Q: What is the difference between a Chapter 7 bankruptcy and a Chapter 13 bankruptcy?
A: The two most common types of consumer bankruptcy are Chapter 7 bankruptcy and Chapter 13 bankruptcy. Approximately 80% of bankruptcies that are filed are Chapter 7 bankruptcies. A Chapter 7 bankruptcy is commonly called a "liquidation bankruptcy". In a Chapter 7 bankruptcy, the debtor is allowed to keep exempt assets. If there are any non exempt assets, those assets are liquidated and the net proceeds are distributed to creditors. For example, if a debtor owns a snowmobile (a non exempt asset), the snowmobile would be sold and the net proceeds distributed to creditors. In approximately 95% of cases, there are no non exempt assets and therefore no distributions made to creditors. Instead, in most cases, all of the debtor's assets are exempt and no distributions are made to creditors.
A Chapter 13 bankruptcy is commonly known as a "payment plan bankruptcy". In a Chapter 13 bankruptcy, no assets are liquidated. Instead, the debtor makes regular payments according to a court approved plan and those payments are distributed to creditors. In general, a Chapter 13 bankruptcy is filed only if absolutely necessary. A Chapter 13 bankruptcy is generally filed under three circumstances, namely (A) where assets would be liquidated in a Chapter 7 bankruptcy, but the debtor does not want to lose the asset, (B) the debtor's home, rental property or vehicle is being foreclosed/repossessed and the debtor needs to stop that process and bring defaulted payments current, or (C) the debtor has excess disposable income. (Back to Top)
Q: How much do you charge to handle the bankruptcy?
A: The fees and costs depend upon the type of bankruptcy that is being filed. We charge $1,500 for a Chapter 7 bankruptcy, which consists of $299 of court costs and $1,201 of legal fees. That basic flat fee includes all legal fees for preparing and filing the bankruptcy, and representing the debtor at the meeting of creditors.
Our fee for a Chapter 13 bankruptcy is $2,200, which includes the court filing fee of $274 and legal fees of $1,926. The basic flat fee includes all legal services for preparing and filing the bankruptcy petition and representing the debtor at the meeting of creditors and confirmation hearing.
In approximately 95% of cases, the basic flat fees set forth above are the only fees that will be charged. However, in approximately 5 . of cases, there may be extraordinary circumstances for which additional fees will be charged on a discounted hourly basis. Those extraordinary circumstances include, but are not limited to, the following: adversary proceedings, objections to claims, objections to attorney fee claims by prior attorneys, negotiations with secured creditors in case of post petition default, objections to creditor violations of the automatic stay, creditor motions for relief from the automatic stay, trustee motions to dismiss, filing petition amendments and/or plan amendments, creditor objections to discharge, trustee objections to discharge, trustee means test abuse proceedings, 522(f) motions to vacate judicial liens, 506 motions to vacate wholly unsecured liens, pond motions to vacate wholly unsecured mortgages and appeals.
The basic flat fees set forth above apply to an individual debtor or joint debtors (i.e. a husband and wife). There are no extra costs or fees for joint debtors.
The foregoing fees do not include costs associated with obtaining mandatory counseling, such as the pre-filing debt counseling and/or the pre discharge financial management counseling.
(Back to Top)
Q: What property can I keep if I file bankruptcy?
A: The property that a debtor can keep in bankruptcy is commonly known as "exempt property". In New York, exempt property is determined by state law. Common exemptions include, but are not limited to, the following:
Principal Residence ____________________ $ 50,000
Cash/Savings Bonds/Tax Refunds _________2,500
Earnings within 60 days before filing ______90%
Household furnishings, appliances,
electronics & clothing __________________5,000
Residential or utility security deposits _____100%
Qualified retirement accounts ____________100%
Tools used in trade/business _____________600
It is important to realize that exemptions apply to equity (i.e. the value of an asset over and above a secured debt). For example, if a debtor owns his principal residence, which is valued at $150,000, and has a $100,000 mortgage, there is only $50,000 in equity, which is entirely exempt. If that same debtor owns a principal residence worth $150,000 and the mortgage is only $50,000, then the equity would be $100,000, of which $50,000 would be exempt and $50,000 would be non exempt.
(Back to Top)
Q: What type of bankruptcy can help me save my home if I am in default in my mortgage, or my mortgage is being foreclosed?
A: The only type of consumer bankruptcy that permits a debtor to save a home from foreclosure is a Chapter 13 bankruptcy. Essentially, a Chapter 13 bankruptcy reinstates a defaulted mortgage. During the pendency of the bankruptcy, the debtor makes all regular post¬ filing mortgage payments directly to the lender. The defaulted payments (i.e. the payments due before the bankruptcy filing) are then paid through the Chapter 13 bankruptcy, according to a court approved plan.
At the conclusion of the Chapter 13 bankruptcy, the pre filing defaulted mortgage payments will have been paid through the Chapter 13 plan and the debtor should otherwise be current on post filing mortgage payments. Through the Chapter 13 plan, the default is cured and at the end of the plan, the mortgage is no longer in default.
(Back to Top)
Q: Are there any types of debts that are NOT dischargeable in bankruptcy?
A: Most types of debts are dischargeable in bankruptcy, such as credit card bills, medical bills and personal loans. However, there are some debts that are not dischargeable in bankruptcy. Non dischargeable debts include, but are not limited to, the following:
(Back to Top)
- Spousal maintenance obligations
- Child support obligations
- Sales tax obligations
- Withholding tax obligations
- Other trust fund tax obligations
- Court fines
- Court ordered restitution
- Student loans
- Other educational expenses such as tuition
Q: I recently moved from NY. Can I still file for bankruptcy in NY State?
A: Yes, if you have not been out of NY more than 90 days. However, like most things in the Bankruptcy Code, the answer is not quite as simple as it seems.
The state in which you must file is controlled by 11 U.S.C. § 1408. That statute specifies that you can file only in the state in which you have had your domicile, residence, principal assets or principal place of business for the majority of the last 180 days.
In most consumer bankruptcy cases, the location of filing (we lawyer types call this venue) is based on residence. As a result, you could file in NY until you have resided in the other state for more than 90 days.
But wait! It can get more complicated if you moved to yet another state before you have been out of NY for 90 days. NY might be the state you would have to file even in when you have been out of NY for six months! Remember, you can only file in the state where you have resided longest in the last 180 days.
One final note: If you file in NY you will have to return to NY State for court proceedings.
(Back to Top)
Q: How long do I have to reside in New York to file here?
A: In order to file bankruptcy in New York, a debtor is required to have resided in New York for 91 out of 180 days immediately preceding the filing of the bankruptcy. As such, once you have resided in New York for at least 91 days, you can file bankruptcy in New York.
Although a debtor may be able to file bankruptcy in New York, New York's exemption statutes may still not apply. In order for New York exemption statutes to apply, the debtor is required to have resided in New York for two consecutive years. If a debtor has not resided in New York for two years, another set of exemption statutes (either state or federal) may apply. (Back to Top)
Q: Does bankruptcy have to be filed in the county in which you reside?
A: Bankruptcy cases generally have to be filed in the court having jurisdiction over cases in the county in which you reside, but there are exceptions. If most of your assets are in another location, or your principal place of business is in another location, you may file in the court in that location.
(Back to Top)
Q: Do bankruptcy filings get posted in the local newspapers?
A: The simple answer is yes. There is no requirement under the Bankruptcy Code that bankruptcy filings be published. However, bankruptcy filings, like most other government filings, are public information. As a "public service", local newspapers often publish general information regarding bankruptcy filings. In the Buffalo area, the Buffalo News regularly publishes information relating to bankruptcy filings. (Back to Top)
Q: When you file Chapter 13, can you move out of state, and still just continue to mail your payments to the trustee as long as you notify them of changes?
A: Yes, once you have filed in the correct state (see the jurisdictional requirements above), you may move wherever you wish, assuming you return for your §341 meeting and have a local attorney who can handle whatever else comes up. Naturally, you will need to be sure to keep your attorney, the trustee and the court advised of your address. (Back to Top)
Q: Can you file Chapter 13 after you have filed Chapter 7?
A: Yes, you can file Chapter 13 even right after a Chapter 7. That is what those of us in bankruptcy practice would call a "Chapter 20." There is no real Chapter 20 bankruptcy. (Back to Top)
Q: Can a judgment be discharged?
A: A judgment can be discharged so long as the underlying debt is a dischargeable debt. For example, a judgment based upon a credit card obligation is dischargeable since the underlying credit card is dischargeable. However, a judgment for child support obligations is not dischargeable because the underlying obligation of child support is not dischargeable.
There is an important caveat when a debtor owns real estate. when a judgment is entered, that judgment may stand as a lien against any real property owned by the debtor. The bankruptcy filing alone will discharge the debtor's obligation to pay the judgment, but will not eliminate the judgment lien.
However, during the pendency of the bankruptcy, a motion can be brought in the Bankruptcy Court to eliminate the judgment lien as well. If the debtor owns a principal residence with only exempt equity, the judgment lien can be removed by motion so long as there is no equity in the property in excess of any mortgages against the property and the debtor's homestead exemption ($50,000). For example, if the debtor owns a home valued at $150,000 and has a mortgage of $100,000, judgment liens can be removed since there is no equity in the property after deducting the balance due on the mortgages and the debtor's homestead exemption. However, if in the foregoing example, the mortgage was only $50,000, the judgment lien cannot be removed since there would still be equity in the property over and above the remaining balance on the mortgage and the debtor's homestead exemption.
Judgment liens can also be released if there is no equity in the real property, and that goes for any property. As such, if the property is fully secured by a mortgage, judgment liens can be released. For example, if a debtor owns property valued at $100,000 and owes a mortgage of $120,000, the judgment liens can be released since the judgment lien would be wholly unsecured. (Back to Top)
Q: Can student loans be discharged?
A: Student loans and most education related debts, such as tuition debts, are generally not dischargeable.
Student loans and other educational debts can be discharged if the debtor obtains a "hardship discharge". However, a hardship discharge is rarely obtained. In order to obtain a hardship discharge, the debtor is required to bring an adversary proceeding to have the court determine whether there would be an extreme hardship upon the debtor if the student loan and/or education expense were not discharged. In order to make that showing, the debtor is required to show that the debtor is not currently able to make any payments whatsoever on the education related obligation. Furthermore, the debtor must also prove that the debtor will likely never be in a position to pay anything towards the education related obligation.
To say the least, making the necessary showing to receive a "hardship discharge" is extraordinarily difficult. As such, the general rule of thumb is that student loans and educational debts are nondischargeable. (Back to Top)
Q: What are the requirements to get a "hardship discharge" of an education loan ?
A: Since the bankruptcy code does not specify the exact requirements for a hardship discharge of an education loan, the courts may apply slightly different standards. Most courts, including those in NY apply a three part test to discharge educational loans:
* Income test If you are forced to pay the education loans you will not be able to maintain a "minimal" standard of living for yourself and your dependents.
* Duration test. The financial circumstances which meet the income test are likely to continue for a substantial portion of the repayment period.
* Good faith test. You must have made a good faith attempt to repay the loans.
(Back to Top)
Q: I thought that student loans WERE dischargeable, once they were over 5 years old, but from what event does the five years start? From the original inception date of the loan? From the date those monies were applied (like at the beginning of a semester)? From the date of graduation?
A: The date that you were looking for was the date that the first payment on the loan was due. Depending upon the kind and conditions of the loan the first payment would often be 6 months after the end of school attendance.
Unfortunately for those seeking to discharge educational loans, this date no longer has any relevance, since educational loans can no longer be discharged in bankruptcy regardless of how old they are. The only basis for discharge is that repayment of the loan will impose an undue hardship upon the debtor and the debtor's dependents. (Back to Top)
Q: If I am discharged from a joint debt, what happens to the co signor?
A: A discharge of a debtor in bankruptcy has no effect upon the liability of a co signor or guarantor. As such, the co signor/guarantor is still liable for the debt. (Back to Top)
Q: Can I protect a co signor?
A: In a Chapter 7 bankruptcy, there is no method for protecting a co signor or guarantor. The automatic stay imposed in a Chapter 7 bankruptcy does not prevent the creditor from pursuing the co signor or guarantor. Furthermore, the Chapter 7 discharge does not prevent the creditor from pursuing the co signor/guarantor. In a Chapter 13 bankruptcy, the automatic stay is broader. The automatic stay prevents a creditor from pursuing a co signor/guarantor during the pendency of the bankruptcy. However, if the Chapter 13 plan does not call for the debt to be paid 100%, the creditor can bring a motion to obtain "relief" from the automatic stay to pursue the co signor/guarantor.
Furthermore, in a Chapter 13 bankruptcy, the debtor cannot treat creditors differently. All creditors must be paid the same percentage. Paying one creditor a higher percentage because there is a cosignor/guarantor is referred to as a "preference" and is prohibited. For example, if general unsecured creditors are to be paid 10% of their claims, all general unsecured creditors must be paid 10%. (Back to Top)
Q: Do I have to list all of my creditors?
A: In filing a bankruptcy, debtors are required to list all of their assets and all of their debts. As such, a debtor is required to list all persons or entities to whom the debtor owes money. That includes, but is not limited to, mortgages, car loans, other secured debts, tax obligations, credit card debts, past due utility bills, medical bills, personal loans, student loans and even debts owed to family or friends. In short, all debts and all creditors must be listed in the bankruptcy.
(Back to Top)
Q: If my bank card or other account has been paid off, do I have to list it?
A: If you have an account with no balance (such as a Visa or MasterCard which has been paid off), you do not owe that company any money and it does not have to be listed. The creditor may still allow you to use the account after the bankruptcy. However some creditors (American Express, for example) may check bankruptcy filings and may cancel the card even if they are not listed.
(Back to Top)
Q: Can I pay off a creditor to avoid listing it?
A: The short answer is that it depends upon the circumstances. If a debt is paid off before the filing of the bankruptcy, the debt will not be included in the list of creditors. However, depending upon the identity of the creditor and the timing of the payment, the payoff of the debt may have to be listed elsewhere in the bankruptcy petition.
If payments are made to any creditor in the 90 days before the bankruptcy is filed and those payments within those 90 days are more than $600 cumulatively, those payments must be detailed in the petition. (Back to Top)