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?" »

When a creditor obtains a judgment against a debtor in New York the judgment creditor will typically seek to enforce the judgment and recover money to satisfy the judgment. This topic is covered in prior Blog posts and on the Frequently Asked Questions (FAQs) on our web site.

A common method of enforcement of a judgment is by a writ of execution against the judgment debtor’s bank account or a wage garnishment. This is accomplished with the assistance of a New York City Marshal in New York City or County Sheriff.

When the Marshal or Sheriff receives a judgment for enforcement they add five percent (5%) to the amount of judgment as their fee. This statutory fee is called “poundage”. For each $1 the Marshal or Sheriff recovers from the judgment debtor they cut 5¢. However, the total amount of the judgment is also increased by 5% to account for poundage.

Continue reading "What Is "Poundage" and What Does It Have to Do With Judgments in New York?" »

As the recession continues many people are having trouble paying their bills even if they have a job. A common question we get from employees in Manhattan and other surrounding areas is whether the employer gets notified if there is a wage garnishment.

When a creditor obtains a judgment against a debtor in New York the judgment creditor will typically seek to promptly enforce the judgment and recover money to satisfy the judgment. This topic is covered in our prior Blog posts and on the Frequently Asked Questions (FAQs) on our web site.

A common method of enforcement of a judgment is by a wage garnishment. This is accomplished with the assistance of a New York /City Marshal in New York City or County Sheriff. Up to ten percent (10%) of a judgment debtor’s wages (25% in any pay period, not exceeding 10% per year) can be garnished.

Continue reading "Will My Employer Learn if I Have a Wage Garnishment 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?" »

In prior posts we have covered how a wage earner repayment plan (chapter 13 bankruptcy) works. Many people are interested in filing chapter 13 bankruptcy in Manhattan, Brooklyn or Queens, but are concerned about what happens if they are unable to make all plan payments, or if they decide they don’t want to continue to be locked into a long repayment plan, In this post we will look at the options available to a chapter 13 debtor who is unable to make all plan payments, such as because he or she lost his/her job, or because expenses were higher than planned.

1. Conversion to Chapter 7. A debtor in a chapter 13 case has the right to automatically convert the case to chapter 7 at any time. This is done by filing a Request for Conversion form with the Clerk’s Office. Once the case has been converted to chapter 7 the debtor no longer has to continue making chapter 13 plan payments. The debtor can obtain a discharge of his/her dischargeable debt in the chapter 7. An example of a situation in which someone might do this is if they had filed chapter 13 for a very specific reason, such as to try to catch up on car loan payments or home mortgage payments to prevent loss of the car or foreclosure, but they weren’t able to successfully make the required catch up payments and lost the car or house. In that situation it may not make sense to continue to be in chapter 13 and conversion to chapter 7 may make more sense.

Continue reading "What Happends If I Can't Make All Chapter 13 Plan Payments in New York?" »

A common question we get asked by our clients in Manhattan and other boroughs of New York is whether they will be able to get any credit after filing bankruptcy.

1. Alternatives to Credit. First of all, although credit can be convenient there are many alternatives to credit. Many of the alternatives to using credit from a financial planning and budgeting perspective are better because people who buy things using credit often spend more than people who don’t. So, the first alternative to credit is to pay cash. This may require the financial discipline of saving up enough money to buy a new or used TV before making a purchase, rather than just “paying with plastic”. People paying cash will often compare prices more carefully than those paying with credit. Another classic alternative to credit is the “lay-a-way plan.” Many retail stores and department stores offer this option. You select an item and put down a deposit and make payments each month until you have paid in full. Once you have paid in full the store gives you the item.

Sometimes you may need to use a credit card not because you are buying something, but more as a form of security deposit -- such as if you are renting a car or reserving a hotel room. They want you to use a credit card to hold a reservation, although they will let you pay the charges in cash. However, many rental car companies and hotels will accept a cash deposit in lieu of credit card. Also, if you make rental car or hotel arrangements through a travel agent or reseller (such as Expedia, Orbitz, etc.) since you have pre-paid the purchase prior to travel you don’t even face this problem.

Continue reading "Will I Be Able to Have Any Credit After 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?" »

When a borrower/debtor owes money to a bank and also has money on deposit with the bank, the bank has a right to setoff the debt owed to it against the funds on deposit. This right is based on the contract with the bank the debtor signed when he or she first opened the account as well as the general common law.

1. How does a bank setoff work?

Setoff means that the bank has the right to offset the debt owed to it against the funds it holds on deposit in any account of the debtor, including checking, savings, money market, and certificates of deposit (CDs). The bank is not required to provide advance notice to the debtor of its intention to exercise its right of setoff. The bank deducts the funds from the debtor’s account and credits them against the debt owed to the bank. Once the bank has setoff the debtor’s funds against the debt owed to the bank this may cause the debtor’s account to overdraft because the account will have insufficient funds to cover outstanding checks after the bank has setoff. For people whose paycheck is directly deposited to their bank, an additional problem is that they can find their funds swept up by the bank on an ongoing basis for more than one pay period.

Continue reading "Bank Right of Setoff in New York" »

A common question we get is “How long will a judgment stay on my credit report in New York.”

A judgment stays on someone’s credit report for seven years. However, even though a judgment may no longer appear on someone’s credit report, that does not mean that the judgment is no longer enforceable. A judgment in New York is valid for twenty years. During that time it can enforced against a judgment debtor’s income and assets.

Continue reading "Judgments, Judgment Liens & Credit Reports in NY" »

The current recession is causing financial hardship for many people. Many people in New York find themselves with no work, or with lower income and hours than they had before. Debt collectors and collection lawyers don’t stop trying to collect debts just because we are in a recession or someone has lost his or her job.

1. Misleading and Extensive Advertising by Debt Settlement Companies.

Many people fall victim to misleading advertising schemes of the so-called debt settlement companies (also known as debt negotiation). They run constant ads on TV and radio with very sympathetic, “common Joe and Jane” type characters who explain how they had financial problems until they call the debt settlement company running the ad. Often, to try to target particular ethnic or immigrant communities, the ads use the patois and words that someone hearing the add from that community would identify with (for example, the ads targeting the Caribbean community have speakers that a listener would identify with as someone from the Caribbean).

2. Failure to Identify that Creditor Participation in Debt Settlement is Voluntary..

The critical thing that the debt settlement companies fail to clearly and prominently disclosure upfront in their advertising and promotional materials is that that participation of creditors (such as banks and credit card companies) in a debt settlement program is entirely voluntary. If a bank or credit card company does not want to participate THERE IS ABSOLUTELY NOTHING THAT THE DEBT SETTLEMENT COMPANY CAN DO TO FORCE IT TO PARTICIPATE. This means that you might hire a debt settlement company and stop paying all of your creditors as they instruct you to do while they propose a debt settlement plan, and in the meantime you may get sued by one of your creditors. This is very common and we see it all the time. We believe this is misleading practice of the debt settlement industry that should be stopped.

Bankruptcy, on the other hand, is not a voluntary process. Bankruptcy is a mandatory process and unsecured creditors (such as they typical credit card debt) don’t get to ignore it and sue you if they want to. But they can in debt settlement

Continue reading "Is Debt Settlement Better than Bankruptcy in NY?" »

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" »

We are often contacted by former and prospective clients in Manhattan and other boroughs of New York City, and elsewhere, who are faced with a potential eviction involving a commercial or residential lease and wonder what their bankruptcy options are.

1. Bankruptcy Filing Creates Automatic Stay

A bankruptcy filing by the tenant (whether residential or commercial) creates an “automatic stay.” This is a mandatory injunction that arises by operation of law without the need for a hearing or order of the Bankruptcy Court. The automatic stay operates like a legal “Stop Sign” to freeze a creditor’s efforts to pursue collections, litigation or judgment enforcement. The automatic stay operates to protect the debtor and the property of the debtor’s bankruptcy estate.

In the case of a lease, whether commercial or residential, the critical issue is whether a writ of eviction has already been issued from the landlord-tenant court. There is a significant body of case law from the U.S. Bankruptcy Court for the Southern District of New York and U.S. Bankruptcy Court (covering Manhattan, Bronx and White Plains) and U.S. Bankruptcy Court for the Eastern District of New York (covering Brooklyn, Queens, Staten Island and Long Island) that once a writ of eviction has issued from the landlord-tenant court the interest of the tenant in the lease has terminated.

Continue reading "Bankruptcy and Eviction in New York" »

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 " »

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 common question I get asked by people from the Bronx, Queens, Staten Island, Brooklyn and Manhattan considering filing for personal bankruptcy is whether they should file chapter 7 or chapter 13.

Chapter 13 bankruptcy is typically used to preserve a valuable asset, such as a house, car, or rental apartment when the debtor is past due on payment and facing a foreclosure, repo, or eviction lawsuit. In chapter 13 bankruptcy the debtor keeps making current payments as they become due and cures the past due portion over time through the chapter 13 plan.

For a debtor with no valuable asset to protect, unless his/her income is above the level where he/she fails the means test , or he/she would like to repay his/her creditors over time, it may make more sense to to file chapter 7 bankruptcy. The means test is based on average income and family size. In a prior blog post we discussed eligilibilty requirements for chapter 13 and issues and in a separate blog post discussed commonly encountered problems in NY chapter 13 cases.

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?" »

In response to questions we received from clients and prospective clients in Manhattan, Bronx, Brooklyn, Queens 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.

Another prior post on our blog I Live in New York and Am Considering Bankruptcy -- Should I Try Debt Settlement First? addressed so called debt settlement or debt negotiation.

In today's post we will explore credit counseling. Future posts will explore other alternative to bankruptcy.

Credit Counseling

The Credit Counseling industry is more reputable than the so called Debt Settlement - Debt Consolidation - Debt Negotiation industry, in part because as a result of the amendments to the Bankruptcy Code in 2005 every individual debtor who wants to file for personal bankruptcy has to complete a credit counseling course from a credit counseling agency approved by the Office of the United States Trustee — which is part of the U.S. Department of Justice. Each federal judicial district has a list of authorized credit counseling agencies (you can find this list through the Bankruptcy Court’s website in your district).

Continue reading "Is Credit Counseling Something I Should Try Before Filing Bankruptcy in New York?" »

New York is expensive place to live. We have higher rent, higher taxes, and higher utility bills than many other parts of the country. Many people in Queens, Brooklyn, Manhattan, Long Island and Westchester are feeling the pressure of higher gas prices, higher food prices and stagnant wages. Faced with mounting credit card debt and other bills filing a personal bankruptcy case, whether chapter 7 or chapter 13, may or may not be the right solution depending on the circumstances. In a series of posts we are exploring alternatives to bankruptcy.

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

In today's post we will explore so called debt settlement or debt negotiation programs. Future posts will address additional alternatives.

Debt Settlement — Debt Consolidation — Debt Negotiation

The so called Debt Settlement — Debt Consolidation — Debt Negotiation industry is driven by advertising and high pressure sales tactics. It is not regulated in many states and is generally not licensed. Many of our bankruptcy clients have had disastrous results with debt settlement companies. The problem is that they advise you to stop paying ALL of your creditors and make payments to them (the debt settlement company). They send out a proposal to all of your creditors. In the meantime there is absolutely nothing whatsoever from stopping your creditors from suing you.

Continue reading "Should I Try Debt Settlement First Before I file Bankruptcy in New York?" »

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?" »

As we see increasing amounts of foreclosure throughout the New York metropolitan area, in Brooklyn, Queens, the Bronx, Staten Island, Westchester County, Nassau County and Suffolk County, our office (Starr & Starr, PLLC in Manhattan) get many inquiries about whether bankruptcy can be used to save a home facing foreclosure or deal with an adjustable rate mortgage that has reset to monthly payments that the homeowner can no longer afford.

A recent post on our blog New York Chapter 13 Bankruptcy Eligibility Requirements and Issues addressed the limitations that Chapter 13 bankruptcy has. One very significant limitation is that secured debt can’t exceed $1,010,650. Many condo and co-op apartments and houses in New York (particularly Manhattan, Nassau County, Suffolk County and Westchester County) have debt in excess of this amount based on multiple secured loans and liens, such as first mortgage, second mortgage, and home equity loan (and sometimes also tax liens).

As we also detailed in our prior blog posting, Commonly Encountered Problems in NY Chapter 13 Chapter 13 can’t be used to modified the rights of a lender secured by the debtor’s principal residence. However, Chapter 11 bankruptcy can

Eligibility Requirements for Chapter 11 Bankruptcy:

Unlike Chapter 7 and Chapter 13 there is no eligibility requirement for Chapter 11.

How Chapter 11 Works

The goal of a Chapter 11 case is to confirm a plan of reorganization. That plan, which creditors get to vote on and is subject to Bankruptcy Court approval, details the debtor’s proposed treatment of creditors.

Modification of Loans. In Chapter 11 a debtor can seek to modify loans secured by his/her home (or other property). If the value of the debtor’s home has fallen significantly, the debtor may be able to split a mortgage creditor’s claim into two parts: one that is secured and one that is unsecured.

Continue reading "New York Foreclosure -- Personal Chapter 11 Cases" »

As a result of the current state of the real estate market in New York and elsewhere, we receive many inquiries regarding Chapter 13 bankruptcy from people wondering if they can use Chapter 13 to save a home or investment property. The answer is that Chapter 13 can be used to save a home or investment property, but has its limitations.

Eligibility Requirements for Chapter 13 Bankruptcy:

Secured Debt Limits. A debt is secured if the debt is collateralized by a lien or mortgage. As of the date of this posting, to be eligible for Chapter 13 a debtor can’t have more than $1,010,650 in total secured debt. This means that if a debtor either has a home or apartment with greater than $1,010,650 in mortgages on it, or has more than one property — such as a primary home subject to a mortgage and 2nd investment property subject to a mortgage — with total debt on all properties greater than $1,010,650, then Chapter 13 is not an option. Car loans (but not car leases) also get added in to the total when calculating the secured debt limit.

Unsecured Debt Limits. To be eligible for Chapter 13, as of the date of this posting a debtor cannot have unsecured debt greater than $336,900. A debt is unsecured when it is not secured by a mortgage or lien on property. Typically credit card debt and student loans are unsecured. Tax debt is unsecured unless the taxing authority has filed a tax lien or warrant.

Continue reading "New York Chapter 13 Bankruptcy Eligibility Requirements and Issues" »

Commonly Encountered Problems in Chapter 13

Need to Make Current Mortgage Payments. A debtor filing Chapter 13 to deal with real estate problems, such as a pending foreclosure, needs to be able to make current mortgage payments as they become due and can seek to cure the arrears (i.e., past due part of the mortgage) over time through the Chapter 13 plan. If a debtor is unable to make current mortgage payments as they become due Chapter 13 bankruptcy may still be used as a means to try to prevent a foreclosure and obtain a sale of the debtor’s property (subject to Bankruptcy Court approval). This may be desirable when a debtor has equity in the property that would get wiped out in Chapter 7 bankruptcy and wants to maintain control of the sale process.

Inability to Restructure Home Loan through Bankruptcy. The Bankruptcy Code provides that the rights of a mortgage lender secured by real estate that is the debtor’s principal residence can’t be modified in Chapter 13. This means that we can’t use Chapter 13 to try to modify the loan and, for example, split it into two separate secured and unsecured loans that receive separate treatment. We can do this for investment properties or other properties owned by the debtor that are not the debtor’s principal residence. We can also use Chapter 11 to do this for the debtor’s principal residence. However, unfortunately, the expense and complexity of Chapter 11 puts it beyond the reach of most consumer debtors.

There is an ongoing problem with a record number of foreclosures taking place this year throughout the New York metropolitan area. Many people in New York, Queens, Bronx, Brooklyn, and Westchester County are facing the prospect of losing their homes in foreclosure and are exploring their options. For many of them bankruptcy may be their best option. In a prior post New York Foreclosure & Chapter 7 Bankruptcy I discussed when and how chapter 7 can be used to deal with foreclosure in New York. Today we focus on chapter 13.

NY Foreclosure & Chapter 13 Bankruptcy

In chapter 13 the debtor keeps his/her property. The trustee does not sell it to pay creditors. Instead, creditors’ claims are dealt with over time. A debtor filing chapter 13 to deal with real estate problems, such as a pending foreclosure, needs to be able to make current mortgage payments as they become due and can seek to cure the arrears (i.e., past due part of the mortgage) over time through the chapter 13 plan. If a debtor is unable to make current mortgage payments as they become due chapter 13 bankruptcy may still be used as a means to try to prevent a foreclosure and obtain a voluntary sale of the debtor’s property (subject to Bankruptcy Court approval). This may be desirable when a debtor has equity in the property that would get wiped out in chapter 7 bankruptcy and wants to maintain control of the sale process.

In chapter 13 bankruptcy the debtor has the ability to cure arrears (past due portion) of the mortgage over time through a chapter 13 plan -- even if there is a foreclosure judgment as long as sale has not yet occurred. You can file chapter 13 and still try to pursue a settlement/workout/loss mitigation program with the lender at the same time, but most lenders will require that you dismiss your bankruptcy case before they will finalize any deal.

To be eligible for chapter 13 a debtor can’t have secured debt (such as mortgages, judgment liens, or tax liens) greater than $1,010,650 total, or unsecured debt greater than $336,900 total (such as credit card debt, student loans, medical bills, etc.).

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.

A common question I get asked a lot by people from New York City, Manhattan, Brooklyn, Queens and the Bronx is how bankruptcy can be used to wipe out a New York judgment. A judgment in New York is good for 10 years and can be renewed for another 10 years. The judgment can be enforced during this period. Interest accrues on a judgment at 9% per year. So for every $1,000 face amount of judgment every year another $900 gets added in. A creditor with a judgment can garnish the judgment debtor’s (i.e., person who owes the judgment’s) wages, attach his/her bank account, put a lien on his/her house or any real estate, and seek to seize and sell his/her car or other assets.

A judgment also appears on the credit report of the person owing the judgment for 7 years and will have a negative effect on his/her credit standing.

Once a judgment debtor files personal bankruptcy any attachment of the debtor’s bank account must be released by the judgment creditor.

A personal bankruptcy filing will wipe out a debtor's personal liability for a judgment. There is an exception for very limited categories of debts that are automatically excepted from discharge, but depending on the amount of the judgment a chapter 13 bankruptcy can still be used to pay off the judgment over time.

In addition, if a judgment has been recorded with the County Clerk in a county where the judgment debtor owns real estate, the lien will not get automatically wiped out in bankruptcy. However, depending on the circumstances the debtor may be able to avoid the lien in the bankruptcy.