Long Island Attorney Answers Frequently Asked Bankruptcy Questions
If you are considering filing for bankruptcy, you will no doubt have many questions. Bankruptcy can be very confusing, and you may wonder if it is the right option for you. Contact Andrew M. Doktofsky, P.C. at 631-812-7020 for a free consultation about filing for bankruptcy in Suffolk County, Nassau County and Long Island.
- What are the requirements to qualify for bankruptcy?
- What exactly does bankruptcy do?
- What are the different types of bankruptcy?
- When will my creditors stop calling me?
- Will I lose my job if I file for bankruptcy?
- Should both my spouse and I file for bankruptcy?
- Will I lose my home if I file for bankruptcy?
- What is the automatic stay?
- What does the bankruptcy trustee do?
- Will I have to go to court?
- Should I repay my debts to my family?
- Should I transfer or sell my property?
- What debts are non-dischargeable?
- Will bankruptcy remove liens on property?
- Do I have to go through credit counseling?
- What effect will filing for bankruptcy have on my student loans?
- How will my credit be affected after filing for bankruptcy?
- How long does the bankruptcy process take?
- How many times can I file for bankruptcy?
- Bankruptcy Question Resources in New York
According to the federal Bankruptcy Code (Title 11 of the United States Code), a person that resides in, is domiciled in, has a place of business, or has property in the United States can file for bankruptcy. The requirements for filing under Chapter 7 differ from those for filing under Chapter 13. To be able to file under Chapter 7, a debtor must be within the income guidelines, known as the Means Test. To qualify for Chapter 13, an individual must have regular income in order to make payments towards a Chapter 13 repayment plan. It is important to speak with an experienced bankruptcy attorney who will help you identify which chapter of the Bankruptcy Code you should file under.
A Chapter 7 bankruptcy allows a debtor to erase debts without repayment. In Chapter 13, the debtor repays some or all of their debt through a repayment plan approved by the Bankruptcy Court. The end result of a successful bankruptcy proceeding is the granting of a discharge by the Bankruptcy Court. The discharge will eliminate most debts, except for certain non-dischargeable debts.
There are several chapters under the Bankruptcy Code under which a debtor (person, business or entity) can file for bankruptcy. However, the chapters that are most applicable to individual consumers are Chapter 7 and Chapter 13. These are the two chapters of the Bankruptcy Code that most individuals will file under. Read more about Chapter 7 vs. Chapter 13 bankruptcy.
Immediately after filing for bankruptcy, an automatic stay goes into effect. The automatic stay prohibits the debtor’s creditors from contacting the debtor through any means, or taking any action to attempt to collect outstanding debts. It may take several days after the bankruptcy is filed for creditors to receive notice of the filing.
Section 525 of the Bankruptcy Code prohibits private and government employers from discriminating against or terminating an employee who has filed for bankruptcy. However, keep in mind that a bankruptcy filing is a public record. Future employers will be able to find out that you have filed for bankruptcy before deciding whether to hire you.
This depends on whether the debts are in the names of both spouses or primarily in one spouse’s name. If the debts are in both names and one spouse files for bankruptcy, the other spouse will still be liable for the outstanding debts. However, if significantly more debt is in one spouse’s name, it may be advisable for only that spouse to file for bankruptcy. Additionally, whether one spouse has a majority of the assets in their name, or both spouses jointly own the assets, will determine whether one or both spouses should file. It is important to speak to an experienced attorney who can help you determine the best course of action.
Whether you can file for a Chapter 7 bankruptcy and keep your home depends on how much equity you have in your home. New York State law allows debtors a homestead exemption of up to $170,825 for their principal residence. If married, and the home is owned by both spouses, debtors can protect up to $341,650 of equity. Note: the homestead exemption varies by the county of residence. See the Property Exemptions page for more information. This exemption also applies to co-ops and mobile homes. However, it must be your principal residence – there is no homestead exemption for investment properties or vacation homes.
If your house has more equity than the permissible exemption limit, then you should be very cautious about filing a Chapter 7 bankruptcy. You could end up losing your home. In that situation, a Chapter 13 bankruptcy filing may be advisable, because in Chapter 13 you keep all of your assets. However, you would have to repay your unsecured debts up to the value of your non-exempt assets, including the non-exempt equity in your home. You would therefore need sufficient income to make the required payments.
The automatic stay prevents creditors from taking any steps to collect debts once the bankruptcy case has been filed. The prohibited actions include phone calls, collection letters, lawsuits, wage garnishments, and restraints on bank accounts. Creditors can file a motion in the bankruptcy court to have the automatic stay lifted. However, these requests will be granted only under certain circumstances. Generally, unsecured creditors (e.g. credit cards) do not have cause to have the stay lifted.
The automatic stay goes into effect immediately upon filing of the bankruptcy. This means the debtor does not have to take any steps to have the stay put in place (except in certain cases of repeat bankruptcy filings). There are certain exceptions to the automatic stay and therefore, not all actions against a debtor are stayed.
Once a debtor has filed for bankruptcy, the court appoints a trustee to oversee the bankruptcy proceedings. The trustees are bankruptcy attorneys who are assigned cases on a rotating basis. The primary function of the trustee in a Chapter 7 case is to determine if there are assets with which to pay the debtor’s creditors. If so, the trustee collects these assets and makes distributions to the creditors. In a Chapter 13 case, the debtor makes payments to the trustee, who is then responsible for disbursing funds to the debtor’s creditors, according to the terms of the Chapter 13 plan. After filing for bankruptcy, the debtor is required to attend a Meeting of Creditors, where the trustee will ask the debtor questions about the debtor’s assets, financial obligations, credit card use, property transfers, income, and expenses.
Most bankruptcy cases do not require an appearance in court. However, you will have to attend a Meeting of Creditors approximately three to five weeks after you file for bankruptcy. Although the meeting may be held in the courthouse, the meeting is with the bankruptcy trustee, not in front of a judge. Usually, creditors do not attend the meeting. Generally, you will not be required to do anything after the meeting, unless a creditor or the bankruptcy trustee files a motion or adversary proceeding against you. In that case, you or your attorney will be required to appear in court. Also, in a Chapter 13 case, you may be required to appear before the judge to have your Chapter 13 plan confirmed.
No. If you are filing for bankruptcy, most loans made to you by “insiders” (friends, family members or business associates) are considered unsecured debt and will be discharged. Any repayments made to these insiders within one year preceding the bankruptcy filing can be recovered by the bankruptcy trustee. While not fraudulent, such payments are considered “preferential payments” and in a Chapter 7 case must be returned to the bankruptcy estate in order to be distributed among all of the debtor’s creditors. However, if the repayment was relatively small, the Chapter 7 trustee may decide that it is not worth trying to recover the money that was repaid.
No. If you are considering filing for bankruptcy, do not transfer money, vehicles or any other property to anyone. Such transfers can be considered fraudulent transfers and may be recovered by a bankruptcy trustee. However, a bankruptcy attorney can advise you regarding legitimate pre-bankruptcy asset planning that may include selling property for fair value.
Certain debts are not dischargeable in bankruptcy. Under both Chapter 7 and Chapter 13, most taxes, educational loans and domestic support obligations (child support or spousal support) are not dischargeable. Read more about non-dischargeable debts in bankruptcy.
Liens generally survive a debtor’s bankruptcy. That is, the debtor’s personal obligation to pay the debt is discharged, while the lien continues to attach to the debtor’s property. This means that the debtor’s creditors can still foreclose on a home or repossess a car if the debtor is unable to pay these loans after bankruptcy. However, some liens can be voided in bankruptcy under certain circumstances, including judgment liens, some junior mortgage liens, certain non-purchase money security interests, and certain motor vehicle liens. Read more about liens and bankruptcy.
Yes. The debtor must complete a federally approved credit counseling course prior to filing for bankruptcy. These courses can be completed online.
Student loans are usually not dischargeable in bankruptcy unless repayment of the student loans would create an undue burden on the debtor or the debtor’s dependents. The court will typically not discharge student loans in bankruptcy proceedings.
While a Chapter 7 or Chapter 13 bankruptcy can remain on a debtor’s credit report for a period of ten years from the filing date, filing for bankruptcy may actually be beneficial to rebuilding your credit. This is because bankruptcy will usually eliminate all or most debts. Your debt to income ratio will improve. This in turn will permit creditors to extend credit to you and allow you to rebuild your credit over time. Furthermore, because a Chapter 7 debtor cannot file another Chapter 7 bankruptcy for eight years, creditors may consider you to be at a lower risk of defaulting on your debts. Keep in mind that any credit obtained shortly after a bankruptcy will not be at favorable interest rates. However, if you wisely obtain credit that you can afford to repay, your credit score will improve over time.
Under Chapter 7, the entire bankruptcy process, from filing to discharge, usually takes approximately 90 to 100 days. A Chapter 13 bankruptcy usually takes between three to five years, depending on the length of the repayment plan. However, during this time, debtors are under the protection of the Bankruptcy Court, and creditors generally cannot take any action to collect debts without first obtaining permission from a bankruptcy judge.
There are statutory limits on the period of time between bankruptcy filings. A person cannot file for bankruptcy if they have been a debtor in a pending bankruptcy case at any time in the preceding 180 days, and the case was dismissed by the court for willful failure of the debtor to abide by orders of the court, or to appear before the court in proper prosecution of the case; or the debtor voluntarily dismissed the bankruptcy proceeding following a request by a creditor for relief from the automatic stay.
There are also limitations on the ability of a debtor to receive a discharge in a subsequent bankruptcy filing. If a debtor was granted a Chapter 7 discharge, they must wait eight years before filing for Chapter 7 again and four years before filing for Chapter 13. If a debtor was granted a Chapter 13 discharge, they must wait two years before filing for Chapter 13 again, or six years before they can receive a discharge under Chapter 7 (although there are certain exceptions to this rule). The time starts to run from the date of filing of the prior bankruptcy case.
In addition, repeat bankruptcy filings can affect whether the automatic stay goes into effect, or may limit the duration of the stay.
Andrew M. Doktofsky, P.C. | Long Island, New York Bankruptcy Attorney
Contact Andrew M. Doktofsky, P.C. today for a free consultation about your specific bankruptcy questions in Suffolk County, Nassau County, and Long Island.