Articles Posted in Personal Bankruptcy

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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)?)
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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.
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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.
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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.
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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

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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.
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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.
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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.
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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).
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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

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