New York Bankruptcy Laws

New York, the empire state, has been justly regarded as the emblem of American success throughout our nation’s unprecedented expansion this past century, and, just as our state enjoyed the fruits of our recent economic boom, we’ve also been forced to suffer the worst effects of this current recession. The unemployment hike and real estate value free fall has been endlessly discussed by the New York newspapers, of course, but – much as foreclosures and sudden bouts of joblessness tug the media’s heart strings – lingering debt problems and excessive credit card balances are far more of a concern to the average New Yorker this very moment. Consumers that ran up their credit accounts during the salad years are now recognizing the very real dangers of unchecked debt loads, and, as generations of New Yorkers (including some of our greatest politicians, artists, and industrial tycoons) have been forced to do before them, the pro active household instinctually opts for bankruptcy protection. Even though society has tended of late to avoid the ordeal for fear of damaging their credit rating, most New York consumers still took some sort of subconscious solace in the notion that bankruptcy – to be specific, the Chapter 7 debt elimination sort of bankruptcy which wipes out unsecured commercial debts – would always be available in their time of need. With personal credit balances at an all time high for New York residents and the economic forecasts so very dim, our citizenry has lined up at their county clerks to declare bankruptcy in record numbers, but a sorrowfully large percentage of New Yorkers file their petitions only to find that bankruptcy protection as they formerly understood the service doesn’t entirely exist any longer.

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 limited the eligibility of borrowers seeking to enter the Chapter 7 debt liquidation program to only those legal residents of New York who could prove that they made less than the average income for their state no matter the extent of their debt holdings nor the reason they were forced to borrow the sums. There’s another qualifying test which New Yorkers who’ve earned more than the median level could attempt to pass by demonstrating a monthly budget that would effectively disallow the household from paying more than one hundred dollars a month to their creditors. However, since the expenses are based not upon the reality of the family’s existence but instead upon fantastically low figures previously calculated by the Internal Revenue Service that supposedly averaged the New York household’s budget (as if there was anything like an average New York household), virtually no borrowers could still gain entrance to the program. Should the consumers actually manage to discharge their debts through bankruptcy, they’ll still have to weather the potential search and seizure of their household goods for resale to satisfy the lenders whose debts were erased. The state house in Albany has somewhat eased this hazard with exemptions for New York residents that dramatically out reach the feeble guidelines newly written within the United States Bankruptcy Code. Still and all, for even the New York households that imagine they haven’t anything in the way of assets, the wages of modern bankruptcy could prove more than a little perilous to the family’s possessions.

For those New Yorkers intending to declare Chapter 7 bankruptcy protection that also own property (this effectively precludes Manhattan consumers, we realize), their primary residences should be let alone following the rules of the New York state homestead exemption. Traditional stick built dwellings, condominiums, co-op apartments, or even mobile trailers on owned land should be exempted so long as there’s not more than fifty thousand dollars in equity for a single home owner or one hundred thousand dollars for a married couple (though, keep in mind, the borrowers shall still have to maintain their mortgage payments or risk foreclosure after the bankruptcy has been discharged). Motor vehicles with an assessed value below twenty four hundred dollars after the deduction of the automobile loan would be rendered exempt, and tools of the trade – vocational clothing, farm implements, and certain types of industrial machinery excepted – up to a replacement value of six hundred dollars are also vouchsafed by the New York legislature. A sampling of household furnishings (television, radio, fridge, sewing machine, stove, and the furniture and kitchenware deemed necessary by the New York courts), burial plots less than a quarter of an acre in area, wedding rings, and family photos and portraits will all be protected alongside most retirement plans and public assistance benefits. However, jewelry without matrimonial imprimatur – including watches that had been handed down for generations – would only be protected if the item’s worth was appraised to be less than thirty five dollars, and books – other than educational texts or the family bible – couldn’t be estimated at a cost of more than fifty dollars. In total, the replacement value of the property owned by the New York household considering bankruptcy must be less than five thousand dollars, and, for even the poorest residents, that generally means one object or another must be sacrificed to the courts.

Furthermore, the rules involving erroneously handled documents have also been altered to the detriment of the New York debtor. Borrowers absolutely must keep in mind that every single case that comes to the attention of the New York trustee during the 341 meeting could be reflexively dismissed for relatively miniscule deviations (often borne from laziness or genuine misunderstandings) later discovered within the original documents presented to the clerk of their New York county. Following this logic, all citizens of New York interested in pursuing bankruptcy declaration should have their tax records and proof of income – especially the most recent pay stubs – at the ready in the unlikely event that the New York trustee demands further documentation of the borrowers’ earning history. Here again, attorneys who have had significant experience with the ins and outs of Chapter 7 bankruptcy petitions should be considered invaluable to New York borrowers as they attempt to wend their way through the regulatory labyrinth, and, should the worst situation (an outright dismissal of the bankruptcy claim based upon some niggling discrepancy from the paperwork) come to pass, the New York debtor’s legal representation may even be able to reverse the court’s original ruling. Actually, to be fair, the dismissal of bankruptcy protection prior to legal discharge of the New York borrower’s unsecured financial obligations would not be the worst case scenario. Yet another land mine buried within the BAPCPA legislation exponentially increases the odds of criminal prosecution for fraud should New York consumers mishandle their paperwork. Such threats would be minimized if not completely evaporated through the employment of skilled New York bankruptcy lawyers who’d oversee the borrowers’ handling of the initial Chapter 7 bankruptcy petition, creditor matrix, and all of the subsequent documentation, but this assistance comes at an ever more dear cost as increasing numbers of New Yorkers decide that they have no other option besides bankruptcy protection.

Chapter 7 bankruptcy does remain, after all, the most effective response to the problem of uncontrolled debts for those New York borrowers sufficiently impoverished that they manage to qualify for the program. Just about three months after the chapter 7 declaration passes through the New York county clerk’s office, all of the unsecured debts deemed relevant under the current United States Bankruptcy Code – this would ignore income and property taxes, unpaid familial support, financial penalties resulting from criminal action, and, most regrettably, even those student loans that were privately held – should be formally discharged and the newly bankrupt New Yorkers should never be bothered by former creditors again. Under extraordinary circumstances, the discharge may yet be revoked (this should really only ever be an issue if the New York borrower takes pride in demonstrating a lack of cooperation with court officials), but, ninety nine times out of a hundred, New Yorker households could consider the affected debts liquidated from the moment that they receive their discharge notice in the mail. Nevertheless, New York consumers should still keep a copy of the discharge paperwork on hand just in case one of the affected lenders or one of the three main credit bureaus (or, more likely, one of the predatory collection agencies that bought the loan for pennies on the dollar before discharge in hopes that they would be able to somehow still intimidate the New York consumer toward paying back a loan that’s no longer legally viable) refuses to automatically change their records following the notification sent out to each lender by the New York bankruptcy court. Of course, the notifications will only arrive at the correct address if the individual borrower properly filled out every last line of their creditor matrix. If the New York consumers filing for bankruptcy happened to simply forget about one element of the documentation, they could genuinely be charged with a criminal offense depending upon the mindset of the trustee of record, and, however unfortunate, ordinary borrowers simply aren’t equipped to tackle much of the necessary paperwork without legal assistance.

Driven to the depths of despair by their failure to pay back the loans that they had willingly taken out during happier times, many New Yorkers now do everything that they can to avoid bankruptcy protection due to fears of property forfeiture, attorney costs, and the lasting damage to credit ratings and FICO scores. Still, the consumers should not give up hope nor rush recklessly from the frying pan of unsecured credit balances and escalating interest into the fire of truly damaging debt management solutions. Chapter 7 bankruptcy, for those New York borrowers able to successfully exploit the few protections yet allowed by the government, may not necessarily be the best maneuver for the household, but quite a number of innovative and exciting strategies have been put in practice around our state and, given the digital revolution and (however floundering) new economy, around the internet. A number of borrowers throughout New York have been more than pleased with the result of debt settlement negotiation specialists whom they never actually met in person throughout the course of their work together. The settlement negotiation solution exploits the lenders’ continuing tensions about Chapter 7 debt elimination bankruptcy protection – alongside assurances that their clients would fully pay back the remainder of their loans in under sixty months – to garner significant reductions of the original balances and propel enduring household budget stability. Professional debt settlement assistance isn’t free, not every New York consumer shall be approved for the negotiation program, but, with balance cuts approaching sixty five percent through negotiation and Chapter 7 bankruptcy protection ever more foreboding, it’s easy to see why so many New York households struggling with unsecured debts have begun to search out more information about the settlement solution.

The decision to reach out for help with your debt is not one that's easy to make. You were raised to "do the right thing", but now it’s nearly unbearable. You struggle along while your creditors are turning up the heat. And now you’re at the point where the late fees, penalties and interest expense make it impossible to keep your head above water.

Ask yourself this. If you could eliminate your debt without permanently damaging your credit, why wouldn't you?

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