Filing Bankruptcy in New York: What to Know Before You File

Filing bankruptcy is a significant decision that can have lasting effects on your financial future. If you are considering filing bankruptcy in New York, there are several key factors to understand before taking the plunge. This guide will provide you with essential information regarding bankruptcy types, the filing process, and what to expect along the way.

Types of Bankruptcy in New York

In New York, individuals typically file for either Chapter 7 or Chapter 13 bankruptcy. Understanding the differences between these two chapters is crucial in determining the best option for your situation:

Chapter 7 Bankruptcy: This type, often referred to as "liquidation bankruptcy," allows for the discharge of most unsecured debts, such as credit card debts and medical bills. However, certain types of property may be subject to liquidation to pay creditors, although New York offers exemptions that can protect your assets.
Chapter 13 Bankruptcy: Known as "reorganization bankruptcy," Chapter 13 allows you to keep your property while creating a repayment plan to pay off your debts over three to five years. This option is suitable for those who have a regular income and can afford to make monthly payments toward their debts.

Eligibility Requirements

Eligibility for each type of bankruptcy varies. For Chapter 7, you must pass the means test, which compares your income to the median income for a household of your size in New York. If your income exceeds the median, you may be required to file under Chapter 13 instead.

Chapter 13 has its own requirements, including a regular income and unsecured debts not exceeding $394,725 and secured debts not exceeding $1,184,200 (these numbers are subject to annual adjustments).

The Filing Process

The bankruptcy filing process in New York involves several key steps:

Credit Counseling: Before filing, you must undergo credit counseling from an approved agency. This counseling must occur within 180 days prior to filing.
Gather Documentation: Collect financial documents, including income statements, tax returns, asset lists, and a list of all debts. Accurate documentation is essential for a successful filing.
Complete Bankruptcy Forms: Fill out the required bankruptcy forms. This includes information about your income, debts, assets, and expenses.
File Your Petition: Submit your completed forms to the appropriate bankruptcy court. In New York, the Eastern District and Southern District courts handle most bankruptcy cases.
Attend the Meeting of Creditors: After filing, you will be required to attend a meeting, known as the 341 meeting, where creditors can ask you questions about your financial situation.
Complete Required Financial Management Course: After your bankruptcy case is filed, you must also complete a financial management course prior to receiving a discharge.

Potential Consequences of Bankruptcy

While bankruptcy can provide a fresh start, it is essential to understand the potential consequences:

Impact on Credit Report: Bankruptcy can stay on your credit report for up to 10 years (Chapter 7) or 7 years (Chapter 13), which may affect your ability to secure loans or credit in the future.
Loss of Property: Depending on your situation and the type of bankruptcy filed, you may risk losing some assets, particularly under Chapter 7.

Consulting a Bankruptcy Attorney

Given the complexities surrounding bankruptcy, consulting a qualified bankruptcy attorney in New York is advisable. An attorney can provide tailored guidance and help you navigate the legal requirements, maximizing your chances of a favorable outcome.

Conclusion

Filing bankruptcy in New York can be an effective way to regain control of your financial situation. By understanding your options, the filing process, and the possible repercussions, you can make informed decisions to secure your financial future. Remember, the journey to financial recovery begins with taking the right steps.