John Lehr, P.C.
John Lehr, P.C.
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Understanding Chapter 7 Bankruptcy In New York

In this article, you can find answers to questions like:

  • What assets can I keep in a Chapter 7 Bankruptcy filing?
  • How long does a Chapter 7 Bankruptcy generally take?
  • What could I potentially lose in a Chapter 7 bankruptcy?

Assets And Exemptions In Chapter 7 Bankruptcy Filings

Hundreds of thousands of Americans file for bankruptcy each year. Understandably, many people are concerned with losing what they’ve worked so hard for. Luckily, there are many assets you will likely be able to keep in a Chapter 7 bankruptcy case.

In New York, a homeowner can protect up to $179,950 in home equity. For married couples, who are both named in the deed, that number doubles to $359,900. What’s more, retirement accounts are completely exempt from Chapter 7 Bankruptcy filings.

Other exemptions can include:

  • Up to $4,825 in automobiles.
  • Up to $10,000 in work-related tools.
  • Up to $11,975 in household goods.
  • Up to $9,000 in personal injury case awards.

It’s important to note: These are only New York state exemptions. Chapter 7 bankruptcy filers may also choose to use federal bankruptcy exemptions.

Under federal exemptions, you cannot protect as much equity in a home — in fact, home equity protections are minimal. However, if you’re not a homeowner, federal exemptions can provide you with greater opportunities to save.

In addition to the complete exemption of your retirement account and partial exemptions for other everyday items, federal exemptions can include the following:

  • Personal Injury Exemption: $27,900
  • Wildcard Exemption (This covers any property that may not be exempt under other exemptions.): $15,425

It’s important to understand your exemptions before you file for bankruptcy. By staying informed, you will know which assets you may not be able to keep in bankruptcy. This will allow you to make an offer to the Trustee to keep the asset or prepare to lose that property.

What Are The Downsides Of Filing A Chapter 7 Bankruptcy?

The main effect of a Chapter 7 bankruptcy filing is that it will appear on your credit report within one week. Depending on your credit rating before the filing, this can cause your credit score to plummet.

Luckily, it’s very common for a person’s credit score to grow within one year of a Chapter 7 discharge. (This happens specifically when the filer is able to get two positive reporting creditors within that period. At our firm, we typically obtain a credit report for our clients before their filing, as well as a report that shows a projection of their score 12 months after their Chapter 7 discharge. (With the two positive reporting creditors.)

Additionally, I talk with my clients about how to go about obtaining lines of credit post-bankruptcy. This is important because it helps to rebuild damaged credit.

(You should keep in mind: From the date of filing to final discharge, a Chapter 7 Bankruptcy case typically takes about 90 days.)

In a Chapter 7 bankruptcy filing, loss can occur due to the liquidation of assets. This occurs in the following steps:

  1.  A Trustee is appointed by the Department of Justice.
  2. The Trustee will confirm that you qualify for relief under the bankruptcy code.
  3. The Trustee liquidates your estate.

Liquidation occurs when the Trustee pursues any non-exempt claims and property under your control. These assets will then be sold to cover a portion of your overall debt burden.

It’s very important to consult with a qualified attorney before filing for Chapter 7 bankruptcy. This way, you can ensure that you are protected and that you file with your eyes opened to any risk that might be present.

What Is The Means Test In A Chapter 7 Bankruptcy?

The Means Test is a form created by the Bankruptcy Abuse Prevention & Consumer Protection Act in 2005. This test determines whether or not an individual or a married couple qualifies for relief under Chapter 7 Bankruptcy code. It also sets forth a minimum amount that must be distributed to unsecured creditors under chapter 13 plan.

The means test is rigid, and it takes into account expenses that are not attributable to the person that files for bankruptcy. These expenses include rent, car payments, food, clothing, and more.

Unfortunately, it doesn’t matter how much you actually spend on many things. Some may consider this to be unfair. However, there are certain deductions that you get on the means test. This may allow you to manage your expenses in such a way that will allow you to qualify for Chapter 7 Bankruptcy if you wouldn’t otherwise.

The means test is not a helpful tool for everyone, but by working with a Chapter 7 Bankruptcy attorney at our firm, we can use it strategically to help you qualify for Chapter 7 filing.

What Is The 341 Meeting Of Creditors? Does This Take Place For All Types Of Bankruptcies?

The 341 Meeting of Creditors occurs in every type of bankruptcy case. In this meeting, the Trustee will ask the Chapter 7 filer a number of questions regarding their assets, debts, income, and expenses.

This gives the trustee the information needed to determine: A.) Whether or not the filer qualifies for relief; and, B.) What assets there are to pursue.

Creditors can also appear at the Meeting of Creditors and ask similar questions about the debtor’s assets, liabilities, income, and expenses.

It’s understandable to feel stressed about these meetings, but you don’t have to be. Generally speaking, a 341 meeting takes about five minutes from start to finish — it’s a very simple process. What’s more, your our firm will go over the questions with you beforehand so that you can feel prepared to participate.

(Due to current COVID-19 restrictions, all trustees in the eastern and southern districts of New York are holding 341 meetings by video or telephone conference.)

For more information Bankruptcy Law in New York, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (516) 200-3238 today.

John Lehr, P.C.

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