What Is Bankruptcy?

What is Bankruptcy?

Bankruptcy is a legal process through which people who cannot repay their debts may seek relief from some or all of their debts.

When should I consider filing for Bankruptcy?

You should consider filing bankruptcy if you are struggling with high debt, receiving calls from creditors or collection agencies, or facing foreclosure, garnishment of wages, or repossession of property.

Are there different types of Bankruptcies?

There are six different types of bankruptcy. Most individual debtors file under either Chapter 7 or Chapter 13. Chapter 7 bankruptcies (also known as “liquidation”) are used most often when the debtor has more bills than he or she can afford to pay. If the debtor owns certain types of valuable property, the property may be sold and the proceeds used to pay creditors. A Chapter 13 bankruptcy allows debtors to repay part or all of their debts over a period of up to 60 months (5 years).

Will I lose all my property if I file Chapter 7 Bankruptcy?

After filing a Chapter 7 Bankruptcy, all of your property will go into what is known as a “bankruptcy estate.” You don’t lose everything, however. You’re allowed to remove (“exempt”) property reasonably necessary to maintain a home and employment from the estate. These assets include some or all of the equity in your home, a car, most basic household furnishings, clothing, pension plans and retirement accounts

State exemption statutes list the property its residents can protect in bankruptcy. New York allows residents to choose either the state or federal exemptions.

How do I file Bankruptcy?

The filing of any type of bankruptcy petition requires that you prepare petition and schedules that list all of your assets and liabilities. You are also required to disclose your current income and monthly expenses. You must also answer numerous questions regarding your financial affairs – such as any transfers of your assets that you have made within two years before your bankruptcy. When these documents are completed, they are e-filed with the Bankruptcy Court.

You are required to provide all of your creditors with notice that you have filed bankruptcy. This form advises your creditors of certain things that they may and may not do during your bankruptcy case.

What is the cost to file a Bankruptcy?

Filing cost differs based upon the Chapter of Bankruptcy you chose to file. Currently, fees are $335 for a Chapter 7 and $310 for a Chapter 13. If the full filing fee cannot be paid at the time the petition is filed, Chapter 7 debtors may apply to pay the fee in installments or for a waiver of the fee.

Advantages to Chapter 7 Disadvantages to Chapter 7
Will take only 4-6 months Lose all property that is not exempt
Usually requires only one court trip Will affect ability to obtain credit in the future
Can file if below state median income Cannot get another Chapter 7 discharge for 8 years
Advantages to Chapter 13 Disadvantages to Chapter 13
Get to keep most or all of your property Complex with multiple court appearances
Pay off back taxes and reduce or negotiate interest from accruing on debt If payments to trustee are missed, case will be dismissed, no discharge and advantages lost
Can stop a house foreclosure (make up missed payments over 3 to 5 years and keep or attempt to sell the house) Must live under strict budget based on IRS standard for living expenses for 3-5 years buying only essential items. MOST people fail to complete the plan
Pay off most of debt and attain a fresh start at end of 3 to 5 years Not able to receive discharge if prior chapter 7 discharge within 4 years or prior chapter 13 discharge within 2 years