Filing a Chapter 7 bankruptcy stops creditors from calling and asking the same question, over and over, “Your bill payment is still past due.” “Your outstanding balance is now $X.” “Surely you can make a payment today.”
A Chapter 7 filing will stop their harassment and stop any lawsuits that you’re involved in. And if you’re in a mortgage foreclosure, it’ll even temporarily stop the foreclosure. It can rid you of your other debt and allow you to concentrate all of your income towards resolving the foreclosure on your home. But more importantly, filing a Chapter 7 bankruptcy also relieves the anxiety and the stress of these debts.
When potential clients come into my office, I can tell they have anxiety and stress. I tell them, “It’s just money. The good news is it’s not your health. It’s not your children. It’s just money, and bankruptcy can resolve that problem for you.”
This is why bankruptcy law has been rewarding for me as an attorney – because debt, while an overwhelming, screeching, and clawing problem, it can be resolved, and I can provide my clients with the relief that they need.
The Assets You Can Keep In A Personal Bankruptcy
As provided by the New York Civil Practice Law & Rules statutes, the below assets are protected under the state or federal exemption for approximate dollar amounts:
|Type of Exemption||New York State Bankruptcy Exemptions||Federal Bankruptcy Exemptions|
|Homestead Exemption||$179,975.00 if you are within New York City, Westchester or Long Island, double that amount if owned jointly||$27,900.00 for individuals and double that amount if owned jointly|
|Motor Vehicle Exemption||$5,000.00, or|
$12,000.00 if equipped for a disability
|Tools of the Trade Exemption||$10,000.00||$3,000.00|
|Wildcard Exemption||$3,500.00||$1,425 plus any portion of the unused homestead exemption up to $14,000.00|
|Personal Property Exemptions||$12,000.00 on most household items||$700.00 to $27,000.00 on various categories of personal property|
|Retirement Accounts||Most retirement accounts in full||Tax-exempt retirement accounts and IRA/Roth IRA up to $1.5 million.|
|Personal Injury Claims||$27,900.00||$27,900.00 plus any unused amount of the wildcard exemption up to $15,425.00|
The New York State exemptions provide more protection for your home than do the federal bankruptcy exemption.
In bankruptcy, a wildcard exemption can protect any property you chose from creditors based on federal law and in some states, including New York State.
Under the New York State exemptions, if you have a home and you need to protect it, you cannot also protect money in your bank. Thus, you’d want to have a low amount of money in the bank by the time you file.
Under federal exemptions, you can also protect about $25,000 in a personal injury case.
If you remember Terry’s scenario above, he received a personal injury settlement after filing for Chapter 7 bankruptcy. In the scenario, the trustee used it to settle his debts. Choosing to use the federal exemptions would allow him to protect $27,900.00 of his personal injury case settlement, preventing the trustee from using that amount to pay off his creditors.
On top of that, If Terry does not own a home he could then add the wild card exemption of $15,425.00 for a total of $43,325.00. If Terry had owned a home, he would need to use the New York exemptions rather than federal exemptions. But without owning a home, he could use the federal exemptions and protect up to about $43,325.00 in his personal injury claims. Yes, it can be complicated and confusing. That’s why hiring a bankruptcy lawyer was in Terry’s best interest.
If you own a business, that’s not protected generally. You can still protect it under the wildcard and maybe under tools of the trade, but that’s something that you need to discuss with your attorney. When speaking to people who are in business, I make sure to protect whatever assets they have and make sure they understand what is not protected. Again, my focus is on the best interest of my clients.
The Realistic Downsides To Filing A Personal Bankruptcy
Bankruptcy will be on your credit report for 10 years. You will not be able to get a credit card while you’re in bankruptcy. This means that if you’re in Chapter 13, you may not be eligible over a five-year period. And if you’re in Chapter 7, that’s about one hundred days during which you certainly will be turned down for credit.
Often after you achieve your discharge, you won’t be able to get an unsecured card right away. My suggestion is to apply for a secured credit card after you get your discharge, use it normally and pay it on time and you will rebuild your credit within a year.
If you recall Emily’s story (the college graduate who was fearful that filing for bankruptcy would prevent her from getting a job after college or being able to rent her first apartment), applying for a secured credit card was part of my suggestions to help her improve her credit after bankruptcy.
Bankruptcy: The Right Step For All Serious Debts
If you qualify for bankruptcy and are dealing with an amount of debt that you don’t have the ability to repay or settle, it is definitely the right choice. But each individual is different.
I am an expert at assessing whether you qualify to file bankruptcy and which bankruptcy chapter would work best given your individual circumstances. So, if you have any questions or concerns related to the filing process, don’t hesitate to get in touch with my office.
Alternatives To Bankruptcy That Should Be Considered
If you’re only dealing with one or two creditors, and you have enough cash to pay 20 to 30% of your debt, you could contact them. (Terry did this when he offered his creditor $2,000.)
You can also have an attorney contact them to make offers and deals. If you can get out of your debt without bankruptcy, your credit will recover quicker and you won’t have that bankruptcy on your credit report for 10 years. It’s just a question of cost.
As I said previously, you have to look at bankruptcy as a business decision. If settling is less expensive, or if the cost of settling is less troublesome to you than bankruptcy, then settling should be considered.
For more information on Bankruptcy Law in New York, a free initial consultation is your next best step. Get the information and legal answers you are seeking by calling (516) 550-5467.