Filing for Bankruptcy in New York

2007-10-15 12:53:47

( Legal )



What is Bankruptcy?

Bankruptcy is a legal process where you officially declare to a court of law that you are unable to pay back all your debt obligations, due to loss of your income source or other reasons. The court will then arbitrate between you and your creditors regarding the method in which you will repay part or all of your debts.

As an individual, you have a choice to file for bankruptcy under Chapter 7, 11 or 13. If you file under Chapter 7 bankruptcy, you are declaring that you can no longer pay any of your debts. Except for a few exempt properties, all your assets will then be foreclosed and liquidated to pay back your creditors. If you are a sole proprietor of a business, you may file for reorganization of your business and restructuring of your loans under Chapter 11. If you're earning income as an employee and still have a steady source of income despite your debt problems, you may want to consider filing under Chapter 13.

Regardless of its type, your bankruptcy filing will stay on your credit record for at lease ten years. It will also deter you from being able to acquire additional credit cards or loans. Even if you do, you will be considered only for subprime lending rates and terms.

Policies and Procedures on Filing for Bankruptcy in New York

You file for bankruptcy in New York if you are a resident or business owner in that state. Under New York State bankruptcy laws, individuals may file only for either Chapter 7 or 13.

Except for some exemptions and documentary requirements, New York State bankruptcy laws are highly similar to that of other states. Laws about filing for bankruptcy in New York have incorporated some recent changes in 2005, specifically that you are required to undergo credit counseling at least six months prior to filing for bankruptcy, and that you will need to attend seminars on financial management after you have filed.

Even if you have filed for Chapter 7 bankruptcy, the court will still conduct a means test, where it will determine the extent of your ability to pay. Factors considered are your total outstanding balances on loans, bills, taxes, and alimony payments. Your income level is compared to the standard median income, which varies by state. You are eligible for Chapter 7 bankruptcy only if your income falls below the New York median level. As such, you will have to file under Chapter 13 bankruptcy instead.

If you file for Chapter 13 bankruptcy, you need to present a repayment proposal and your total debt must be within a specified ceiling. If your proposal is accepted by the creditors, you keep all your assets but must pay accordingly. Once you have complied with the repayment plan, you will be eligible for a debt discharge, and you're well on your way to rebuilding your credit record.


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