Law Office of Carol Ryder and Associates

BANKRUPTCY

The number one question most people have is "Can I keep my car?" The answer is: probably but it depends. For example, 95% of Chapter 7 filers use the federal exemption scale and generally, you are safe with a car worth under $15,000 in most cases. If it is worth more, then possibly the bankruptcy trustee could exact the difference between the exemption chosen and the car's value. However, remember, the Trustee incurs costs selling assets and the courts prefer debtors keep their automobiles to keep working and paying bills going forward.  


The next big question is: "Do I have to pay taxes on debts that were discharged by the lender?" The answer is yes for discharged debts over $600, and creditors are NOW sending out 1099cs, which are treated as income. * Thus, you MUST declare the written-off debt on your taxes. NOW, it is too late because NOW it is no longer a debt you can discharge in bankruptcy.  SO, if you currently have a lot of debts outstanding, it may be in your best interests to file for bankruptcy NOW, while you probably can discharge the creditors, BEFORE that debt is written off and THEN becomes income you must report on your taxes. 


*Creditors are required to file a form for debts over $600 that are discharged. As more and more offices automate, more creditors are catching on to the benefits of doing so to their bottom line.  SO, now that it is tax season, many people are receiving ugly surprises in the mail-1099cs from creditors. OR, their taxes are rejected by the IRS because they have not been filed properly-the IRS automatically electronically receives these, just like your W2s and many other items electronically filed with the IRS have to match your returns exactly


The professionals in our bankruptcy and foreclosure) group have decades of experience, and we have a terrific support staff of attorneys, paralegals and others to help get you the best results possible. We can show you that bankruptcy is not the awful experience people dread, and our associates do everything in their powers to make it go as smoothly and painlessly as possible for our clients IF they believe it is in the client's best interests to do so. It can also stave off an 11th hour foreclosure sale, providing a temporary respite while the client re-arranges his/her finances and other personal situations. Once a person is in foreclosure, her/his credit is damaged so the fear of what bankruptcy can do to one's credit is a moot point. However, by providing respite, the client can accumulate funds to, perhaps, rent something appropriate and, if the landlord has issues with the client's credit rating, he/she can always reassure the landlord by putting more money down, money saved over the years it takes for foreclosure proceedings from first missed payment (default) to foreclosure filing by the lender to auction.  With legal representation, that time is usually extended extensively.


We can help decide if Chapter 7 bankruptcy, Chapter 13 bankruptcy, and/or Chapter 11 bankruptcy, and/or even more options, may provide the best solution to your situation. There is much more to know and we look forward to providing such information as we build this website. However, just call and we can discuss YOUR situation, rather than generalities posted on websites...speak to a human being who understands your plight and works hard to assuage your fears.


Bankruptcy - Chapter 7 Bankruptcy and Chapter 13 Bankruptcy


 Chapter 7 and Chapter 13: basic information


Bankruptcy is designed to provide a fresh start for individuals experiencing severe financial distress. Where appropriate, it can be used to discharge most types of liabilities, including credit card and mortgage obligations. However, bankruptcy cannot be used to discharge all obligations. Some common non-dischargeable debts include domestic support obligations, tax arrears, criminal fines and most student loans.


Chapter 7 or Chapter 13 of the United States Bankruptcy Code are the two most common types of bankruptcies used by consumer (non-business) debtors. Depending on the chapter and other important factors, filing for bankruptcy can place a temporary "automatic stay" on the ability of creditors to pursue you and your assets. This limited period can be helpful in allowing you to maintain property such as your home, bank accounts and other personal items while addressing your duties to creditors. It is especially helpful in foreclosure cases, and even foreclosure cases that have advanced to the eve of the foreclosure auction can be aided with the immediate stay granted with the filing of the bankruptcy. 


A bankruptcy formally begins when you or your attorney file a petition for relief with the Federal Bankruptcy Court. On Long Island, in Nassau County or Suffolk County, Chapter 7 and 13 petitions are filed with the Bankruptcy Court located at either 271 Cadman Plaza East in Brooklyn, New York or 290 Federal Plaza in Central Islip, New York. Our office prefers filing in Central Islip since it is much easier for our clients, as well as our attorneys, to appear there.


At that point, a trustee will be appointed to your case. It is the trustee's duty to ensure that you qualify for bankruptcy and that the interests of your creditors are maintained. Approximately 30 days after filing, you will be required to appear at a meeting of creditors. At this meeting, the trustee will question you about your finances and the circumstances leading to your financial distress. Creditors listed in your petition have the right to attend this meeting and ask questions, but this seldom occurs. If the trustee is satisfied, the hearing will be closed and the bankruptcy can proceed. 


Differences Between a Chapter 7 bankruptcy and a Chapter 13 bankruptcy


Chapter 7 Bankruptcy


A Chapter 7 bankruptcy is commonly considered a "liquidation" scenario in which the value of a debtor's property is totaled and in most cases, theoretically reduced to a dollar amount. New York State laws and the Federal Bankruptcy Code provide different options for protecting most, if not all, of the equity in certain pieces of consumer property. Depending on the amount of equity possessed and the income level of the debtor's household, a successful Chapter 7 will result in the discharge of personal debt. In most cases, this includes credit card bills, medical expenses and other consumer liabilities. Thus, you probably can keep your car


However, secured debts, such as debts owed on homes and vehicles, must be repaid if you wish to keep that property. A Chapter 7 discharge is only available to individual debtors and not to partnerships or corporations. However, a Chapter 7 Bankruptcy filing can stop a foreclosure auction and give you time to work something out with the lender and/or litigate the foreclosure case. 


Chapter 13 


A Chapter 13 bankruptcy is known as a "reorganization" and enables individuals with regular, consistent income to develop a plan to repay all or part of their debts. This approach is often used by individuals seeking to become current on mortgage arrears or those who do not qualify for a Chapter 7 due to their income level. In a Chapter 13, debtors propose an installment plan to repay creditors over three to five years. Those with regular income below the state median amount for a household of a similar size and location will be placed on a three-year plan. During this time, the automatic stay prevents creditors from starting or continuing collection efforts. Any individual, even if self-employed or operating an unincorporated business, is eligible for Chapter 13 relief as long as the individual's unsecured debts are less than $360,475 and secured debts are less than $1,081,400. These amounts are adjusted periodically to reflect changes in the consumer price index. However, a Chapter 13 Bankruptcy filing can stop a foreclosure auction and give you time to work something out with the lender and/or litigate the foreclosure case. A corporation or partnership may not be a Chapter 13 debtor. 


Warning about doing it yourself-pitfall:

Although an individual is permitted to file his/her own bankruptcy, the act of filing and full disclosure of assets can be complicated. An unsuccessful filing will result in dismissal, which may prevent you from obtaining the full benefits of the Bankruptcy Code if you attempt to reapply. There are also waiting periods that must be observed if attempting to file consecutive bankruptcies. Seeking the help of a bankruptcy attorney can help you navigate the process and avoid costly mistakes.