Bankruptcy

In this current economic climate, people in New York, particular in the counties that make up Long Island, Nassau and Suffolk, are increasingly worried about credit card debt and house foreclosures. Inevitably, thoughts turn to Bankruptcy. It doesn't matter where you live in New York, the Bankruptcy laws are the same, as they are federal statues.

There are two most frequently used types of consumer bankruptcy actions are: the Chapter 7 and the Chapter 13. There is a Chapter 12 Bankruptcy , which is available to Farmers or Fishermen with regular pay.

In a Chapter 7 Bankruptcy the debtor's property, to the extent that it has value, is sold to pay off the debts. The creditors get paid pennies on the dollar. Once the property is sold and the creditors are paid, the debtor's debts are satisfied. He walks away with a clean slate. Not all his property is sold. The property must have value so that is may be sold. If is has no value, then in likelihood the trustee in bankruptcy will not sell the property.

In most Chapter 7 Bankruptcy cases, if the debtor is an individual, he or she receives a discharge in Bankruptcy that releases him or her from personal liability for certain dischargeable debts. The debtor normally receives a discharge just a few months after the petition is filed. Amendments to the Bankruptcy Code enacted in to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 require the application of a "means test" to determine whether individual consumer debtors qualify for relief under chapter 7. If such a debtor's income is in excess of certain thresholds, the debtor may not be eligible for chapter 7 relief.

The second type of bankruptcy is the Chapter 13 Bankruptcy. This bankruptcy does not involve the selling of the property to wipe out the debt. Rather, the debtor creates a plan, with the approval of the Bankruptcy Court, to pay back the creditors. Assets might be sold but do not need to be or required to be sold. The debtor's plan may last several years, but the goal is to pay off the debt and protect your property from being sold.

Chapter 13 is often preferable to chapter 7 because it enables the debtor to keep a valuable asset, such as a house, and because it allows the debtor to propose a "plan" to repay creditors over time – usually three to five years. Chapter 13 is also used by consumer debtors who do not qualify for chapter 7 relief under the means test. At a confirmation hearing, the court either approves or disapproves the debtor's repayment plan, depending on whether it meets the Bankruptcy Code's requirements for confirmation. Chapter 13 is very different from chapter 7 since the chapter 13 debtor usually remains in possession of the property of the estate and makes payments to creditors, through the trustee, based on the debtor's anticipated income over the life of the plan. Unlike chapter 7, the debtor does not receive an immediate discharge of debts. The debtor must complete the payments required under the plan before the discharge is received. The debtor is protected from lawsuits, garnishments, and other creditor actions while the plan is in effect. The discharge is also somewhat broader (i.e., more debts are eliminated) under chapter 13 than the discharge under chapter 7.

Under the 2005 amendments to the anyone filing for a Bankruptcy must to a nonprofit credit counselor within 180 days of the filing.