New York Bankruptcy Lawyer Blog

A common question we get from our clients and prospective clients in New York City, Nassau. Suffolk and Westchester Counties is whether they will be able to keep their homes if they file for personal bankruptcy.

This is Part II of a two part series on this issue. In Part I we looked at the information we need to answer the question of whether a debtor will get to keep his or home in bankruptcy. In this Part II we will look at different bankruptcy strategies that can be used in different situations.

1. Chapter 7 to Wipe Out Unsecured Debt. For many people considering bankruptcy who own a home, the problem is not that they can’t pay the mortgage, but that all of their debts combined are too much for them to pay. They may have enough to pay their living expenses and the mortgage, but not also make credit card payments. In that situation, assuming that the debtor has equity less than his or her applicable homestead exemption (discussed in Part I), a chapter 7 personal bankruptcy filing may be used to wipe out the unsecured debt. There are specific requirements for chapter 7, and not everyone will necessarily will be eligible for chapter 7. However, even if you own a home there is a still a good chance that you are eligible for chapter 7.

Continue reading "Will I Be Able to Keep My House if I File for Bankruptcy in New York - PART II? " »

A common question we get from our clients and prospective clients in New York City, Nassau. Suffolk and Westchester Counties is whether they will be able to keep their homes if they file for personal bankruptcy.

This is Part I of a two part series on this issue. In this Part I we will look at the information we need to answer the question of whether a debtor will get to keep his or home in bankruptcy. In Part II we will look at different bankruptcy strategies that can be used in different situations.

1. Value of the Home. This is the critical starting point question. It is always surprising how many people considering bankruptcy are not aware of the current fair market value (FMV) of their home (i.e., house, condo or cooperative apartment). Anyone considering a personal bankruptcy case needs to obtain current and accurate information regarding their home’s present value (FMV). Free online home value estimates (such as zillow.com) are not useful because they will not be a trustee or bankruptcy judge as evidence of value. A Broker’s Price Opinion is a good potential starting point However, the best evidence of current market value is a written appraisal report prepared by a licensed appraiser. In NY the current fee for an appraisal is about $350 - 550 depending on the whether the house is a single family, two family or three family house.

2. Debt on the Home. In addition to the current fair market value of the home anyone considering a personal bankruptcy filing needs to know how much secured debt there is on the home. Secured means that the loan has a mortgage on the property (such as a first mortgage, second mortgage, and/or home equity line of credit). A payoff demand from the lender is the best evidence of the current balance of a loan. In addition, any other liens or encumbrances, such as tax liens or judgment liens need to be considered. If the debtor isn’t sure whether or not there are other liens on his or her home a title report may be needed.

Continue reading "Will I Be Able to Keep My House in New York if I File for Bankruptcy in New York - PART I? " »

Many of our clients and prospective clients in Manhattan, Bronx, Queens and other boroughs are facing the difficult situation of a wage garnishment and wonder if a personal bankruptcy filing could help.

Just to review, a creditor with a judgment can garnish the defendant/judgment debtor’s wages. The law permits up to 25% of a judgment debtor’s wages to be garnished in any pay period, not exceeding 10% per year,.

Immediately upon filing a personal bankruptcy petition the automatic stay goes into effect.

Continue reading "Using Bankruptcy to Stop Wage Garnishment in New York" »

1. The Bankruptcy Court is a Court of Limited Jurisdiction.

Upon the commencement of a bankruptcy case the automatic stay goes into effect. The automatic stay is a mandatory injunction of the bankruptcy court that prevents to commencement or continuation of litigation against the debtor (person or entity that has filed for bankruptcy).

The bankruptcy court, however, has limited subject matter jurisdiction. This means that there are certain subject matters that the bankruptcy court does not have jurisdiction over. For example, the bankruptcy court does not have jurisdiction to determine criminal, family law or probate matters, among others.

In addition, the statutory grant of jurisdiction to the Bankruptcy Code provides that the bankruptcy court does not have jurisdiction to enter final orders in personal injury or wrongful death matters. A bankruptcy judge has jurisdiction to make findings of facts and conclusions of law based on the record before the court, and based on this the United States District Court in the district where the bankruptcy case is pending has jurisdiction to enter final orders. In this regard a bankruptcy judge’s jurisdiction is similar to that of a United States Magistrate Judge (the underlying reason for this is the distinction made between judges appointed under Articles III and IV of the Constitution).

Continue reading "What Happens To Personal Injury and Wrongful Death Claims In The The Manhattan Bankruptcy Court?" »

A question that we get from time to time from clients and prospective clients in Manhattan, Bronx, Brooklyn and surrounding counties is whether if they file for bankruptcy some one will come search their house or apartment.

From an attorney perspective this question is always troubling because whether or not someone will actually come search your house or apartment if you file for bankruptcy, the schedules and statement of financial affairs need to be answered completely and truthfully. There are currently many individuals serving time in federal penitentiary who have been convicted of “bankruptcy crimes” -- such as concealing assets in connection with a bankruptcy case.

The bankruptcy trustee has the ability to obtain an order authorizing him or her to search the debtor’s house or apartment with the assistance of the United States Marshall -- and break doors, locks and safes to conduct an investigation. Usually this type of order will be obtained on an ex parte basis -- meaning without prior notice to you to prevent you.

Continue reading "Will they come search my house or apartment if I file for bankruptcy in New York?" »

A question many of our clients and prospective clients in Manhattan, Brooklyn, Westchester and surrounding counties have is why the fees some attorneys charge for consumer bankruptcy cases are much less than others?

Experienced and knowledgeable bankruptcy attorneys who specialize in bankruptcy tend to charge fees that are set fairly close to each other. In part this is because the fees charged by bankruptcy attorneys are not a mystery. Bankruptcy attorneys are required by law to disclose the fees charged to their clients on a statement filed with each bankruptcy petition. Bankruptcy attorneys who regularly practice in the Bankruptcy Court often will see these statements in the course of their practice and know what their colleagues are charging. Generally these fees reflect what the experienced bankruptcy attorney believes will be a reasonable and fair fee to cover the anticipated issues likely to arise in the debtor’s case.

Continue reading " How Much Should I Pay to Hire a Bankruptcy Attorney in New York?" »

A common question we get from our clients and prospective clients in Manhattan, Bronx, Brooklyn and adjacent counties is if the Bankruptcy Court/Bankruptcy Judge will “approve their case”.

In a typical personal bankruptcy case you will not encounter a bankruptcy judge. There will not be a hearing held in the Bankruptcy Court for the Judge to evaluate your bankruptcy petition and approve it or deny it.

In the typical non-business consumer bankruptcy case your only personal contact with the “bankruptcy system” will be at the meeting of creditors at which the chapter 7 trustee or chapter 13 trustee (depending on which chapter of bankruptcy you file) will ask you questions about your income, assets, debts and financial history. However, the trustee is not a bankruptcy judge. He or she does not have the power to “approve” or “disapprove” your case. A denial of discharge or dismissal of a personal bankruptcy case can only be done by a bankruptcy judge. However, a trustee can bring a motion seeking to deny discharge or dismiss a bankruptcy case in appropriate cases.

Continue reading "Will the Bankruptcy Court Approve my Bankruptcy in New York?" »

Whether a debtor gets to keep his or home in a bankruptcy case depends on a number of factors, such as whether or not there is equity in the house, how much of a homestead exemption the debtor is able to claim, if there is a mortgage -- whether the debtor is current with mortgage payments to the lender or not, and finally what chapter of bankruptcy the debtor files (i.e., Chapter 7 or Chapter 13).

For further information regarding chapter 13, please review our prior Blog posts
( Chapter 7 or Chapter 13 Bankruptcy Filing in New York? ), ( New York Chapter 13 Bankruptcy Eligibility Requirements and Issues), and ( What are the benefits of chapter 13 (why file chapter 13 instead of chapter 7)?)

Continue reading "Do I get to keep my home in New York in bankruptcy?" »

An involuntary bankruptcy case is a bankruptcy case started against a debtor by its creditors. The debtor can be either an individual or a business entity. The creditors file a petition with the bankruptcy court and then if the debtor -- if he, she or it doesn’t want to be in bankruptcy -- can challenge that the requirements for an involuntary bankruptcy are not satisfied.

If a debtor has more than 12 creditors, and most debtors will have more than 12 creditors,
an involuntary bankruptcy requires 3 or more petitioning creditors that don't have contingent claims, or claims that are subject to dispute as to liability or amount, totaling at least $13,475. So one creditor alone holding a judgment can't file an involuntary bankruptcy against a debtor. It is usually a good idea to have more than 3 petitioning creditors so that if the validity of any creditor's claim is challenged, such as that the claim is subject to bona fide dispute, there are still additional petitioning creditors with valid claims.

Continue reading "What is an Involuntary Bankruptcy Case in New York?" »

By the time many of our bankruptcy clients come to has they have exhausted most of their personal savings, and often their retirement assets. Some people invade these funds -- that are intended to provide income in retirement -- and use them to try make minimum payments on credit cards and cover living expenses. This is a very common scenario we see for people who have lost their job and unemployment has run out.

In bankruptcy, retirement assets, such as I.R.A.s and 401(k) are generally exempt. If someone intends to file bankruptcy and get a fresh start from their debts it doesn’t make a lot of sense to

Continue reading "Should I Cash Out My Retirement Accounts to Pay Bills?" »

A common question we are asked by people living in Manhattan, Brooklyn, Queens and surrounding counties is whether they can leave the state after filing for bankruptcy..

The answer is that there is no requirement that a debtor remain physically present in New York continuously after filing for bankruptcy until his or her case is closed. The debtor (person filing bankruptcy) will be required to attend the meeting of creditors in his or her case that is held approximately 30 days after the case is filed. In a chapter 13 case he or she will also be required to attend the confirmation hearing with respect to the chapter 13 plan held approximately four months after the case is filed. In a chapter 11 case there are various status conferences that the debtor may need to attend.

Continue reading "Can I Leave New York After I File for Bankruptcy?" »

A question we often get from clients and prospective clients is what can they do if they are owed money by a company that has filed for bankruptcy protection in New York. The answer depends on why they are money, when the debt arose, and what type of bankruptcy the company has filed.

1. Hierarch of Claims -- Administrative, Secured, Priority & Unsecured

In bankruptcy cases not all claims are created equal. There is a hierarchy or rank order of claims that determines who comes first in the cash waterfall.

a) Administrative Claims. These are claims related to the administration of the debtor’s case. In a chapter 11 case administrative claims includes claims for goods sold or services provided to the debtor company after the date of bankruptcy filing. In addition, administrative claims in a chapter 11 case include post-bankruptcy use and occupancy charges related to the debtor’s real estate leases, and post-bankruptcy equipment and vehicle lease fees.

b) Secured Claim. A secured claim is a claim that is secured by collateral (i.e., a claim that has a lien on property of the debtor). Some common examples of secured claims are a mortgage secured by real estate, a vehicle loan secured by a vehicle, or a bank loan secured by the debtor’s assets or accounts receivable. In addition to these examples of voluntary secured claims, a debtor may be subject to involuntary secured claims, such as for tax liens or judgment liens.

c) Priority Claims. These are certain claims incurred prior to the debtor’s bankruptcy filing that are given priority (i.e., get paid ahead of other claims) as specified in the Bankruptcy Code. Common examples of priority claims are certain pre-bankruptcy wage and commission claims, certain taxes and other obligations to the government, and spousal and child support.

Continue reading "Help I am Owed Money By a Company that Has Recently Filed for Bankruptcy in New York!" »

The purpose of a personal bankruptcy is to get a “fresh start” by obtaining a discharge (wiping out) of debt. To assist debtors in obtaining their fresh start the law allows them to keep a modest amount of property. The property that an individual is allowed to keep in bankruptcy is known as “exempt” property.

New York has opted out of the federal exemption scheme contained in the Bankruptcy Code which means that an individual in New York is only allowed to claim exemptions available under New York law, plus certain federal exemptions other than those contained in the Bankruptcy Code.

Except for the homestead exemption, the exemption scheme in New York has not been updated in a long time and the exemptions are not pegged to inflation or the consumer price index (CPI).

Continue reading "Prebankruptcy Exemption Planning" »

This is a question that we get asked a lot by our clients and prospective clients. The answer is “that depends” – it depends on what chapter (type) of bankruptcy we are talking about.

1. Duration of a Chapter 7 Bankruptcy Case

When someone asks how long will a bankruptcy take, they really mean how long is my involvement as debtor (person filing bankruptcy) going to be. The goal of a personal bankruptcy case is to get a discharge. From the debtor’s perspective that can be viewed as the end of the typical bankruptcy case, although the actual case may continue on without affecting the debtor (as discussed further below).

In the typical chapter 7 case involving an individual there are really only three dates we care about. The first is the date the bankruptcy petition is filed with the Bankruptcy Court because that starts the case (and the automatic stay). The second important date is the meeting of creditors, which is usually scheduled about four week after the meeting of creditors. The third date is sixty days from the date first scheduled for the meeting of creditors. That is the very earliest that a debtor is eligible to get her or her discharge (order wiping out debts). However, in actual practice the discharge order takes the Clerk time to process so that the discharge is routinely entered 70-90 days after the date first set for the meeting of creditors. So this means that the length or duration of a typical chapter 7 bankruptcy case is about 100 - 120 days

Continue reading "How Long Does Bankruptcy Take in New York?" »

Many people considering filing for personal bankruptcy in New York have not hired a lawyer before and are not sure how to select a lawyer. Since they are not familiar with lawyers and how to evaluate and compare one lawyer with another, they focus on the one factor that they understand – the cost. While cost is certainly one factor to consider when choosing a lawyer, it is not the only factor.

1. Bankruptcy Is More Complex Due to the 2005 Changes in the Bankruptcy Law.

In 2005 as a result of credit card company lobbying the Bankruptcy Code was extensively changed by Congress. These changed created new duties for bankruptcy attorneys and made representation of consumer debtors in bankruptcy cases much more complicated than it was before. As a result, those lawyers who only dabbled in bankruptcy stopped taking new bankruptcy cases. Those lawyers who specialized in bankruptcy cases raised their rates to account for the increased cost and complexity of cases after the 2005 changes.

Continue reading "How Much Does Bankruptcy Cost in New York" »

This is the second in a three part series of postings in which we examine preference claims in detail. In a prior post (Help I’ve Been Sued by a Bankruptcy Trustee in New York, What Do I Do Now?) we discussed what are bankruptcy preference claims. In this post we will examine the new value defense to a preference claim. In a subsequent post we will look at the ordinary course defense.

Elements of the New Value Defense

One of the potential defenses that a creditor/defendant can raise to a preference adversary proceeding commenced by a trustee or debtor in possession in the U.S. Bankruptcy Court for the Southern District of New York is the ordinary course defense. The elements of this defense are:

a) after receipt of what would otherwise be a preferential payment;

b) the creditor extended new value to the debtor in the form of additional goods or services;

c) for which the creditor/defendant has not be paid by an unavoidable transfer.

Continue reading "New Value Defense to Preference Adversary Proceeding Filed in the U.S. Bankruptcy Court for the Southern District of New York" »

We often get calls and e-mails from people who have been sued by a trustee or debtor-in-possession in a chapter 11 case pending in the United States Bankruptcy Court for the Southern District of New York and United States Bankruptcy Court for the District of Delaware.

1. What is a preference claim?

In bankruptcy cases a trustee has the ability to file a lawsuit in the Bankruptcy Court – called an adversary proceeding – seeking to recover certain payments made by the debtor prior to bankruptcy as preferential.

The elements of a preference claim are:

a) a payment by a debtor to a creditor made within 90 days of bankruptcy filing (1 year in the case of payment to “insiders”);
b) for a debt that was owed to the creditor prior to the time the payment was made;
c) made while the debtor was insolvent; and
d) that allowed the creditor to receive a greater recovery than if the payment had not been made and the debtor had instead been liquidated in a chapter 7 bankruptcy case and the creditor received payment as allowed by law in a chapter 7 case.

The first thing to understand about a preference claim is that the trustee (or debtor in possession in a chapter 11 case) is not challenging that you, the creditor, actually provided the goods or services for which you were paid. Instead, the preference recovery provisions of the Bankruptcy Code are intended to promote the Bankruptcy Code’s goal of “equality of distribution” among similarly situated creditors. The bankruptcy law, as drafted by Congress, views it as unfair that you had your invoices paid in the 90 days prior to the debtor’s bankruptcy filing while other creditors did not. The preference avoidance provisions of the bankruptcy law allow the payment to you to be potentially recaptured by the trustee (or debtor in possession in a chapter 11 case).

Continue reading "Help I’ve Been Sued by a Bankruptcy Trustee in New York, What Do I Do Now?" »

A creditor can start an involuntary bankruptcy case in New York City against a debtor (either a person or business) who owes the creditor money. An involuntary bankruptcy case is a bankruptcy case started by creditors. If a debtor has more than 12 creditors who are owed at least $13,475 as a group, those creditors can file an involuntary bankruptcy case against the debtor if they can establish that the debtor is not paying his, her or its debts as they become due. Also the debts must be fixed and liquidated in amount and not contingent (meaning that nothing else has to happen to fix liability – such as a judgment in a personal injury case resulting from an accident). In addition, the claims cannot be subject to bona fide dispute as to liability or amount -- if there is a valid and legitimate dispute about the debt it can't be the basis for an involuntary bankruptcy case.

If a debtor has less than 12 creditors in all, one petitioning creditor owed at least $13,475 can commence an involuntary bankruptcy petition against the debtor.

Continue reading "If a Person or Business Owes Me Money Can I Put Them Into Bankruptcy in New York?" »

New York is a destination for many people relocating here for work, school or personal reasons. Many people are surprised to find out how expensive the cost of living is here compared to many other parts of the country. Many people underestimate their costs of housing and other living expenses which causes a lot of problems for their budget.

A common question we get asked is “How long do I have to live in New York before I can file for bankruptcy here?”

The rule is that you have to have lived here more in the past 180 days than anywhere else. So, for example, if someone moved here from Ohio, she would need to live in New York at least 91 days before she could file for bankruptcy here.

Continue reading "Can I File for Bankruptcy in NY City if I Recently Moved Here?" »

If you have past-due tax debt that you owe to the Internal Revenue Service (IRS), New York State Department of Taxation & Finance (NYS Tax), and/or New York City Department of Taxation (NYC Tax) you know that the government authorities can be very aggressive in enforcing back due taxes.

1. Problems & Risk of Owing Past-Due Tax Debts.

If you have past-due taxes the balances continue to grow over time because of interest and penalties. The government can intercept any tax refunds that you are entitled to receive from them and apply the money against your past-due taxes. They can garnish your wages. They can put a lien on your assets. They can seize your bank accounts, car, house and other properties.

2. Bankruptcy Solutions to Tax Problems.

For many people with past-due taxes bankruptcy may be a way to either (a) get their finances affairs in order so they have money to deal with the taxes, or (b) a way to wipe out the taxes.

a) Chapter 7 Bankruptcy Solutions.

In the Frequently Asked Questions (FAQs) on our website Will all my debts get discharged (wiped out) in bankruptcy?) we have provided a general overview of the rules regarding discharging debt in a personal bankruptcy filing. For some people filing a chapter 7 bankruptcy will be a way that they can permanently eliminate their past-due taxes without having to pay them. To figure our whether or not your taxes can be wiped out in bankruptcy you will need to know exactly what taxes you owe and for what years. You can contact the IRS, NYS Tax and NYC Tax and follow their procedures to order copies of your “tax transcript” for each tax year you have an unpaid balance. We have successfully used chapter 7 bankruptcy to help many of our clients permanently eliminate their taxes.

Continue reading "Using Bankruptcy to Solve Your Tax Debt Problems in New York City " »

As a result of the current economic conditions many business owners in New York City have decided that they will need to shut down their businesses. They are faced with the decision of how to best do this. Essentially, the options are to liquidate the business in chapter 7 bankruptcy, to liquidate the business by an assignment for the benefit of creditors in state court, or to liquidate the business outside of bankruptcy. For businesses with greater resources another option is liquidating the business in chapter 11 bankruptcy.

1. Chapter 7 Business Liquidation
This involves filing a chapter 7 bankruptcy petition, with supporting schedules of assets, debts and other information with the Bankruptcy Court. A chapter 7 trustee is then appointed to administer the assets of the business and liquidate them to raise cash to pay creditors’ claims.

One major benefit of a chapter 7 bankruptcy is that, immediately upon filing of the bankruptcy case, the automatic stay goes into effect. This stops all further collection activity against the debtor, as well as any pending litigation, foreclosures or judgment enforcement.

Another positive of a chapter 7 bankruptcy for a business is it is a fairly straightforward process to prepare the bankruptcy papers. Our law firm handles these types of cases on a flat fee basis so the business owners know in advance what their legal fees will be.

One of the negatives is that a trustee is appointed to liquidate the assets of the company, and he or she has the ability to investigate financial transactions involving the company and bring lawsuits against insiders to seek to avoid or recover certain transactions. This topic is discussed further in the Frequently
Asked Questions (FAQs) on our website.

Continue reading "Wind-Down Outside of Bankruptcy in New York" »

The purpose of this blog post is to provide information about bankruptcy to the gay and lesbian community in New York City that uniquely affects them.

As a result of the 2005 changes to the Bankruptcy Code, for gays and lesbians considering filing for personal bankruptcy there are certain things they will need to consider. In addition, there are certain provisions of the Bankruptcy Code that may affect the rights of gays and lesbians differently than heterosexuals.

First of all, for consumer debtors (i.e., debtors whose debts are primarily for personal, family or household debts and not for a business), the 2005 amendments to the Bankruptcy Code established means testing (see the Frequently Asked Questions (FAQs) of the Starr & Starr, PLLC website: What is the "means test" for chapter 7 and why is it important? ).

Continue reading "Gays, Lesbians and Bankruptcy in New York City" »

Student Loans Problems in New York City

Many people in New York, and particularly in Manhattan, have large student loans for undergraduate and graduate college education. A student loan debtor (person who owes money for a student loan) can often obtain deferment or consolidation of his or her student loans to delay making payment or lower the payments. However, for people with very large student loans and income that is lower than they had anticipated, student loans can be an enormous problem. This is especially the case for someone who never finished his or her course of study or obtained a degree, or obtained a degree for which there is not much demand in the marketplace. In addition, if someone obtained an expensive graduate degree, such as medicine or law, but but is working in a lower paying field than his or her field of study this is particularly a problem. Finally, the cost of living in New York is one of the highest in the country and people living here have a significantly higher cost of living than in many other states.

Due to changes in the law regarding student loans, there is no statute of limitation for student loans -- meaning the loans do not become unenforceable by the passage of time. This means that long after someone is out of school he or she can still be saddled with high student loans.

Continue reading "Student Loan and Bankruptcy in New York " »

People are often scared about what will happen to their car if they file bankruptcy and whether they will lose their car. This is question we get asked very often by clients in the Staten Island, Brooklyn, Queens, Westchester and Long Island.

In a prior post ( What Happens to My Car in Bankruptcy ) we covered what happens if the car is paid for. In another post ( What Happens If I Am Financing a Car and I File Bankruptcy? ) we covered what happens if a car is being financed,
In this post we cover what happens if the car is being leased.

The discussion regarding the debtor’s equity in the car in our earlier post ( What Happens to My Car in Bankruptcy ) still applies to the equity in a car being leased (if any, such as if there is a $1 buyout option).

Continue reading "What Happens If I Am Leasing a Car and I File Bankruptcy? " »

People are concerned about what will happen to their car if they file bankruptcy. Clients in the Bronx, Queens, Brooklyn, Long Island and Westchester ask us this all the time.

In a prior post ( What Happens to My Car in Bankruptcy ) we covered what happens if the car is paid for. In this post we cover what happens if the car is being financed. In a later post we will cover what happens if the car is being leased.

What Happens If My Car Is Being Financed?

The discussion regarding the debtor’s equity in the car in our earlier post ( What Happens to My Car in Bankruptcy ) still applies to the equity in a car being financed.

With that in mind there are basically three options available to a debtor under the Bankruptcy Code, and fourth option not mentioned in the Bankruptcy Code that may also be possible. The options are:

1. Surrender Option (Give the Car Back). One option is to “surrender” or give the car back to the finance company. The debtor has the option to give back the car and discharge the debt (i.e., wipe out the debt in bankruptcy). Now days, however, many car finance companies are willing to try to restructure the loan with the debtor (see Reaffirmation Option below) because they don’t want the car back.

Continue reading "What Happens If I Am Financing a Car and I File Bankruptcy? " »

This is a very common question we get from clients and prospective clients in Brooklyn, Queens, Staten Island and Westchester (car ownership seems to be lower among our Manhattan clients). The answer, like many things, involving the law, is that “that depends”. Is the car paid for, being financed, or is it being leased?

This is part of a three part series. In the first part we will address what happens if the car is paid for, in the second part what happens if the car is being financed, and in the third part what happens if the car is leased.

What Happens If My Car Is Paid For?

If someone files bankruptcy in New York and he or she owns a car outright the answer is pretty simple. They get to claim an “exemption” in the equity in the car (which currently is limited to $2,400). If the value of the car is

Continue reading "What Happens to My Car in Bankruptcy? " »

A recent article on MSNBC (NYC restaurants slammed by financial crisis) details the problems currently faced by NYC restaurants. NYC restaurant owners are reporting a significant drop in business in wake of the recent financial crisis. They also have some of the highest rent in the country for space, and face high food, employee, and insurance costs. Faced with a significant drop in revenue, restaurant owners may not survive if they continue to do “business as usual” and will need to adapt to changing market conditions. In exploring their options, restaurant owners and investors should consider all available options, including the bankruptcy restructuring options that are the focus of this blog post. Bankruptcy is not a panacea and is something to consider when other options (such as obtaining additional investment, consolidation of space, altering menus and pricing, etc.) have been fully explored. However, bankruptcy presents some useful tools to NYC restaurant owners and investors that need to be understood.

1. Ability to Sell Below Market Lease Without Landlord Consent.

Often a below market lease in New York City may be one of a restaurant’s most valuable tangible assets. Most commercial leases in NY contain extensive restrictions on a tenant’s ability to sell or sublet space. In bankruptcy, however, a debtor in possession (in a chapter 11 reorganization or liquidation case) or trustee in a (chapter 7 liquidation case) has the ability to “assume and assign” a lease even though the landlord does not agree. The right to do this is not absolute and the replacement tenant must be able to establish an adequate ability to perform under the lease. In addition, defaults under the lease must be cured (or adequate assurance of prompt cure provided) in connection with any sale of the lease. The key point is that in a bankruptcy it may be possible for the value in the lease to be realized even if the tenant is in default under the lease and has been sued for nonpayment of rent (as long as the lease has not yet been terminated). Utilizing this option may allow an unprofitable restaurant to move to another location with cheaper rent where is could be profitable.

Continue reading "New York Financial Crisis' Affect on NYC Restaurants and Bankruptcy Options" »

In response to questions we received from clients and prospective clients in New York City, Bronx, Queens, Manhattan and Westchester, in a series of 4 posts we are exploring the most common alternatives to personal bankruptcy for New Yorkers faced with money problems.

A prior post on our blog I Live in New York and Am Considering Bankruptcy -- Should I Try Negotiating with My Creditors First? covered negotiating directly with creditors and/or collectors.

A second post I Live in New York and Am Considering Bankruptcy -- Should I Try Debt Settlement First? addressed so called debt settlement or debt negotiation.

A third post I Live in New York and Am Considering Bankruptcy -- Should I Try Credit Counseling First?
addressed credit counseling as an option.

In today's post we will explore whether doing nothing is a viable option and what it means to be judgment proof.

Instead of Bankruptcy Should I Do Nothing -- Am I Judgment Proof?

Unfortunately many people with financial problems by default seem to select the “Do Nothing” approach. This is the “ostrich approach” (the large bird that can’t fly that sticks its head in the sand when there is trouble). Unlike fine wine, personal financial problems don’t age well (they age more like fish left out in the hot sun).

If you have financial problems and ignore them they are likely to follow a very predictable path – COLLECTIONS followed by COLLECTIONS LAWSUIT followed by JUDGMENT followed by JUDGMENT ENFORCEMENT including wage garnishment and bank account seizures. If you deal with the problem at any early stage you may be able to nip it in the bud before it becomes a collections lawsuit or a judgment. By the time you are faced with collections lawsuits and judgments, doing nothing will usually not help you. Your creditors will not sit back and do nothing — they will most likely move forward in the collections process to try to get judgments against you and to enforce those judgments.

Continue reading "I Live in New York and Am Considering Bankruptcy -- Should I Do Nothing -- Am I Judgment Proof?" »

Many New Yorkers are feeling the pressure of the high cost of living in Manhattan, Bronx, Brooklyn, Queens, Westchester and Staten Island and a painful combination of some or all of the following: high mortgage debt, high credit card debt, high gas prices, high medical bills, student loans and other debts are exploring their options. Filing a personal bankruptcy case, whether chapter 7 or chapter 13, may or may not be the right solution depending on the circumstances. Bankruptcy is not a panacea (cure all) and should not be viewed as the solution to every personal or business debt problem.

In a series of 4 posts we will explore the most common alternatives to personal bankruptcy, which are (1) negotiating directly with creditors and/or collectors, (2) so called “debt settlement” or “debt consolidation”, (3) credit counseling, and (4) doing nothing (ignore problems and hope they will go away).

In today's post we will explore negotiating directly with creditors and/or collectors.

Negotiating Directly with Creditors and/or Collectors

This is certainly an option that should be explored. One problem for many debtors is that they often have too much overall debt to work out a payment plan with each creditor individually. If a debtor has a compelling hardship (such as major injury, illness and/or death in family affecting income, natural disaster, etc.) creditors may be willing to work with a debtor in reducing debt or permitting payment over time. Even without a major hardship some creditors may be willing to grant concessions.
If the debt has been turned over to a collection agency you should be aware that collectors are very aggressive in seeking payment (that is basically the essence of their job). Debt collectors typically will not agree to much in the way of discount or to stretch out payments by very much. Bankruptcy clients of ours often say they tried to work out a deal involving small payments over a long time (such as $50 a month for 3 years) and the collectors they dealt with simply were not interested. However, each collection agency and collector varies.

Continue reading "I Live in New York and Am Considering Bankruptcy -- Should I Try Negotiating with My Creditors First?" »

As a result of the changes to the Bankruptcy Code in 2005 many people are confused about whether they are eligible to file personal bankruptcy.

As a result of credit card and bank lobbying, in 2005 Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCA). While BAPCA changed the eligibility requirement for personal bankruptcy, the changes for the most part only affect a small minority of people.

Don’t Believe the Hype in the Debt Settlement/Debt Consolidation Ads

The debt settlement/debt consolidation industry, which is based on extensive advertising and high pressure sales tactics, would have you believe that you are no longer eligible to file personal bankruptcy in NY as a result of the 2005 changes in the bankruptcy law.

Continue reading "New York Personal Bankruptcy -- Am I Eligible to File?" »

Many people in New York, Bronx, Queens, Brooklyn, Staten Island and Nassau and Suffolk Counties are in danger of losing their homes through foreclosure these days. Bankruptcy may be a good option for many of these people to try to save their homes. There are three different bankruptcy options available to individuals, chapter 7, chapter 13 and chapter 11. Today we will look at when chapter 7 can be used to stop a foreclosure.

NY Foreclosure & Chapter 7 Bankruptcy

Once a debtor files bankruptcy the automatic stay goes into effect and prohibits the lender from continuing with the foreclosure. In chapter 7 bankruptcy a critical issue is whether the homeowner has equity in the home. Equity is the difference between the current fair market value of the home and all the mortgage liens on the property. In chapter 7 bankruptcy in New York the debtor is entitled to an exemption (i.e., gets to keep) up to $50,000 of equity in his/her home, or $100,000 if married and the home is jointly owned by debtor and his/her spouse. This is commonly known as a homestead exemption. If the equity is less than this there is no value for the bankruptcy estate to turn to cash to satisfy creditors’ claims. However, if a debtor has significant equity greater than the value of allowed exemptions then the chapter 7 trustee can seek to sell the home. In a sale by the chapter 7 trustee the mortgage(s) would get paid, the debtor(s) would get a check for the amount of their exemption, and the remaining money would go into the bankruptcy estate to be distributed to creditors by the trustee.

For people with mortgage problems and other unsecured debt problems as well, chapter 7 bankruptcy can be a good option if eliminating the other unsecured debt (such as credit card debt or medical bills, etc.) would solve their money problems so they would have enough money to pay the mortgage. However, to keep your home in chapter 7 you need to continue to pay the mortgage as it become due.