Most people know what bankruptcy means, but many are unaware of what it actually entails. For example, if one were to file for bankruptcy, how would they even begin the process? Just as importantly, once the process is underway, how can they pick up the pieces and begin to reshape their lives?
Fortunately, as a bankruptcy attorney in Buffalo, NY, I can shed light on the entire process for you and make certain you understand what the rules are, how you can best protect your assets and what it is you need to do to endure this difficult ordeal.
As such, this page is designed to answer many of the common questions I receive regarding bankruptcy. If you would like more details or to discuss your specific situation, please fill out and submit the contact form.
Chapter 7 or Chapter 13 Bankruptcy?
Chapter 7 bankruptcy discharges most unsecured debts, such as medical bills, personal loans, and credit card balances. To qualify for Chapter 7 bankruptcy, you must be below the median income level for your household size. If you exceed that level you are subject to a means test. If you do not pass the means test you will not be entitled to a Chapter 7 discharge.
Chapter 7 can help people get out of bad car loans. In Chapter 7, if you owe more for your car than it is worth, you can voluntarily surrender it to the creditor. Once repossessed and auctioned, the deficiency (the difference between what it sold for and what you owe on the loan) becomes a dischargeable unsecured debt.
Although it may relieve you of personal liability for secured debts, such as a mortgage or a car loan, Chapter 7 does not dissolve the security interests of the lienholders. If you are behind on your mortgage payments or car loan and wish to keep your home and/or your car, Chapter 7 will not help you. Chapter 7 cannot prevent foreclosures or repossessions.
Chapter 13 can prevent foreclosures and repossessions. It entitles you to enter into a 3-5 year repayment plan by which to refinance your car loan or mortgage arrears at a low interest rate.
Chapter 13 entitles you to pay off all or a portion of your unsecured debts over 3-5 years. It also entitles you to discharge your unsecured debts for a minimum of 5 cents per dollar. The percentage you are required to pay is based on your income, household size, and assets. At the end of the plan (if you complete it), the portion of your debts you were not required to pay are discharged by the Court.
Chapter 13 can discharge unsecured debts for individuals whose income exceeds the income allowance for Chapter 7. If you exceed the median income level for your household size you are subject to a means test. This determines, based on income and reasonable expenses, your 'disposable income.' Your disposable income is the monthly minimum you would be required to pay your unsecured creditors in a 5 year Chapter 13 repayment plan. The highest you could be expected to pay is 100% of the debt over 3-5 years. .
Anyone, regardless of income or assets, can consolidate their debts in a Chapter 13 plan. There are no credit requirements and you pay no interest. . There are, however, attorney's fees and a 10% trustee's premium. A portion of the attorney's fees are usually paid up front while the balance generally adds $25 to $35 to the monthly plan payment. The trustee's fees are 10% 'across-the-board.' While interest accrues annually, trustee's fees are more like handling fees. For each dollar spent the Trustee receives ten cents. The total interest on a $100,000 consolidation loan at 10% over 5 years would be $27,440, while the total premium payments to a Chapter 13 Trustee over 5 years would be $10,000.
Chapter 13 bankruptcy allows you to avert foreclosure by extending the delinquent mortgage payments over the life of a 3-5 year Chapter 13 repayment plan. It also allows you to cure other delinquent secured debts, such as automobile loans. To find out which form of bankruptcy is right for you contact Buffalo NY bankruptcy attorney Thomas Denny.
What is a bankruptcy discharge?
A bankruptcy “discharge” releases you from personal liability for discharged debts and prevents creditors from taking legal action against you to collect the debts. If you are struggling to pay your debts, Buffalo bankruptcy attorney Thomas Denny will help you obtain protection from collection action under Section 362 of the U.S. Bankruptcy Code. When your bankruptcy case is complete, you will receive an order of discharge from the Court, which will release you from all or most of your debt obligations.
Can I Keep My Home After Bankruptcy?
Under the New York State bankruptcy exemptions, a debtor in Buffalo NY may keep up to $85,400 (per owner) in equity in his or her home. A married couple filing jointly may keep up to $170.800 in home equity. Under the federal exemptions, each debtor may keep up to $23,675 (per owner) in equity in his or her home. As long as the difference between what you owe on your house and its market value is less than the exemption amount, you will not lose your home. For those who do not own homes, the federal exemptions are the preferable option since they allow the debtor to keep considerably more in cash and personal property, such as an automobile with equity exceeding $4000.
Will bankruptcy stop foreclosure?
Filing for bankruptcy places an automatic stay (a stop) on foreclosure proceedings. Under Chapter 7, however, after several weeks, the mortgagee (the bank) will likely apply for and be granted relief from the stay and be allowed to continue the foreclosure proceeding. Chapter 13 provides a way to avoid foreclosure altogether by forcing the bank to allow you to pay the past due amount over time, in addition to your current mortgage payments. Contact Buffalo bankruptcy attorney Thomas Denny for more information on how bankruptcy can stop foreclosure.
Will I have to go to court?
Approximately 20 to 40 days after filing for bankruptcy you will be required to attend a ”meeting of creditors.” There, the trustee will review your petition and ask questions about your property and finances. The proceeding takes approximately 15 minutes and, although it is a called a “meeting of creditors,” very rarely do creditors actually attend. Unlike many lawyers who send associates to take their places, Buffalo bankruptcy attorney Thomas Denny personally represents each and every one of his clients at the meeting of creditors.
Will bankruptcy affect my credit?
Although bankruptcy will remain on your credit report for ten years from the filing date, by eliminating all or most debts, it may actually help your credit. In addition to improving your debt to income ratio, bankruptcy may allow you to qualify for an FHA or VA-insured mortgage in as little as two years. As your counselor, Buffalo bankruptcy attorney Thomas Denny will provide guidance on how to establish new credit and improve your credit rating.
What is the “means test?”
The “means test” is a formula used to determine who can and cannot file for bankruptcy protection under Chapter 7. The law requiring a “means test” was enacted in 2005 to deter wealthy debtors from filing for Chapter 7 bankruptcy. For example, if you are an individual filing for bankruptcy in Buffalo and your income is less than the state median of $50,768, or if more than 50% of your debts are business-related, you will not be subject to the means test. If, as a result of the means test, you cannot file under Chapter 7, you may still be entitled to file for bankruptcy protection under Chapter 13.
May I file for bankruptcy individually or should my spouse file also?
If yours debts are in both your names, both you and your spouse should file. Otherwise, it is not necessary to have a bankruptcy noted on both of your credit reports. If you choose to file alone, however, your spouse will not be relieved from his or her share of any debts discharged in a Chapter 7. In a Chapter 13, on the other hand, if the Plan calls for payment of 100% of your debts, you may file without your spouse even if he or she is a joint debtor. This is usually the case when someone is filing specifically to avert foreclosure. Buffalo bankruptcy attorney Thomas Denny represents both individuals and married couples filing jointly.
Can I be fired for a bankruptcy?
The law strictly prohibits an employer from terminating you or denying you employment for filing bankruptcy or for not having paid a debt that is dischargeable in bankruptcy. Furthermore, you cannot, solely because of bankruptcy or insolvency, be denied a federal student loan, a drivers license, or a professional license. For further information regarding bankruptcy discrimination and your rights under the law contact Buffalo bankruptcy attorney Thomas Denny.
Can bankruptcy stop a repossession?
Filing for bankruptcy creates an automatic stay under which all collection actions, including repossession of an automobile, are stopped. The lender has the option, however, to apply to the court to have the stay lifted to protect its security interest. Nonetheless, in bankruptcy you can elect to reaffirm your car loan and keep your car if you can demonstrate that the car is necessary and that the payment is reasonable. Contact Buffalo bankruptcy attorney Thomas Denny for additional information.