When your debts become too high to pay with your current income, bankruptcy offers a difficult but manageable financial path forward. Going bankrupt either fully wipes out or significantly reduces your debt, but it comes with some serious drawbacks. The process can also be fairly complicated depending on how much debt you owe, what sort of income you have, and what types of assets you own.
Navigating the New York Bankruptcy Process
Your first step should always be to contact a New York bankruptcy attorney and go over the pros and cons, as well as discuss other potential options. Filing for bankruptcy may not be the best choice for your unique financial or family situation, and there are long-term consequences to know about ahead of time.
It's critical to understand what will be lost and what will be protected after declaring bankruptcy. Some assets, like an inheritance, a life insurance payout, or a settlement can still be seized by creditors for a period of time after you’ve filed. Certain types of debts also aren’t normally removed by bankruptcy, such as:
- Child support
- Court fees or criminal fines
- Loans acquired under false pretenses
- Some credit card charges prior to the bankruptcy filing
- Some taxes
- Student loans
Here’s another reason why you need the help of a legal professional. If you can prove that retaining these debts would create an undue hardship, it is possible to have some of them waived in specific circumstances. Back taxes you owe that are more than three years old and that aren’t subject to a lien can also be discharged in some cases.
After meeting with an attorney to discuss the details and plan for your financial future, the bankruptcy process then proceeds by:
- Attending a mandatory credit counseling session from an approved agency.
- Filing either a Chapter 7 or Chapter 13 bankruptcy petition. This petition includes an extensive listing of assets, income, property, and creditors. Once filed, you are then protected from lawsuits, wage garnishments, and debt repossession calls from your creditors.
- Means testing to determine which type of bankruptcy is utilized. If your expenses exceed your income, you file for Chapter 7, which is known as liquidation bankruptcy. If your income exceeds your expenses (not including your debt), you are required to go with Chapter 13.
- Notifying creditors of your bankruptcy.
What You Will Lose and Possible Exemptions
The purpose of bankruptcy is to remove financial burdens from the debtor, while still getting some money to the creditors in one of two ways. In Chapter 13 bankruptcy you must still continue to directly pay off reduced debts based on your amount of excess income, while your creditors will sell off many of your assets under Chapter 7 to recover payment.
Obviously, leaving a debtor with absolutely nothing isn’t a viable solution, which is why there are property exemptions included with Chapter 7 bankruptcy, like:
- Your home (up to a specific amount of equity)
- A primary vehicle (up to a specific amount of equity)
- A small amount of personal cash assets if you don’t utilize the home exemption
- Tools necessary for your profession
While bankruptcy is primarily handled under federal law, New York offers different property exemption amounts than other states. The specific amounts covered change by county due to the varying costs of living and the average price of homes. A larger home exemption is available in Rockland county than Saratoga, for instance.
These specific amounts can also be doubled when spouses file bankruptcy together and they jointly own the property. Your attorney can explain the exact amounts for your specific location and help you formulate the best plan for sheltering your remaining assets.
Talk to an Attorney as Soon as Possible
An experienced lawyer is key to reducing debt through bankruptcy while protecting your assets. If you need to file for bankruptcy so you can move forward to a better financial future, get in touch with Alatsas Law Firm to schedule a consultation.