Filing Bankruptcy in New York and Bankruptcy in New Jersey
Process and Discharge
Whether you’re up to your neck in loans, out of work or stretching one small paycheck to meet ever-growing obligations, nearly everyone occasionally flirts with the idea of ditching their debt.
While the reasons to file for bankruptcy vary, statistically speaking, 33 percent of debtors cite job or income loss as one of the reasons or even the number one reason they file. But the reality of bankruptcy is that it’s a complicated legal procedure that has to be done with expertise
Reforms in 2005
Bankruptcy laws are now even more complicated thanks to new reforms that went into effect Oct. 17, 2005. The changes in the laws make it harder to qualify for bankruptcy and even exclude some people from filing Chapter 7 altogether.
The new reforms require that a person filing for bankruptcy must get credit counseling from a government-approved credit counseling agency. The debtor must go to counseling within 180 days before filing for bankruptcy. There are some exceptions, such as the lack of qualified agencies to provide counseling and certain emergencies.
What’s more, before any debt can be discharged under Chapter 13, debtors have to take a government-approved financial management education program. If debtors fail to complete the course, debts will not be discharged.
After these programs are completed, a person may file for bankruptcy. Most people opt for either Chapter 7 or Chapter 13. While rules vary widely from state to state, here’s a general rundown on each, along with the new stipulations:
Chapter 7
Commonly known as liquidation, Chapter 7 usually takes four to six months from the date of filing to the final discharge. You can file only once in six years. This form of bankruptcy basically allows filers to give up assets in exchange for discharge of their debts. This is frequently the option for people who have few or no assets, often little or no income, and a lot of debt.
New Rules
Some new bankruptcy rules will make it harder to qualify for Chapter 7:
Debtors must pass the “means test,” meaning when they file, their income must be less than the median income in their state. If a debtor’s income is above the state’s median and the person can afford to pay $100 per month toward paying off debt, then the filer will be forced to file under Chapter 13.
Whether someone can afford to pay $100 per month is based on a formula that includes monthly income, expenses, and total amount of debt. Our bankruptcy attorneys will research your monthly income against your State’s median income and provide you with an analysis as to which Chapter best suits you.
Chapter 13
Also known as debt adjustment, Chapter 13 allows individuals, not corporations, to temporarily halt foreclosures and collection actions while they draft and execute a plan to repay some or all of the debts over a three- to five-year period.
One of the biggest benefits for Chapter 13 filers is that the amount you’re going to have to pay on that debt will depend not on how much you owe but on how much you have — your regular income. This type of bankruptcy lets you reschedule and extend secured debts over the life of your Chapter 13 plan.
With a Chapter 13 bankruptcy, you must be under the allowed debt limits. As of April 2005, it’s $307,675 of unsecured debts — such as credit card debt and medical bills, not tied to an asset — and $922,975 of secured debt — those tied to an asset that can be repossessed or foreclosed upon, such as a house or car. The limits change April 1 each year.
If the plan passes muster with the court, then all disposable income is given to the trustee, who keeps a percentage as a fee and parcels out the rest to the creditors in accordance with the plan. You’re only prevented from re-filing for Chapter 13 for six months.
What’s good about Chapter 13?
Chapter 13 allows debtors a chance to halt foreclosure proceedings on their homes. While they must still make mortgage payments on time, they can pay off delinquent mortgage payments and ultimately keep their homes, according to the Administrative Office of the United States Courts.
What’s more, even though it lingers longer, Chapter 13 is kinder on the credit score than a total liquidation. Creditors will see that the debtor is making an effort to pay off the debts. Unfortunately, it will be harder to obtain new credit because creditors will know you already have to pay off other creditors. With Chapter 7, they know you’re not paying off those debts
Get a good attorney
In the event you want to file for bankruptcy, you need an experienced lawyer who specializes in bankruptcy to navigate the law. Steer clear of petition preparers, typing services or paralegals. And if you are even considering filing on your own, remember the old adage: A man who represents himself has a fool for both an attorney and a client.
The Law Offices of William Z Schneider will navigate you through the web of federal laws, state exemptions, means test, and other delicate nuances of the Bankruptcy Code. Call us today to schedule your free appointment.
Discharge
A bankruptcy discharge releases you from personal liability for certain debt. In other words, you are no longer legally required to pay any debts that are discharged. The discharge permanently prohibits creditors from taking f collection action on your debts, including legal action and communications, such as telephone calls, letters, and personal contacts.
Contact William Z Schneider & Associates to get a full explanation of your rights in bankruptcy.
