Bankruptcy offers a fresh start by discharging a wide variety of debts and can stop creditor harassment and wage garnishment. It may also provide a means to resolve mortgage or lease default or to stop a foreclosure sale.
As Westchester bankruptcy lawyers located near the White Plains Bankruptcy Court, we counsel individuals and businesses in the areas of bankruptcy and foreclosure. Many factors affect such an important decisions, so it is crucial to seek experienced lawyers to evaluate individual options. Our many years of experience both in bankruptcy courts and state and federal courts outside of bankruptcy give our clients a solid understanding of their options and the confidence to make the right decision. It is vital that each client is comfortable once a decision regarding a bankruptcy is made.
Bankruptcy law is comprised of Constitutional Law, U.S. Law, state law, federal rules of procedure, federal rules of bankruptcy procedure, local rules, judges’ rules and case law at the above-mentioned fora. To say it is a complicated, interweaving body of law is an understatement. While individuals do sometimes file pro se and are sometimes able to obtain a discharge or other desired result from a bankruptcy without counsel, there are substantial risks involved in proceeding without experienced counsel. Judges routinely admonish pro se debtors to consider representation. We welcome consultations to determine whether a bankruptcy proceeding is appropriate and to determine how our representation may add value to your financial situation.
Bankruptcy Information
Automatic Stay
When a bankruptcy case is filed, there is an automatic court order, called the Automatic Stay. The Stay prohibits creditors from taking any action against the Debtor or the Debtor’s property and is intended to preserve the status quo. Violation of the Stay may subject the violating creditor to sanctions, including attorneys fees and other monetary damages. Further, actions taken subsequent to the filing of a petition, for example, the foreclosure sale of a property may be void if done in without bankruptcy court approval or the modification of the Stay.
The purpose of the stay is to halt various actions which may be occurring in different courts or even different jurisdictions and to consolidate every party with a claim against the Debtor (the person filing the bankruptcy) or the debtor’s property in a single place–the bankruptcy court. We service the White Plains area, greater Westchester as well as the counties of Rockland, Putnam, Dutchess and New York City.
Dealing with debts
Chapter 7
A chapter 7 bankruptcy typically seeks to discharge most types of debt. Certain types of taxes, governmental fines and penalties, domestic support obligations (alimony, child support) and students loans, as well as certain debts incurred prior to filing, are not eligible to be discharged.
Car Loans
A chapter 7 debtor has several options with regard to car loans.
- surrender a vehicle in which the loan is in default and owe nothing.
- exchange the vehicle for a less expensive vehicle and owe nothing further to the original creditor.
- pay or obtain bankruptcy financing to pay the value of the vehicle and owe nothing further.
Chapter 13
A chapter 13 bankruptcy can sometimes serve more varied purposes than a chapter 7. This is a type of personal (as opposed to business) reorganization. A chapter 13 debtor must propose a repayment is required to repay: (1) priority debts such as domestic support obligations and certain tax debts; and (2) past-due secured debts, such as mortgage arrears. These debts are then paid by an appointed trustee who receives monthly payments from the debtor’s income. Unsecured debt (e.g. credit cards) share in funds leftover after the priority and secured debts are paid in full. Whatever portion of these unsecured debts is unpaid after the plan-period is usually discharged at the end of the bankruptcy case.
Mortgages
A chapter 13 may also be an effective tool for dealing with mortgage issues. Debtors may elect to engage the mortgage lender in loss mitigation, in which the Court supervises the workout process. The bank’s claim to ownership and the amount past due or owed in total may also be challenged by the Debtor. A bankruptcy can also stop the sale of a piece of real property at a foreclosure sale.
In some circumstances, a second mortgage or secured line of credit may be converted to an unsecured debt and stripped of its security interest in the property.
For investment properties, debtors may also pay the mortgage company the value of the property rather than the amount owed, and strip off the lien securing the higher value loan obligation.
Chapter 11
A chapter 11 is primarily designed for corporations and other business entities although individuals can file under chapter 11 if their debt limits exceed the limits imposed under chapter 13 or the flexibility of a chapter 11 is more suited to the filer’s particular circumstances.
A traditional business chapter 11 typically seeks to deleverage its balance sheet by reducing its debt. For larger companies may involve the conversion of creditors to equity holders, wiping out equity holders (in other words, debt-holders become the owners of the reorganized company). Companies today frequently file liquidating chapter 11 cases that serve similar end-functions as a chapter 7 liquidation. But the primary purpose of a chapter 11 reorganization is to enable a business to continue generating revenue . It also create an efficient forum to devise a workout solution benefiting creditors in an order priority and increase the value of the business.
In a similar way, a chapter 11 can allow an individual filer to more efficiently deal with debts that may either be too difficult or inefficient to handle individually or that themselves may reduce the value of certain collateral that would otherwise be controlled or liquidated by one or more creditors. A debtor may have more insight or ability to increase or maintain the value of certain assets necessary to effectively reorganize and so will typically remain in possession of his or her assets through the bankruptcy process.
Eligibility
Chapter 7
Chapter 7 requires income below certain thresholds. While the analysis can be complicated and there are a number of exceptions, there is basic two-part test:
- First: Is the filer’s household income less than the median income for a comparable household size? If so, the first part of the test is met.
- For 2023 New York’s median income is:
- 1 person: $$68,814
- 2 people: $$84,958
- 3 people: $103,444
- 4 people: $126,167
- For 2023 New York’s median income is:
AND
- Second, is the total net (take-home) pay less than the (reasonable) monthly expenses? If so, the second part is met.
Chapter 13
Chapter 13 does not have the same income limitations as chapter 7, though it does have maximum debt limits. An individual with more than $2,750,000 of total debt is ineligible for a chapter 13 and must instead file under chapter 11 of the Bankruptcy Code.
Further, an individual must have regular income from which to pay a portion to an appointed trustee each month. Chapter 13 cases come with other requirements before obtaining a court order confirming the debtor’s proposed plan of reorganization (e.g., the debtor must repay all priority tax debt and reinstate or repay any past due secured debts). However, many debtors do not file chapter 13 bankruptcies with such “confirmation” as a primary goal. For example, a chapter 13 may be to stop a foreclosure and obtain a loan modification. This often may not require “confirmation” of the proposed plan. Chapter 13 comes with it an unqualified right of the Debtor to withdraw.
Chapter 11
While chapter 11 does not have the same debt or income requirements as chapters 7 and 13 it is the most burdensome and costly type of bankruptcy to undertake.
Chapter 11 bankruptcies need not be completed within five-years like chapter 13s, although a Debtor must pay certain taxes within five years. The complexity and case-tailored nature of this type of bankruptcy demands far more intricacy and involvement both from the debtor and the debtor’s attorney. Everything from tax filings to insurance coverage is highly scrutinized and the number of court filings required of the debtor’s attorney is significantly higher than in a chapter 13. The debtor must close all pre-bankruptcy deposit accounts and open new “debtor-in-possession” (or DIP) accounts and must file monthly operating reports to account for all income income and expenditure.
General Eligibility
- Other than chapter-specific requirements, bankruptcies have numerous other requirements applicable to all chapters; such as (a non-exhaustive list):
- Filed in good faith
- Tax returns timely filed
- All necessary or required forms and schedules timely filed
- A congressionally-approved pre-filing bankruptcy course completed and accompanied with certificate of completion (and post-filing course completed prior to discharge)
- All statements and certifications complete and accurate
For more information on bankruptcy law, see our Articles and News section. Or contact a White Plains bankruptcy lawyer today .