Manhattan Chapter 7 Bankruptcy Lawyers Are Here to Help!
Chapter 7 bankruptcy is known as the ‘liquidation bankruptcy’ because the court liquidates (sells) your assets to pay off creditors and lenders. As soon as the court liquidates your assets and pays your creditors and lenders, it discharges any remaining balance.
Asset liquidation sounds scary, but the reality is that the court will not sell everything you own. Personal property, clothing, your home or real property, retirement savings, and certain others are exempt.
With this type of bankruptcy, you can complete the entire process quickly and can start your financial life anew. Thanks to bankruptcy relief, with your newfound financial freedom, you may consider refinancing your home or even buying a new home.
Our bankruptcy lawyers in New York City have a combined experience of more than 30 years. They will guide you through the entire bankruptcy process to help you make the most informed decision. Feel free to call us today for a personalized consultation.
What is the Process for Filing for Chapter 7 in Bankruptcy Court?
The reality is that most Chapter 7 bankruptcy applicants never face any asset liquidation. Most will be able to enjoy a clean and fresh start while keeping their possessions.
This is the general process per bankruptcy code:
- Complete Pre-Bankruptcy Credit Counseling: This will come first, and you will do it within 180 days of the date you want to file for bankruptcy.
- With the certification received, you can now proceed to the submission. If you have not done so before, it is time to contact an experienced bankruptcy attorney. To proceed with the process, you must have the following: The certificate of completion of credit counseling. Expense and income calendar (what you spend versus what you earn). List of assets and liabilities (what you earn versus what you owe). A schedule of contracts pending execution and unexpired leases (any contracts you have that have not been completed). Statement of financial affairs (a report of liens, lawsuits, outstanding leases, property liens, and foreclosures).
- Once your case has been filed, you will be assigned a bankruptcy trustee and given a court hearing within 45 days.
- The bankruptcy court must receive all documents within two weeks of your case being filed.
- You will perform a means test to verify that you are eligible for Chapter 7. In the meantime, the bankruptcy trustee issues an ‘automatic stay.’ The stay causes the following: Stops any current foreclosure proceedings. Freezes pending civil lawsuits such as collectibles. Prevents collections on any of your debts.
- At this point, creditors can object to the discharge if they can prove that you have committed some type of fraud.
- As soon as the trustee reviews the objections, they will issue their report.
The forms for your bankruptcy petition can be found on the US Courts website. While you could fill them out yourself, any minor mistake could ruin your entire application. It is highly recommended to hire the services of a Chapter 7 bankruptcy attorney who will do all of this hard work for you.
How Long Does Chapter 7 Take and How Much Does it Cost?
Being organized, a person can file most bankruptcy forms within a week. One to two months after filing, you meet with the trustee who is overseeing your bankruptcy case. It is known as a 341 meeting.
If everything is correct, two or three months after your meeting with the trustee, you will receive a letter informing you of the discharge. In short, from the start of Chapter 7 bankruptcy until the discharge of your debt, it usually takes between three to six months.
The court fees are $338. If you earn less than 150% of the federal poverty line and are filing pro se, you may qualify for an exemption. You can also pay this fee in installments if the bankruptcy courts agree to your request.
Is Chapter 7 the Right Option for You?
Here are some signs that indicate that you are a good candidate to file for Chapter 7 bankruptcy:
- Your credit score is already low, that is, below 600.
- You have more than $ 10,000 of forgivable debt.
- It is impossible for you to make ends meet by keeping up with your payments.
- You do not own luxurious property.
- You worry about being sued for your debt or having your wages garnished.
- There is no clear path to pay off your debt over the next five years.
- You pass the means test by earning below the median income for your state.
If these assumptions apply to you, it may be wise to consider filing for bankruptcy Chapter 7. Feel free to contact our law office to speak with one of our attorneys for help in bankruptcy law.
When Might it Be Wise to Wait Before Filing Bankruptcy?
In some cases, waiting some time before filing for Chapter 7 bankruptcy can help. For example:
- You transferred or returned the property to a family member or friend in the last year: In this case, it will be better to wait as you must show these activities on your bankruptcy documentation. Also, your trustee will ask you about them.
- You rely on credit cards to make ends meet or made large purchases in the last six months. Here you should wait to file and pay your most recent changes first.
- If you owe money to the landlord and you do not plan to move: In this case, try to catch up on your rent payments before applying. The same usually happens with car loans to keep your vehicle.
- If you are suing or plan to sue someone: It will be smart to postpone filing for Chapter 7 bankruptcy until you get an outcome on the case. In personal injury cases, it is common for people to delay filing while waiting for a settlement.
- If you expect your financial situation to get worse: Keep in mind that you can only file for Chapter 7 bankruptcy once every eight years. You don’t want to do it if you know that the result will be increasing your debt.
What Can Chapter 7 Do for You?
With a successful bankruptcy filing, it is possible for many Americans to obtain the debt relief they’re looking for and get back to living their lives again with a fresh financial start. Other advantages include:
- Stop debt collection harassment.
- Suspend the lien on a vehicle or other property. In some cases, even force the creditor to return the property even after a repossession.
- Suspend a foreclosure to allow you to catch up on your payments.
- Avoid or reestablish the termination of your public services due to non-payment of previous bills.
- Eliminate the legal obligation to pay all or most of your debts, that is, the discharge of debts.
- Reinstate your driver’s license if you have been suspended for failing to pay court-ordered damages after an accident. Unless it involves a DUI case.
What are Chapter 7’s Limitations in Bankruptcy Law?
There are, however, certain disadvantages and limitations to Chapter 7 bankruptcy laws.
- It can’t protect you from bad checks and other criminal charges. You cannot waive fees, compensation, penalties, or criminal penalties.
- Won’t absolve property taxes, past-due alimony payments, most student loan debt, or recent IRS debt.
- In most cases, you will not be able to eliminate a consignee’s obligation on your loan.
- Will not eliminate creditor rights to unsecured property such as home mortgage payments and vehicle loans.
While Chapter 7 may absolve the debt, that does not mean that the creditor’s legal claim or lien is dismissed. After bankruptcy, your vehicle may be repossessed, and your home may remain in foreclosure if you don’t make payments.
What Debts Can Be Erased with Chapter 7 and Which Ones Cannot?
Let’s take a general look at what common debts incurred that Chapter 7 bankruptcy may erase. These are known as “dischargeable” debts:
- Medical bills.
- Car loan.
- Credit card payments.
- Payday and personal loans.
- Utility bills.
- Debts for failures in credit cards and debt collection agencies.
Chapter 7 bankruptcy cannot erase the following most common debts, known as “non-dischargeable”:
- Most student loans.
- Alimony and child support.
- Tax debts and other penalties or debts that you owe to the government.
What Are the Advantages and Disadvantages of Filing for Chapter 7 Bankruptcy?
Bankruptcy is not something you should do without thinking first. There are pros and cons to consider carefully.
Advantages of Filing for Chapter 7:
- It will only take three to six months from the moment you file to the discharge.
- Most state exemptions will allow you to exclude most of your properties from bankruptcy.
- After filing for Chapter 7 bankruptcy, you will be able to keep wages and property that you buy after filing.
- You may opt for new lines of credit within one to three years of filing for bankruptcy. (Of course, at a higher interest rate.)
- There are lenders who specialize in post-bankruptcy home buying and loans.
- You can file only one Chapter 7 application every eight years, but you can choose to get a Chapter 13 plan before you have the right to apply for Chapter 7 again.
- Bankruptcy prevents your lenders from taking aggressive steps to collect your debts.
- Bankruptcy relieves many of your financial obligations, but only an order from a family court can void your child support and alimony obligations.
- Many people will see their credit score improve if they are below the 600 range.
- The eight-year bar does not apply if you obtained a good faith Chapter 13 discharge after paying at least 70% of your unsecured debts.
- Chapter 7 does not require you to have a debt of any specific amount to request redress. Even if your bankruptcy case is converted to Chapter 13, you can still improve your situation by obtaining more favorable terms.
Disadvantages of Filing for Chapter 7:
- Bankruptcy can stay on your credit report for up to 10 years.
- You will lose all your credit cards.
- You will lose the property you own that is not exempt from sale by the trustee. That is, you can lose luxury possessions.
- Bankruptcy will make it exceedingly difficult to get a mortgage if you don’t already have one.
- If you face a worse situation in the future, you will not be able to file for Chapter 7 bankruptcy for six years from the date you first filed for bankruptcy.
- It will not eliminate your student loan debt or exempt you from paying child support or alimony.
- You can’t file for Chapter 7 bankruptcy if your previous Chapter 7 or 13 cases was dismissed within 180 days. This applies if you violated a court order or requested dismissal when a creditor requested relief from the automatic stay.
- Even after the bankruptcy procedure is completed, you may still be required to pay off some debts like a mortgage lien.
- If you have a certain amount of disposable income and apply for Chapter 7 relief, the court may turn it into a Chapter 13 case. This will change your goal to get rid of debt between three to six months to having to pay it off in a payment plan that’s either three or five years.
Frequently Asked Questions for a Bankruptcy Attorney:
Here are some of the most frequently asked questions we get at our law office. For your own personalized consultation, call us today and tell us about your case.
What is the Means Test?
Anyone who files for a personal Chapter 7 bankruptcy must pass this test.
The means test is a formula-based tool that assesses whether you qualify for Chapter 7 bankruptcy or instead, for Chapter 13. To learn more about the bankruptcy code and other matters, schedule a consultation with our law firm.
What Assets Are Exempt from Chapter 7?
The exemptions vary from state to state, although there are also federal exemptions. These state and federal exemptions allow you to keep certain assets to avoid being in a poor personal situation after the discharge.
Federal law prohibits liquidation of the following possessions:
- Jewelry totaling up to $1,600.
- Clothing, personal, and household items: Up to $600 per item and up to $12,625 in total.
- Pets and crops, if you have them.
- A motor vehicle up to $3,775 in total value.
- Up to $1,283,025 in Roth IRA and IRA accounts.
- Any retirement accounts that are tax-exempt, including 401(k) and 403(b) plans. Also defined benefit pension plans.
- Work equipment and work tools up to a value of $2,375.
- Medical equipment and health aid devices.
- Unused home or real estate exemption up to $23,675 in equity.
- Compensation money such as recovery for personal injury, payment for lost profits, or wrongful death.
- Any type of federal benefit you receive such as Social Security, Veterans, or Unemployment benefits.
If you are married, all the listed values are duplicated.
Which is Better: Chapter 7 or Chapter 13?
The main difference between Chapter 7 bankruptcy and Chapter 13 is that Chapter 13 does not erase the debt right away. With Chapter 13, the debtor proposes a payment plan based on their ability to pay off certain debts. The plan lasts three or five years.
What Alternatives Are There to Bankruptcy?
There are alternatives to bankruptcy that can help you start over. Choosing the right method for you requires an analysis of your financial situation and the types of debt you face.
We can also help you in these cases. Feel free to contact our experienced New York finance attorneys today.
Repayment plan: Entering a debt management plan with a debt relief agency is an option. Unlike the debt settlement that we will see next, this plan involves paying off your debt over time. That is, in a more feasible way. As a general rule, only unsecured debt can be included in this plan.
Debt settlement: In this case, you can negotiate directly with your creditors by contacting them to discuss the problem. Perhaps you can negotiate an affordable payment plan or renegotiate the full amount. As a general rule, it is usually paid in a lump sum.
Sell a valuable property so that you can pay creditors: Be careful with this option, as the money received may not be enough to settle all your debts. There is even a chance that you may still need to file for bankruptcy.
Debt Consolidation: With this option, you can get a debt consolidation loan to deal with your debts. This way you will only have to make a monthly payment to the new creditor. These loans usually have lower interest rates than what you are currently paying.
Does Filing for Bankruptcy Ruin Your Reputation and Life?
No. Although you can run from certain creditors for a while, it turns out to be incredibly stressful in the end. Bankruptcy will allow you to start over and stop running away.
The goal of bankruptcy is to give a second chance to people who made a financial mistake and, with that goal in mind; you should approach it.
Do You Need a Law Firm Experienced in Bankruptcy Code?
It is not required by law, and you can file bankruptcy yourself. However, even on the website of the US courts, it is stated that it is extremely difficult to do it successfully without the proper legal experience. Even a small administrative error could get your case dismissed.
The truth is, you will have many more options with an experienced Chapter 7 bankruptcy lawyer by your side. In important financial and estate matters like bankruptcy, it is always recommended to hire legal representation, such as the attorneys from the law firm of Ortiz & Ortiz, LLP.
Contact a Manhattan Chapter 7 Bankruptcy Lawyer to Discuss Your Case
Our New York legal team has a long track record of success in helping individuals and businesses get through their financial difficulties. We can help you with the legal process of filing for bankruptcy in New York.
It is important to have attorneys who know the laws of New York to guide you as you seek to restore your economy in the shortest time possible. The goal is to reduce your debt and improve your creditors’ prosecution situation.
Feel free to contact us through our phone or contact page. You can also book your confidential consultation online. This does not commit you to anything and can be the first big step in your financial recovery. You may reach our law office at 917-920-6437.