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Should You File Bankruptcy?

When some people hear the term "bankruptcy," they shirk away. On the other hand, some people prematurely announce they are going to declare bankruptcy, file the paperwork and discover that they really did not need to in the first place. Understanding the seriousness of your financial circumstances will help you to determine if you are the right candidate.

Willingness to Accept the Consequences Filing for bankruptcy means that you are going to face certain consequences. Speaking with one of our lawyers, and thoroughly reading through paperwork will help you to understand what the specific consequences for your scenario are. For example, you may lack the ability to take out any credit cards for an extended period of time. Therefore, you must recognize what the consequences are and express willingness to accept them.

Willingness to Part with Personal Property Depending upon the type of bankruptcy you are filing for, you may have to surrender some of your personal property in order to deal with the debt. For example, you may need to move out of the house that you own and into an apartment, or you might have to surrender your vehicle. As a result, you must be prepared to find alternative ways to get to work or another place to live. This situation does not occur every time a person files for bankruptcy. Instead, you should research the details of the specific type of bankruptcy for which you are filing.

Specific Type of Bankruptcy If you do decide to file for bankruptcy, you will likely file for Chapter 7 or Chapter 13. Generally, Chapter 7 bankruptcy is for people who have little to no income and who need to have all of their debts obliterated. Chapter 13 bankruptcy is for people who do have an income and who will need to pay their bankruptcy bank over time. To decide if you should file, you should know about the specific requirements for each time. For example, it is possible that you will make too much money to qualify for Chapter 7 and, therefore, be eligible only for Chapter 13 bankruptcy.

Legal Troubles with Your Bills Missing a payment on a bill every so often is not an immediate reason to file for bankruptcy. However, over time, you may find yourself consistently unable to pay your bills. Debt collectors are calling your home, and you are receiving letters in the mail about the issue. After some time legal action may be taken against you. Consulting with one of our bankruptcy attorneys can help you in this process and assist you in realizing the time has come to file for bankruptcy.

Home and Money Taken Away When you are in serious financial trouble, the entities to which you owe money may begin to garnish your wages. Instead of relying on you to make payments on a regular basis, the entity will take your income. As a result, you can begin to suffer financially in other ways because you will then unlikely be able to pay the rest of your bills. Also, you could be in a place where your home is close to foreclosure because you have not paid your mortgage in quite some time. These are two major reasons to consider filing for bankruptcy.

Delinquent Taxes You also may have been unable to pay the taxes on your property, or you might have experienced trouble with paying income taxes that you owe. Remember, these issues are related to the government, and you may find yourself in a position where you are being threatened with jail time. You can be taken to jail if you do not pay your taxes. On a lesser level, your wages might be garnished for this issue as well. Instead of facing these serious penalties, you can look into bankruptcy.

Understanding Lack of Funds and Bankruptcy Some people think that they should declare bankruptcy because they do not have any money saved. As tough as it is to face, many people do live paycheck-to-paycheck. However, they are still paying their bills. People should understand when the situation turns into one where bankruptcy can be a solution. If people are unable to pay their bills and have no money saved, then they could be in that place. Also, individuals who are unemployed and do not see a paycheck coming any time in the future are also often candidates for bankruptcy.

Understanding all of the details of bankruptcy without the guidance of a trusted professional is challenging and overwhelming, especially during a period of time that is likely already stressful. Speaking with one of our experts helps you to determine if bankruptcy is the right answer for you and for which type you may qualify. You will have guidance as you walk through this process.

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Who Can File for bankruptcy?Exploring the bankruptcy process can be a difficult undertaking and ought to only be considered with the assistance of competent legal counsel, and it is important for individuals who are considering filing for bankruptcy relief to look into whether they may be allowed by law to even seek protection. The process is intended to help honest individuals who have exceeded their means to pay down their debt to have a chance to get out from under those debts without those financial burdens ruining their lives. The question of who can or cannot file for bankruptcy protection also dovetails into the question of what type of bankruptcy filing they should pursue. In most cases, a Chapter 7 or 13 bankruptcy filing is what a petitioner is likely to seek.

How can file for Chapter 7 bankruptcy?Chapter 7 bankruptcies are typically the simplest and least time-consuming of the two most common options. The Chapter 7 bankruptcy process is intended for individuals who have low incomes and have exceeded any reasonable ability to pay down their debts within their available financial means. The court system wishes to discourage individuals from filing Chapter 7 bankruptcy simply to get out from under their debts. This leads to a series of basic requirements, sometimes called a means test, that filers must satisfy before the court will consider a petition for bankruptcy relief. Those requirements include:

Assembling previous tax returns in order to provide proof of income
Proof of the last six months worth of income
A certificate showing attendance of a mandatory credit counseling class
The court may also wish to see evidence that the individual seeking Chapter 7 bankruptcy relief did not intentionally run up new financial obligations in order to create the appearance of additional financial hardships. Likewise, if a person has filed for Chapter 7 bankruptcy within the last eight years, the court will not accept a new bankruptcy filing. Individuals seeking relief through a Chapter 7 bankruptcy filing should also be aware that in return for discharging most of their debts that the court expects them to give up any available assets that they may own that might be liquidated in order to satisfy any outstanding obligations to any creditors. The court’s goal throughout this process is to discourage individuals from attempting to defraud creditors through the misuse of the bankruptcy system.

The baseline that the court uses to determine whether a person’s means are sufficient to pay down existing debt obligations is based upon the median income of that individual’s state. If a debtor’s means fall below the state’s median income, the court will allow that person to pursue a Chapter 7 bankruptcy filing. If an individual’s income is greater than the median income, then court will wish to see proof of how much disposable income the person has available. Disposable income is defined as income minus basic expenses, such as shelter, basic transportation, necessary clothing and food.

How can file for Chapter 13 bankruptcy?A Chapter 13 filing is intended for individuals and businesses that have sources of income and wish to restructure their debts rather than seeking to have those debts discharged. The foremost requirement for individuals seeking relief through Chapter 13 bankruptcy is a reliable source of income that would be expected to be useful in paying down the debts in question as a restructuring goes forward. If an individual fails to pass the means test for filing a Chapter 7 bankruptcy case, then they must either file for relief through Chapter 13 or find an alternative route to begin paying down their debts, such as a negotiated solution through their creditors.

What types of debt may be discharged through bankruptcy?

Not all types of debt may be discharged through the use of the bankruptcy process. For example, almost all debts that are owed to or guaranteed by the federal government cannot be discharged. This includes outstanding tax bills, student loan payments and child support obligations. The court may consider discharging or reducing the amount that a debtor owes on any of the following:

Medical expenses
Credit card obligations
Most types of commercial and personal loans
Utility bills
Should you file for bankruptcy?

The question of whether to file for bankruptcy should ultimately be addressed only with the assistance of a qualified legal professional. Our NYC bankruptcy law firm works with individuals who may wish to consider what bankruptcy options are available to them, and we’ll work hard to point you in a direction that’s appropriate to your financial circumstances. We’ll assist you in learning how the process works and help you decide whether seeking bankruptcy protection is right for you.

What's the means test

New York City residents who are considering bankruptcy should become familiar with the means test. This test is required for anyone filing Chapter 7 relief, and involves a precise formula that’s used to calculate debt and income. What is the means test and why is it important? Read on to find out more.

History of the Means Test

In 2005, the United States bankruptcy Code was amended to prevent consumers who were filing for Chapter 7 relief from abusing the system. Prior to that time, people of all income levels were eligible to file Chapter 7, which works to eliminate as much debt as possible. By passing the bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005, Congress hoped to prevent bankruptcy from being used to counteract poor spending habits. It must now be taken before filing a Chapter 7 bankruptcy to determine your eligibility for it.

What does the Means Test Include?

The means test involves a series of questions concerning income, assets, and debts to determine your ability to pay off your debts. The first step involves determining whether your income is more or less than the median income in New York. If your income is less than the statewide median, you have already passed the means test.

If your income is above the median, additional calculations are needed to determine if you are able to pay off your debt. These additional calculations are needed in order to assess whether or not you have “disposable income”, or money left over after your expenses are covered to repay debt with. To do this, the cost of basic living expenses such as rent, food and health care will be figured. The allowable amount is based upon the national standards that are determined by the Internal Revenue Service (IRS).

You will also enter information about your secured and unsecured debts on form 22A. When entering this information, keep in mind that certain debts are not dischargeable in bankruptcy court, including taxes, student loans, child support and spousal support.

Presumption Does/Does Not Arise

Filling out form 22A is much like preparing a manual tax form. When finished, the numbers will reflect that you either do or do not have enough disposable income remaining to pay your debts with. If calculations determine that “the presumption does not arise”, this means you are not disqualified from filing Chapter 7 bankruptcy. If the presumption does arise, you are ineligible and must consider Chapter 13 or another form of relief.

Means Test Exceptions

Certain individuals are exempt from taking the means test. For example, disabled veterans who primarily incurred their debt while serving on active duty may automatically check the box labeled “the presumption does not arise.”

Members of the Reserve and National Guard components of the Armed Forces who were called to active duty after September 11, 2001 for at least 90 days are exempt during their period of active duty as well as for 540 days after being released. Reserve component soldiers meeting this criteria will check a box marked “the presumption is temporarily inapplicable.” Once the exclusion period ends, service members have 14 days to complete the means test or the presumption will automatically expire.

Deciding to File Chapter 7

Just because you pass the means test does not mean filing Chapter 7 bankruptcy is the right decision. While it can eliminate all or most of your debt, you must also give up any property that is not exempt. Your property will be handed over to a bankruptcy trustee, who will liquidate it in order to pay off as many of your debts as possible. It also does not eliminate student loan debts, and will not absolve you of the responsibility to pay child support or alimony.

Criteria that Makes you Ineligible

You are not eligible to file Chapter 7 bankruptcy if you have previously filed Chapter 7 or Chapter 13 proceedings within the past six years, or have had a bankruptcy case dismissed within the past 180 days because you violated a court order. If allowed to file, you will be prohibited from filing an additional bankruptcy petition for six years afterwards.

At our New York City law firm, we meet people every day who need debt relief, but are anxious about taking the means test. If you’re one of these people, we invite you to schedule a consultation so we can answer your questions and determine if a Chapter 7 proceeding is ideal in your situation.

The Bankruptcy Process

bankruptcy is a process that not many Americans understand. It has a lot of negative connotation because of its close association with financial distress. In reality, however, bankruptcy is a symptom of underlying financial problems, not a cause. In this article, we will explain the details of the bankruptcy process, how and why it can be beneficial, and why people need to understand it.
When anyone gets into financial distress due to a large debt load, they face a significant problem. They do not have enough income to cover their debts, which means that the debt will keep growing larger due to interest. There are many different kinds of debt that can lead to bankruptcy. A single large debt like a mortgage or car can be just as much of a problem as several smaller debts, like credit cards. In fact, credit cards can be even harder to manage because the interest rates are higher, so the debt grows faster.
When you decide that you are not capable of managing the debt load you have, then it is time to think about bankruptcy. Bankruptcy is a way to protect your assets from creditors, who might otherwise be able to repossesses them as payment of your debt. The bankruptcy process can help you discharge and restructure some of the debt.
What bankruptcy does is that it lets you go to court with a bankruptcy judge and your creditors to discuss a solution. In court, you inform the creditors that you are unable to pay off your debts in their current form. Because your creditors would rather have some money than no money at all, they are willing to work with you to reduce your debt load or extend your deadlines in order to make the debt easier for you to pay off.
In bankruptcy court, you come to an agreement with your creditors about what you can afford to pay and how you can do it. This might involve giving up some assets that are directly tied to the debt. For example, if you have a mortgage that you cannot pay, you might need to give up the house. The same is true for a car. The key is that in bankruptcy, you can manage to protect the rest of our assets from being taken away. You can also arrange for a portion of the debt to be forgiven in order for you to manage to pay the rest.
There are two main categories of bankruptcy for individuals: chapter 7 bankruptcy and chapter 13 bankruptcy. Chapter 7 bankruptcy is meant for people with credit card debt, medical debt, and other debt that does not have collateral. There is also an income requirement: you must make below a certain income to qualify for Chapter 7. Chapter 13 bankruptcy is for people with more money and assets, as well as larger debts. It generally involves working out a payment plan.
Bankruptcy can be stressful, but it is an important part of the process of getting out of debt. Bankruptcy itself is a beneficial process that repackages your debt in a way that you can handle. It is like medicine for debt- it might not be pleasant to go through, but it is the solution to excessive debt.
However, going through bankruptcy is not an easy process. It is a legal procedure that requires the help of an expert NYC bankruptcy lawyer to help you understand what is happening at each stage and protect your assets as much as possible. Like any other legal process, bankruptcy is much easier with a better lawyer.
We are a New York NYC bankruptcy law firm with decades of experience helping people successfully negotiate bankruptcy. Our clients always feel relieved after our help, because we don’t just mechanically step through the process. We work to protect you and your interests. Our emphasis on our clients comes from our professionalism: we are not simply trying to make money from clients that we already know are in financial distress.
If you feel that you might be losing control of your debts and you do not think you can keep up, the worst thing you can do is ignore the problem. If you let the debt build up, then it will only get worse. Consider getting in touch with us and we can advise you about what you need to do next. It is an uncomfortable process, but a necessary one.

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