last eight years you filed for Chapter 7 bankruptcy
- in the last six years you filed a Chapter 13 bankruptcy
Now you want to file for Chapter 13 bankruptcy, but you will not be able to do so if:
- in the last four years you filed for Chapter 7 bankruptcy
- in the last two years you filed for Chapter 13 bankruptcy
Generally, you can file for a Chapter 11 bankruptcy as soon as the last bankruptcy has concluded.
If you have never filed for bankruptcy before, you may do so without any time restrictions.
How much does it cost to file for bankruptcy?
If you are thinking about filing for bankruptcy, it is because you are in debt. Therefore, the monetary cost of the process itself may be a factor to consider.
Costs of filing bankruptcy in New York:
- Filing for Chapter 7 bankruptcy costs $335.
- Filing for Chapter 13 bankruptcy costs $274.
These amounts are the same whether you are filing individually or jointly with your spouse. And in the event that you do not have a sufficient balance to incur this expense, the court allows you to pay in installments.
Another investment is time. You should consider that for this process you will have to dedicate hours of work to advance in each of the 8 steps of the process.
How to file for bankruptcy in New York in? 8 steps to consider in this process
In the previous lines we have seen some aspects that you must have clear before starting this process called bankruptcy. But now let’s get straight to the point: How to file for bankruptcy in New York? Next, point by point we will explain how to proceed.
1. Credit Counseling
The Bankruptcy Act of 2005 provides that individual debtors filing for bankruptcy must have credit counseling.
- All debtors who want to file for bankruptcy must receive credit counseling.
- It must take place within six months prior to filing for bankruptcy.
- In addition, the Bankruptcy Act of 2005 requires that subsequent to the bankruptcy filing, the debtor complete a course of financial management instruction.
2. Means Test
This step consists of an evaluation of your financial situation as required by the Bankruptcy Act of 2005.
- The bankruptcy means test consists of analyzing your income and expenses and, based on that, determining if you qualify for bankruptcy.
- You will also look at the option of filing for Chapter 7 or Chapter 13 bankruptcy.
- This test is conducted by the courts during the six months prior to filing.
- To determine if you qualify your income is compared to the New York median income. Along those lines, if your income is below the median, Chapter 7 is chosen. And, if it is above the median, further testing will be done to determine which chapter you should file your bankruptcy under.
3. Gathering paperwork
This part can be very tedious, but it is very important. Whether or not you ultimately qualify for bankruptcy relief depends on this step.
Some documents you should gather:
- Detail each of your current sources of income
- Present the most important financial transfers you have made during the last two years
- List your living expenses for one month
- Present what your debts are. This includes secured and unsecured debts
- Indicate all your properties. This means all your assets and possessions. They can be real estate, automobiles, companies, partnerships, investments, among others
- You must also submit your tax returns for the last two years
- Real estate deeds, title deeds of the car or cars in case you have more than one
- Documents related to any loans you may have
4. Filing for Bankruptcy
Gathering the information outlined in point 3 above is a good way to get on the path to completing the process to file for bankruptcy in New York. This information can be gathered on your own or with the help of an attorney.
Now that you have all the documentation in hand, it is time to analyze what property or assets are exempt from seizure under either the New York exemptions or the federal exemptions, depending on which protects more.
- Filing for bankruptcy can be done by you or your attorney. The petition consists of two pages and other forms available from the Bankruptcy Court for the District of New York.
- These forms are called schedules. Through them, the court will ask you to describe your current financial status and recent financial transactions. Generally for the last two years. These are usually 50 to 60 pages,
- At this time you must be completely candid about your financial situation. If the judge or your creditors feel or discover that you have withheld information or lied, the outcome of your petition may be at risk.
- Filing for Chapter 7 bankruptcy costs $335. If you do not have the funds to pay this amount, you may be able to pay in installments. A Chapter 13 bankruptcy costs $274 and cannot be waived.
Chapter 13 Filing Requirements
If you want to file for Chapter 13 bankruptcy, you will need to file additional documents. Specifically, you will need to add a proposed repayment plan to your petition. This, considering that Chapter 13 involves a payment plan either 3 or 5 years long in which you pay off your debts or part of them.
In this repayment plan you will need to structure your finances for the next few years. For example, outline how much money you will have left over to pay outstanding bills and how this money will be distributed to creditors. You should, through this plan, establish payment priorities.
The payment plan you will propose will face three tests:
- Surrender in good faith.
- Unsecured creditors must be paid as if you had filed for Chapter 7 bankruptcy. To give you an idea, this is the value of all the non-exempt property you own.
- Disposable income must be paid into the proposed plan for at least three years. Although it can be extended to five years to comply with the above.
5. Automatic stay of all debts
As soon as you file the paperwork with the bankruptcy court, the stay on all of your debts goes into effect. What does this mean? Creditors will no longer be able to contact you for collection efforts. Nor will they be able to make any claims on your assets. This phase of the stay will stop any foreclosure proceedings.
Note: The automatic stay will also prevent you from going to jail for unpaid debts.
6. Bankruptcy Trustee
Once you have filed for bankruptcy, the court will assume legal control of your debts. And also of any property that hasn’t been exempted.
Here’s how it works:
- You file for bankruptcy.
- The court assumes legal control of your debts.
- The court appoints a trustee for your case. And their job will be to see that creditors or lenders are paid as soon as possible.
- It will be the trustee’s job to review all the documentation you submitted and, in particular, the assets you own. It will also be the trustee’s job to review any exemptions you wish to claim. It is the trustee who may be able to contest items in your case.
Note: What is a trustee and what powers do they have? Consult our New York bankruptcy lawyers.
7. 341 meeting of creditors
One to two months after you file for bankruptcy, the trustee will call the first meeting of creditors. Here you will also be required to attend. This meeting is also called a “341 meeting” after the name of the corresponding section of the bankruptcy code.
- If you are filing for Chapter 7 bankruptcy, it is very likely that creditors will not attend.
- If you are trying to file for Chapter 13, there will probably be one or two creditors in attendance. This is especially true if there are doubts as to the legitimacy of your proposed repayment plan or if you have a mortgage.
- Any objections are usually resolved in a negotiation between the debtor and the creditor or between the debtor’s attorney and the creditor.
- If no agreement or resolution is reached, a judge will intervene.
- This meeting lasts approximately five to twenty minutes. You will receive notice of the location of the meeting. Due to COVID, all appearances have been made telephonic. You can check the New York Bankruptcy Court Directory to confirm the address and time.
8. Plan Confirmation
If you have filed a repayment plan that meets the requirements of Chapter 13, you or your attorney must go to a hearing before the bankruptcy judge. At that hearing, your repayment plan will be confirmed or denied. If the plan is approved and you comply with it, the remaining balance of debts (if any) will be eliminated at the end of your term.
If I file bankruptcy in New York, what happens to my property?
What property or assets you can keep after filing bankruptcy will depend on what chapter you filed under. However, let’s review some of them.
- If you are thinking about filing for Chapter 7 bankruptcy, you can keep all of your exempt assets. What are these assets? Review them in detail here.
- Keep in mind that once you have determined if the property is exempt, the value of the property will be what it is worth now. And not what you paid for it when you bought it. This also applies to furniture and cars as well as real estate.
Filing bankruptcy brings up a lot of questions. Can I buy a house after filing bankruptcy? Can I buy a car? Can I refinance my house after bankruptcy?
Why hire the attorneys at Ortiz & Ortiz?
Filing for bankruptcy is a decision that you must make conscientiously. In this article we tell you step by step how to file for bankruptcy in New York. And, as you can see, it is a long process in which you must be very orderly and honest about your financial situation.
Our bankruptcy lawyers are ready to review your case and assist you in this process:
- They will advise you financially.
- They will be able to make an evaluation of your situation and analyze if it is feasible to file for bankruptcy.
- They will guide you through each of the steps involved in filing for bankruptcy. They will also advise you, according to your income, which chapter you should file under.
- Our attorneys can accompany and represent you at the 341 Meeting and at any time necessary.
For these and other services, please contact us today – we look forward to hearing from you!