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Suffolk Office:
222 Middle Country Road, Suite 206
Smithtown, NY 11787
Phone: (631) 265-0102

Nassau Office:
1225 Franklin Avenue, Suite 325
Garden City, NY 11530
Phone: (516) 559-7219

Manhattan Office:
5th Ave, Suite 1007
New York, NY 10017
Phone: (917) 464-3815

CHAPTER 7 BANKRUPTCY

Why you should contact us immediately:

It is important to consult an attorney if you are considering bankruptcy. This process can be a complex, confusing one. We can help alleviate the complexity by offering legal counsel to determine which chapter of bankruptcy your unique case qualifies for. If your wages are being garnished, if you are facing harassment by angry creditors, or if you are making little or no income and are in over your head with debt, Chapter 7 may be the answer. We also will make sure you have filed all the necessary forms to file your bankruptcy and will assist you with reaffirming secured debts. It is essential to seek help from a professional on your road back to financial stability.

Chapter 7 Overview:

Chapter 7 is the section of the U.S. Bankruptcy Code that provides “asset liquidation.” It is the fastest, most common type of personal bankruptcy. This is the sale of the debtors’ nonexempt property and the distribution of those proceeds to their creditors. In return, the debtor then receives a discharge, releasing the debtor from all dischargeable debts, and creditors are ordered to stop their harassment and attempts to collect the discharged debts.

While discharging does relieve a debtor of all obligations to pay that debt, not all debts can be discharged. These debts include certain taxes, alimony, child support, liens, student loans, debts occurring due to defrauding/misleading a creditor and debts not listed in the Chapter 7 bankruptcy petition.

Chapter 7 Process:

The process begins with a “means test” instituted by the U.S. Government in the Bankruptcy code in order to determine if you qualify for Chapter 7. If you do, before a petition can be filed, you must complete an approved Credit Counseling Course either on the internet, at home, or by phone. The next step is to file an official petition that consists of the schedules and statements of your financial affairs. This includes listing all assets, debts (even if they are non-dischargeable), creditors and their mailing addresses.

Once the petition is filed, an “automatic stay” is enacted, creating a legal barrier to collection actions from creditors. The case is then assigned to a Trustee appointed by the court who proceeds to administer the Chapter 7 bankruptcy case and conduct an examination pursuant to Section 341 of the bankruptcy code at the Meeting of Creditors. This examination serves two purposes:

  1. It allows the court to verify the validity of the claims you made concerning your financial affairs
  2. It allows the court to determine if you have any “non-exempt” assets, meaning assets which exceed the limitations allowed under state law that then can be liquidated to help repay a portion of the debt sought to be discharged.

Advantages to Filing Chapter 7:

  • -stops creditor harassment and debt collection efforts
  • -may “stay” foreclosure proceedings, putting the process on hold and thus giving you time to figure out an alternative to foreclosure
  • -if successfully completed, Chapter 7 discharges all eligible debt
  • -There is no maximum or minimum amount of debt that can be discharged
  • -Chapter 7 proceedings are relatively quick, lasting approximately 3 to 6 months to complete, meaning your debt can be discharged in a relatively short amount of time.
  • -You can learn from your mistakes with credit and debt and begin a new chapter of financial stability

    • Disadvantages to Filing Chapter 7:

  • -Your non-exempt property and assets may be at risk of being surrendered to the bankruptcy court and liquidated to pay off creditors.
  • -Not all debt is eligible for discharge. Some non-eligible debts include spousal support, child support, mortgage liens, and certain student loans and taxes.
  • -Chapter 7 can only be filed once every 6 years.
  • -If you have co-signers on your home or on other assets they may end up paying for your loans (unless they seek similar protection).
  • - Chapter 7 bankruptcy may have negative affects on your credit rating and thus make it difficult to get loans in the immediate future.
  • -Discharge is only available to individual debtors, not to partnerships or corporations.

Eligibility for Chapter 7 Bankruptcy:

Two criteria determine eligibility to file for Chapter 7 as a Long Island resident:

  1. Assets: Under New York State law, an individual is allowed to protect certain basic assets from their creditors, known as “exempt property.” As long as the value of your assets to do not exceed the statutory limits, you have met these criteria.
  2. Income/Means Test: The means test determines whether your income is low enough for you to file for Chapter 7. The first step is to determine your average monthly income. If your total income is below the median income for your state for the 6 month period prior to filing, then you qualifiy. If your income is above this median you must then determine if you have the ability to repay a portion of your debt. This question requires you to complete an analysis of your income and expenses.

*If you cannot afford to repay at least $185.00/month you are not eligible to file a petition for protection under Chapter 7 bankruptcy and rather should file under Chapter 13 where you can repay your debts throughout a 5 year period.

Q and A

Q: I owe a lot of money to the electric company; will they shut off my power if I file a bankruptcy?
A: Like any other company or service, your electric company may not discriminate against you because you have filed a bankruptcy case. Thus, they cannot stop providing you with power. However, they may request a deposit, for security purposes, in order to continue services. The deposit is usually equal to approximately twice your average monthly bill. If you are not in debt to your electric company then this deposit may be waived. Therefore, unless you fail to make post-filing payments, the company will not shut off your power.

Q: How do I rebuild Credit?
A: Credit is the ability to borrow money. Many people considering bankruptcy fear that that if they take this road, they will never or it will be a number of years before they can get credit again. This is simply false. Many banks now offer “secured” credit cards where a debtor puts up a certain amount of money (as little as $200) in an account at the bank to guarantee payment. Typically this credit limit is equal to the security given and is increased as the debtor provides his or her ability to pay the debt. In terms of mortgages, you should be able to finance a home within two years after receiving a bankruptcy discharge, as long as you can provide a minimum down payment and show the ability to make the monthly mortgage payment. While the fact that you filed bankruptcy does remain on your credit report for 10 years afterwards, it becomes less significant as time goes on and most importantly, does not mean you cannot get credit.

Ronald S. Cook is a Bankruptcy Attorney that proudly serves New York City, Manhattan, Nassau County and Suffolk County on Long Island, New York, NY. We offer reasonable rates and payment plans. CALL US TODAY AT 631-265-0102 or EMAIL US FOR YOUR FREE BANKRUPTCY REVIEW.