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What is a Chapter 7 Case? Under the new Bankruptcy Reform Act, if your yearly income is above the median average which in New York State ranges from approximately $43 thousand to $75 thousand depending on family size, you will be required to qualify for chapter 7 bankruptcy by showing that your net income after deducting certain allowable expenses is inadequate to fund a chapter 13 plan. If you qualify for chapter 7 bankruptcy you are allowed to keep and exempt most of your personal property. Since virtually all of your household furniture, appliances, clothing, car and retirement funds and many other items are exempt, most people simply do not own any property that is not exempt and most consumer debtors will lose nothing in a Chapter 7. What Chapter 7 does is discharge or erases signature loans, credit cards, medical or hospital bills and other unsecured debts. Where a car or a home has already been repossessed and sold, the lender or guarantor of such mortgage has the right to sue a debtor for the amount owed over what the property brought at the sale. A Chapter 7 can discharge that type of debt which is called a "deficiency", and will stop that type of law suit. All of the above mentioned debts are dischargeable debts that can be erased and you simply can get rid of those debts in a Chapter 7 and never can be held legally liable to pay them again. A Debtor in a Chapter 7 is normally allowed to keep a motor vehicle that they owe money on as long as they remain current on their payments and the book value of the motor vehicle after deducting the loan balance is less than the allowed $2,400 exemption. Of course, a leased car is not considered the debtor's property at all, so a debtor is permitted to keep the car as long as the payments are kept current. Under the new Bankruptcy Reform Act, you may be required to reaffirm your debt to a car lender. In many cases, an appraisal may reveal that a house actually has very little equity available to creditors after deducting the value of existing mortgages and your homestead exemption and in such cases a debtor will be able to retain the house as well, as long as mortgage payments are kept current. A debtor should not file a chapter 7 where he or she is many installments behind on their home mortgage, since there is no ability to reorganize past due amounts due to a lender in a Chapter 7 case. So a debtor should not file a Chapter 7 case where there are substantial arrears on a home mortgage or installment sales contract unless the debtor has surrendered or is willing to surrender the collateral to his or her creditors. The main advantage of a Chapter 7 is that the debtor's discharge is received after about four months and the debtor does not have to make any trustee payments to obtain the discharge. The debtor must attend one brief creditor's meeting, and obtain a certificate from an approved credit counseling agency that he or she has completed a financial education course. My office will furnish you with a list of approved credit counseling agencies that provide such education courses. Chapter 7 is normally recommended by counsel where there is mainly unsecured debt. All assets and all liabilities must be listed and the information you supply to your attorney must be complete, accurate and truthful. Chapter 7 is normally the least expensive way to dissolve or discharge credit card debt. Chapter 13 is a wage earner and debt adjustment plan. Chapter 13 is generally used where a debtor is behind on house payments or car payments, owes money for taxes and wants to pay or reduce credit card or signature loans, 3 year old income taxes, tax penalties and deficiency claims. Debtors pay one plan payment every month to a trustee who is appointed by the bankruptcy court. The trustee in turn pays creditors the dollar amount provided for in the plan. If a debtor is past due on mortgage payments then the past due amounts are paid through the trustee's office over a period of up to sixty months, or a five year term. The trustee then pays the mortgage company the past due amounts and the debtor pays future monthly payments that come due directly to the mortgage company. A Chapter 13 plan must be a good faith plan based upon your income and ability to repay your debts. Chapter 13 allows you the best terms under the law for repayment and debt adjustment. Remember now, that Chapter 13 STOPS foreclosures, STOPS automobile repossession, STOPS IRS tax seizures, STOPS creditor harassment and it STOPS law suits until payments under your plan are complete and you receive your discharge. In a Chapter 13 plan you can restructure any of your federal or local taxes that you owe and pay them all off over a period of up to five years. The tax authorities must STOP wage garnishment and tax seizures. Creditors in general have no vote in a Chapter 13 case and the secured creditors on cars, trucks or other personal property in some cases may be required to accept a reduced value for their lien via a monthly payment made by the debtor to the trustee who in turns pays the lien creditor. The debtor must begin plan payments within thirty days after the date that the case is filed. The Debtor is required to attend an initial hearing approximately 4 to 6 weeks after the case is filed. This hearing is presided over by the Chapter 13 trustee who reviews the debtor's proposed plan and conducts a brief examination of the debtor's assets, liabilities and budget. A second hearing referred to as a confirmation hearing is scheduled before the Court where your case is reviewed by the Judge before your plan can be confirmed. A Chapter 13 debtor must remain current on trustee payments as well as any post-petition mortgage or car payments in order to have his or her plan confirmed. If you fail to make your plan payments, your case will be dismissed. What are exemptions in bankruptcy? When you file a chapter 13 or chapter 7 bankruptcy case you are allowed to keep what is known as exempt property and still discharge or erase debt. Essentially, a debtor can keep up to $50,000 of equity in a personal residence, condominium or coop apartment. Equity is what is left after subtracting the balance due on all mortgages from the market value of your home. If you own the property jointly with your spouse and you both file a petition, the exemption is increased to $100,000. In many cases, where the debtor has little or no equity in a home, the debtor is allowed to exempt up to $2,500 in bank deposits, U.S. bonds, cash or anticipated tax refunds. A debtor can also keep up to $5,000 in value of personal property such as household appliances, furniture, and personal clothing and up to $2,400 in value of one motor vehicle. A debtor may keep an unlimited amount of retirement benefits, IRAs, and qualified pension plans. Furthermore, cash value in life insurance is exempt. If you're going to come in and have a free initial consultation with me then there's going to be some things that you absolutely must have with you. The first thing that you must have is a list of all of your creditors. It's best to bring in a recent monthly statement or other written evidence of the debt. I need to know what is owed to each creditor and what kind of security or collateral they hold if any. Bankruptcy is a notification process and if you do not list a creditor then the debt may not be discharged or erased by your bankruptcy. I need to see a list of your assets such as real estate or personal property such as vehicles, bank accounts or claims you might have against others. I also need to see a record of your income for the past six months. This includes income from all sources such as wages, unemployment benefits, worker’s compensation, social security or pension income. If you do not retain pay stubs or vouchers for benefit payments, please contact your employer or benefit provider and obtain a record of your income for the past six months. Finally, please bring a list your usual monthly expenses for housing, utilities, food, clothing and transportation. During the course of preparing your case, the following documents may have to be produced to verify information you have supplied. Although you do not need to bring them with you for the free initial consultation they will be required to file your case. Guarantees and notes signed as principal, endorser or co-maker What information do you need about my creditors? Before your petition can be prepared, you must provide this office with the exact name and address (including zip code) of each of your creditors (including debts for which you are liable as a co-maker or guarantor), the account number if any, the year and month the debt was incurred, and the basis of the debt. Remember, this list must include ALL debts including those which are not yet due or non- dischargeable debts such as student loans, taxes, fines and penalties. The best approach is to have available a recent statement on each account. If you do not have any paper documents we can obtain this information from your credit report. If any creditor is holding security on your property (for example a mortgage on your house or lien on your car), furnish this office with the name and address (including zip code) of these creditors, the nature and value of the security, the amount originally borrowed and presently due and bring in copies of any writings or documents evidencing said security. The value of a home can only be established by obtaining an appraisal. The value of a car can be determined by checking the book value. See the Kelly Blue Book: www.kbb.com. What are considered my assets? You will need to provide this office with complete information as to your assets including (a) Cash on hand, (b) Deposits of money with banks, credit unions, landlord or utility company, (c) Art, stamp or coin collections, (d) Jewelry or firearms, (e) Cars, trucks, boats or other vehicles, (f) Stocks, bonds, mutual funds or annuities, (g) Life insurance, pension or retirement plans including IRAs or Keoghs, (h) Interest in any business or partnership. What if I have a claim against another party? If there are any moneys due to you, or if you have a claim like a worker's compensation case, personal injury, accident case, legal or medical malpractice or insurance claim pending, provide me with the name and address of the party liable to you, the amount due and the nature of the debt or claim. The name and address of any representative handling the claim on your behalf should be provided along with copies of any writings or documents you may have concerning this claim. What if I paid off certain loans or other debts paid during the past year? If any personal or bank loan, or credit card debt was repaid by you in whole or in part during the past year, provide this office with the name and address of each lender, the original amount borrowed, the date when the moneys were received, the amounts and dates of repayment and whether the lender was a relative. How do I prepare a monthly budget? My office will assist you in preparing a budget but you must bring with you a list of your regular monthly expenses including rent or mortgage, utilities, food, clothing, laundry and dry cleaning, newspapers, periodicals and books (including school books), medical and drug expenses, insurance (including auto, home, life, medical, etc.), transportation, (including gas, tolls, repairs, commuting, etc.), recreation, dues (union, professional, etc. not deducted from wages), taxes (not deducted from wages), alimony, maintenance or support payments. I will also require copies of your utility bills (gas, electric, oil heat phone, cell, cable, internet, etc.) at the time of filing. What are your office hours and appointment times? If you would like to make an appointment for a free initial consultation, I would be delighted to meet with you at any mutually convenient time. My office hours are normally between 9:00 AM and 6:00PM, Monday through Friday although appointments are only scheduled between the hours of 11:30AM and 4:30PM. I am also available for appointments on most Saturdays between the hours of 11:00 AM to 3:00 PM. My office is conveniently located at 30 Bay Street, in Suite 604 on the 6th Floor, which is near the Staten Island Ferry and across the street from the Post Office in St George. For Saturday appointments you must call to confirm the appointment before 5:00 PM 5:00PM on the Friday before a Saturday appointment. If the appointment is not confirmed, I may no longer be available when you arrive. Metered parking is available in front of the building on in the municipal lot in the rear of the building which is reached via Slosson Terrace off of Bay Street. Contact the Law Offices of Charles R. Tropp Are some debts not dischargeable in bankruptcy? Yes. It is usually not possible to eliminate the rights of secured creditors. Although it is possible to cure arrears and force creditors to take payments over time in the course of a chapter 13 plan, a debtor generally cannot keep secured collateral unless he continues to pay. In addition, some debts have been singled out for special treatment pursuant to bankruptcy law and cannot be discharged such as child support, alimony, most student loans, certain court ordered payments, criminal fines and some taxes. If a relative or friend has co-signed a loan which you plan on discharging in bankruptcy, the co-signer may still be obligated to repay the loan. Finally, debts which are incurred after you file your bankruptcy case are not discharged. What is the effect of bankruptcy on my credit? By federal law, a bankruptcy can remain a part of your credit history for up to ten years. Whether or not you will be granted credit in the future is unpredictable since it depends on future events. In most cases it may actually be easier to obtain future credit, because new creditors may feel that since old obligations have been discharged, they will be first in line. They also recognize that you cannot file another chapter 7 bankruptcy for eight years. You always have the option after bankruptcy of voluntarily paying some creditors, such as a doctor or hospital with whom you wish to maintain credit. These payments are voluntary and do not reaffirm the past obligation. After you receive your discharge, my office will provide you with additional information on how to restore your credit.
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- Foreclosures
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30 Bay Street, Suite 604
Staten Island, NY 10301
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