Are you faced with the difficult reality that you or your business will need to file bankruptcy? The bankruptcy process can be extremely difficult to understand and figuring out which type you qualify for is not easy. Here is a simplified guide to the types of bankruptcies and the guidelines for filing in New York State.
Each state has a different process for filing for bankruptcy however; the definitions of each type of bankruptcy are the same throughout the United States, as per the Federal Bankruptcy Act. First and foremost, is it necessary to establish the two parties involved when a bankruptcy claim is filed. The party that is filing for bankruptcy is the “debtor” and the party that the debtor owns money to is referred to as the “creditor”.
No matter what state you live in there are two types of debt: secured and unsecured. Unsecured debts are often less multifaceted than secured debts. With an unsecured debt a creditor does not hold any collateral to keep if you do not pay back you debt. An example of unsecured debt is credit card or store card debt. Debt is considered to be secured when creditors possess time type of collateral. For example, a car loan is considered to be secured debt because the lender can take your vehicle if you fail to pay your monthly payment for an extended period of time.
The United States Code details four different kinds of bankruptcy. They are Chapter 7, Chapter 11, Chapter 12 and Chapter 13. Here are small summaries of each:
Chapter 7 bankruptcy can be filed by individuals, partnerships or corporations when they are unable to pay off owed debt. In order to repay the debt a trustee will sell all of the possible assets a debtor owns that can be sold under New York State law. Basically, all of the debtor’s applicable assets are liquidated. The State of New York has exclusions to what can be legally liquidated. These exclusions include clothing, furniture, a wedding ring, domestic animals worth up to $450, and school books.
This type of bankruptcy is most often filed by businesses. It is extremely complex because business owners essentially “reorganize” their debt. A debtor can continue to maintain his or her business and continue to run all operations. This also means that they can make profit and hold on to their earnings. Unlike in Chapter 7, debtors are not liquidated. Instead, a debtor creates a plan within 120 days of filing for Chapter 11 that details how they will repay their debts.
Chapter 12 bankruptcy was designed for farms and fishermen with seasonal income. It is structured similarly to Chapter 11, but is less intricate and has fewer requirements.
In Chapter 13, debtors do not have to liquidate their assets. Just like in Chapter 11, debtors are asked to design a plan to reimburse creditors within three to five years. It is similar to Chapter 13 but is designed for individuals rather than businesses.
Under New York State law, when a Chapter 7 is file, a fraction of a debtor’s assets can be kept. These exemptions are extended to certain pieces of real estate and one vehicle valuing up to $2,400 and a percentage of wages among other household items (see the description of Chapter 7 above for more examples).
In the State of New York you are not responsible for your spouse’s debts unless you have cosigned any type of agreement with your spouse (i.e.: a lease agreement). If you and your spouse find that you need to declare bankruptcy in the State of New York, only one spouse will need to file. New York is not a community property state.
Bankruptcy is very convoluted and it is natural to have many questions concerning your individual case. NY Law Professionals can help you find the best bankruptcy attorney in New York for your individualized needs. You can search our online database of bankruptcy law professionals in your area 27/7. You can also read reviews and visit the firm’s website all from one site.
Do not delay your search for the best bankruptcy attorneys in your area. Log on to the NY Law Professionals website today!
Before you choose your bankruptcy attorney, be sure that you Know the types of bankruptcies and the laws of New York State.. This article, A Guide to Understand Bankruptcy in New York has free reprint rights.