How to File for Bankruptcy in New York

No state has weathered the economic storm without its citizens facing financial troubles and even bankruptcy.  However, few have had as many bankruptcy filings each year as New York, with over 50,000 filings in 2009 alone.  While that is not the highest per capita rate, it is a considerable number of residents finding no other way out of debilitating debt.  For those considering this serious step, knowing all the alternatives and having solid legal advice can help them determine the best options for their situation and needs.

Finding a Bankruptcy Attorney

It is important, however, to find a qualified bankruptcy attorney with experience in this field and a solid record of successful petitions.  That takes a bit of research on the part of the debtor, but it is worth it to find someone who will provide advice paving the way to a brighter financial future.  The debtor can check state bar associations for recommendations, ask their friends and neighbours for recommendations, and search the web for suggestions from trusted legal sites.  Be sure to obtain a list of services and fees in writing and compare it with those of other candidates.  Then conduct personal interviews to find the appropriate legal representative.

Bankruptcy Options

It is vital to file the appropriate type of bankruptcy, as well.  There are six types in all, but the two most commonly chosen by individuals and families are:

• Chapter 7, which generally results in most unsecured debt being discharged, or erased.  The downside is that some property may also be liquidated to satisfy those creditors before the discharge.  For those who can file a “no asset” bankruptcy, it may require no property liquidation at all, as what they have falls under property exemption statutes.
• Chapter 13, which is most often chosen by those with enough disposable monthly income to make regular, if smaller, payments under a more appropriate payment plan.  The goal is to pay off all or most debt in three to five years.  That which is not paid in full at the end of the repayment plan may be discharged, as well.  The debtor’s property is not at risk of liquidation or repossession unless they default on the new payment plan.

New York Exemptions

In order to protect the property a filer requires for survival and moving forward, both federal and state exemptions exist preventing liquidation.  New York state does not permit filers to use federal exemptions, but the state exemptions, which cannot exceed $5,000 for personal property and tools of the trade, include:

Filing the Petition

While filing for bankruptcy is a debt relief process, the reforms of 2005 have included required steps in the filing process to help the debtor use credit more wisely in the future:

• The debtor undergoes credit counselling before filing for bankruptcy
• Once they have filed, a court-appointed bankruptcy trustee takes charge of the estate
• The trustee holds a 341 meeting, named after the code section in which it is found, in which the debtor answers questions about their assets, property, and obligations under oath, with creditors invited but not required to attend
• The trustee determines what property, if any, needs to be liquidated for Chapter 7 filers and if the repayment plan of the Chapter 13 filer is viable
• The Chapter 13 filer appears before the judge to have their repayment plan approved
• The Chapter 13 filer fulfills their repayment plan, at the end of which, any eligible debts are discharged
• The filer attends required debt education courses before any debts can be discharged
• For the Chapter 7 filer, eligible debts are discharged and they are free to start fresh
  • However, any secured debt must either be repaid or abandoned to the lien holder