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Filing Bankruptcy

Filing BankruptcyMany clients come to me who have tried to file bankruptcy on their own. The usual result of a client filing bankruptcy is that the bankruptcy gets dismissed. To start with, there is a prerequisite to filing a bankruptcy. The prerequisite is that an individual seeking to file bankruptcy must take a credit counseling course. If the individual does not take the credit counseling course his case can be dismissed. That is the first half of the requirement. The second half of the requirement is after the meeting with the bankruptcy trustee the individual who filed bankruptcy must take the second half of the credit counseling course.

Filing Documents with the Court

The filing of a bankruptcy requires the filing of a bankruptcy petition, a statement of financial affairs, a statement of current monthly income, supporting schedules, a means test calculation and a statement regarding the individual’s social security number. In theory a debtor must list his or her income, assets and debts and show that he or she has negative cash flow.

Chapter 13 or Chapter 7?

The person filing bankruptcy must decide whether a Chapter 13 or a Chapter 7 bankruptcy is appropriate. Individuals who seek to save their homes usually try to file a Chapter 13 bankruptcy. However, to qualify for filing a Chapter 13 the individual filing bankruptcy must meet certain financial requirements.

Re-affirmation of Debts

When an individual files bankruptcy he or she must provide the court with their intention as to whether they are going to re-affirm certain debts such as, mortgages on their home or car loans.

Hire an Attorney

While it may look like it is just involved with a series of filing a number of forms, extremely few individuals can correctly file a bankruptcy on their own and navigate the system through the court.

schlissel-headshotElliot S. Schlissel, Esq. is the managing partner of Schlissel DeCorpo LLP. Their office regularly files bankruptcies for individuals in the Metropolitan New York area. He can be reached for a free consultation at 800-344-6431 or e-mailed at Elliot@sdnylaw.com.

VIDEO: Why You’d File Bankruptcy

Bankruptcy Explained

CHAPTER 7 BANKRUPTCY

Picture of a gavel on a white background

There are basically two types of bankruptcies for individuals or married couples can file. These two types of bankruptcies are referred to as Chapter 7 bankruptcy and a Chapter 13 bankruptcy. A chapter 7 bankruptcy is a liquidation. Non-exempt assets are liquidated and if there are any assets over and beyond the bankruptcy exemptions distributed on a percentage basis to the creditors. In the large majority of all Chapter 7 bankruptcies the debtor pays nothing to the creditors and the creditors receive zero.

CHAPTER 13 BANKRUPTCY

The second type of bankruptcy is a Chapter 13. This is basically a wage earner plan. The debtor pays the secured creditors example a car loan, mortgages, 100 cents on the dollar as to what is owed. The unsecured (example: credit cards, personal loans, debts owed to hospitals and doctors) usually are paid a lesser percentage then 100 cents on the dollar. This type of bankruptcy will last anywhere from 3 to 5 years.

FILING A CHAPTER 7 BANKRUPTCY

There are a variety of things that need to be done with regard to the filing of a Chapter 7 bankruptcy. The following is a list of some of these items:

  • You must pay a Court filing fee of $335.00 when filing a Chapter 7 bankruptcy.
  • A credit counseling course must be completed from an approved agency and documentation of this must be filed with the court.
  • Petitions must be filed with the court.
  • A trustee will be appointed and there will be a scheduled creditors meeting before the bank and the chapter 7 bankruptcy trustee in which the debtor must attend and give testimony.
  • Parking tickets, child support, spousal maintenance, student loans, sales tax, income taxes and a variety of other debts are non-dischargable in bankruptcy.
  • Bankruptcy attorneys don’t work for free. They usually charge between $1,500.00 and $3,500.00 to file a chapter 7 bankruptcy.
  • There is an income requirement test called the bankruptcy means test an individual must qualify for when filing a Chapter 7 bankruptcy.

REQUIREMENTS FILING A CHAPTER 13 BANKRUPTCY

The following are some of the requirements necessary to filing a chapter 13 bankruptcy:

  • There is a $274.00 filing fee
  • You must take a credit counseling course by an approved agency and document it has been taken.
  • You must file a chapter 13 repayment plan.
  • You need to meet monthly income requirements and monthly payment requirements pursuant to the chapter 13 plan.
  • You have to file schedules and petitions with the bankruptcy court.
  • Bankruptcy attorneys usually charge between $3,000.00 and $5,000.00 to file a chapter 13 bankruptcy plans.

Conclusion:

Attorney Elliot S. Schlissel

There are many reasons for filing bankruptcy – loss of employment, medical issues, inability to pay debts as they come due, mismanagement of finances, excessive credit card use, and many additional reasons. However all Americans should be aware that the filing of a bankruptcy takes place in the United States Bankruptcy Court and every American has a right to file bankruptcy. The filing of a bankruptcy cannot be used against you for any purpose and any discrimination or action taken as a result of your filing bankruptcy may allow you to take legal action to deal with this matter.

Banks Agree to Eliminate Debts From Credit Reports After Bankruptcy Discharges

bankruptcy relief lawyerJP Morgan Chase and Bank of America, two of the largest banks in the country have agreed to update credit reports of individuals who had owed them money to show the debts were discharged pursuant to bankruptcy proceedings.

Federal Law requires once an individual files a Chapter 7 bankruptcy and is discharged from said bankruptcy that the bank who the money was owed to is required to update the debtor’s credit report to show the debt is no longer due and owing to the bank. Previous notations such as “past due” or “charged off” should also be removed.

Bank of America and Chase Manhattan Bank are taking this action because of Federal litigation which was brought against them which claimed the banks were holding borrowers’ credit reports hostage until these individuals agreed to pay money for debts that were discharged and they no longer owed.

Mortgages Discharged in Chapter 7 Bankruptcies

If an individual or husband and wife file a Chapter 7 bankruptcy and they list their mortgage in that bankruptcy, the mortgage debt is discharged. They therefore no longer owe the money. The bank still has the recourse of proceeding with a foreclosure action and causing the home to be sold and using the proceeds from the sale of the home to pay off the debt that was owed. If the sale of the home does not cover all of the debt, the homeowners are not subject to a deficiency judgment for the balance due and owing. If the bank refuses to remove the negative inference of the unpaid mortgage debt from the former homeowner’s credit reports it will have a negative impact on their obtaining credit in the future. It will also prevent them from rehabilitating their credit and obtaining a new mortgage in the future.New York family law attorney

Student Loan Considered A Special Circumstance Under Chapter 7 Bankruptcy

new york bankruptcy lawyerA bankruptcy Judge in the Western District of New York found a debtor’s non-dischargeable student loan constituted “a special circumstance” under the Bankruptcy Law. A special circumstance could overcome the statutory presumption of abuse upon filing bankruptcy. This special circumstance would allow the student loan to be discharged in bankruptcy.

Student Loans Are Generally Not Dischargeable In Bankruptcy

The Bankruptcy Abuse Prevention Consumer Protection Act of 2005 created barriers for debtors to file bankruptcy relief under Chapter 7. This law required debtors filing a Chapter 7 bankruptcy who had monthly income higher than the median income in the State to be subject to a “means test“. This means test determines if the debtor is capable of paying back at least a portion of his or her debts. In this event the debtor cannot file bankruptcy under Chapter 7. For a debtor to file Chapter 7 bankruptcy when he or she can’t meet the means test, they must show “special circumstances” that prevents the debtor from having sufficient income to allow him or her to file a Chapter 13 bankruptcy and have a repayment plan.

In the case of a debtor named Jeffrey Powell, he decided to file bankruptcy because he could not pay back his student loans and his other unsecured debts. His disposable income was $697 and the student loan obligations were $658. In his case, if the student loans were paid, he would only have $40 left for payment of all other financial obligations. The court held a surplus of such a small amount did not amount to an abuse of the Bankruptcy Act. The court found the debtor did not have an extravagant lifestyle.

Student Loans Not Dischargeable

Student loans generally are not dischargeable in either a Chapter 7 or Chapter 13 bankruptcy. Under the Bankruptcy Code, a student loan is dischargeable “if the obligation imposes an undue hardship on the borrower or the dependents.” However, the bankruptcy statute does not define the term “undue hardship”.

Bankruptcy Judges are increasingly finding if an individual files bankruptcy and the student loans are not discharged, the student loans accrue interest during the term of the filing of the bankruptcy. This conflicts with the intent of the bankruptcy statute to give the debtor a fresh start.bankruptcy assistance

New York Debt Collection Proposals

debt collection defense lawyerFinancial regulators in New York State have recently proposed sweeping new reforms concerning debt collection practices. There have been more than 13,000 complaints filed against debt collection agencies in the State of New York within the past two years. Debt collection companies sometimes buy defaulted debts for a few cents on the dollar and proceed to collect them with very aggressive tactics. The complaints against debt collection companies range from harassing phone calls, providing information concerning the debts to third parties and trying to collect more than is due and owing.

Federal Regulations

There is a Federal Statute called the Fair Debt Collection Practices Act. This law regulates the hours debt collectors can make phone calls, prevents them from making threats, using obscenities and making numerous phone calls for the purpose of harassing the debtor.

The New Regulations

The new regulations in New York would require debt collectors to verify all disputed debts. In addition, the debt collectors would have to advise consumers when the statute of limitations concerning their debt has expired. The debt collector would have to advise the consumer if a payment on a debt is made after the statute of limitations has expired that this would restart the statute of limitations running all over again. The new regulations would require debt collectors to provide debtors a “clear and conspicuous written document” confirming payment schedules on debts.

These regulations will go into effect upon publication in the State Register. Publication would take place after there has been a 45 day period of time for the general public to make suggestions and comments concerning these regulations. The purpose of these new regulations according to Ben Lawsky, the Superintendent of the Department of Financial Services for New York State, was “to level the playing field for consumers.”

The Author

bankruptcy helpElliot S. Schlissel, Esq. is an attorney practicing law in the metropolitan New York area. Elliot and his associates represent clients in bankruptcy matters. In addition, the firm has extensive experience in defending foreclosure lawsuits.

Filing Bankruptcy as a Married Couple – Is is the Best Way to Go?

As a married couple you’ve got the option of going it together when it comes to bankruptcy. Joint bankruptcy happens to be one such thing that you can file together as a married couple. However, there’s a flip side involved in this story as well and that includes specific circumstances wherein it becomes harder for you to qualify for Chapter 7 bankruptcy or for that matter protect all of your property.

What happens when you file bankruptcy as a married couple?

Filing bankruptcy as a married couple comes with its own set of benefits. Read on to find out more.

1. It’s far more convenient: Filing bankruptcy as a married couple helps a lot for it can make the entire process far more convenient. Joint bankruptcy makes things so much more convenient simply because of the fact that you get to wipe away all your debts together and that too through a single bankruptcy. Moreover, for a joint bankruptcy as a married couple you don’t even need to attend separate hearings.

2. You save money: When it comes to filing joint bankruptcy, then it also saves you money for the court filing fees happen to be the same both in case of individual as well as joint bankruptcy. Then again, it’s a known fact that the bankruptcy attorneys will charge a lot less for a joint bankruptcy as compared to 2 individual bankruptcies. This would only be applicable if you choose to hire a bankruptcy attorney. It’s obvious since there’s less work involved for the petition as compared to 2 bankruptcy filings.

Filing bankruptcy to pay off debt as a married couple has certain difficulties involved as well.

1. Qualifying for Chapter 7 becomes difficult: As a married couple filing bankruptcy, you need to first pass a means test if you’re looking to qualify for Chapter 7. This bankruptcy test essentially involves comparing your income against the median income for a similar kind of household in your state itself. Now if the results show that your income falls below median, then you’ll qualify automatically. On the other hand, if it happens to be above median, then you’re required to disclose all your expenses on this means test so that you manage to qualify.

2. It gets harder to protect all your property: Going by Chapter 7 exemptions, you’re definitely allowed to keep some of your property. Now what you should know is that being married and filing a joint bankruptcy entails certain states allowing you to double up the amount of your exemptions. This would be taking into account the fact that 2 people generally own more property as compared to a single person. However, there are some states which don’t allow married couples to double up their exemptions in spite of filing for a joint bankruptcy. Actually it’s been mostly seen that it’s only about slightly higher. This again goes on to indicate that even in case you go ahead and file an individual bankruptcy leaving aside your spouse, even then you might not be able to exempt all property owned between you and your spouse.

Well, though the above discussion holds true and you might base your decision accordingly, yet it’s also a fact that being married doesn’t make it mandatory to file bankruptcy together. In case it’s only one of you who’s in debt, then there’s simply no need for the other to file bankruptcy. However yes, fact remains that the non-filing spouse is still required to disclose his or her income during the bankruptcy proceedings. If you both are in debt, then joint bankruptcy might just prove a better option ultimately.

Foreclosure And Your Credit Score

foreclosure defense and bankruptcy attorneysIf your home goes into foreclosure it will have a negative impact on your credit score. However, the nature and extent of the negative impact may be different than what you believe it to be. When a financial institution brings a foreclosure lawsuit related to a mortgage default, the institution will normally report to the credit agency there is a foreclosure or a home has been foreclosed upon. This information on your credit score will not necessarily impact on the outstanding balance it shows you owe on the mortgage. The credit report will most likely continue to show the entire outstanding balance of your mortgage being due and owing on your credit report. This negative credit material can stay on your credit report for seven years.

Sales Of Homes In Foreclosure

At the end of the foreclosure process, if the bank is a successful, your home will be sold. In the event the sale of your home at the foreclosure sale does not pay off the entire outstanding debt due in owing on your mortgage, the remaining balance may be shown on your credit score as a “deficiency “. The financial institution may be able to bring a proceeding to collect on this deficiency amount. If they do not take action to collect this deficiency they can report it to the Internal Revenue Service as a forgiven debt. This will cause you to receive a 1099 showing the deficiency as income to you in that tax year. This will cause you to pay income taxes on this deficiency debt!

Foreclosures On Second Mortgages

When the financial institution forecloses on a first mortgage, the second mortgage may continue to be maintained on your credit report by the credit reporting agency. The second mortgage will not show it was foreclosed on because it is a separate and distinct financial obligation.

Bankruptcy And Foreclosure

It may be necessary to file a Chapter 7 bankruptcy to eliminate deficiency judgments related to first mortgages and the personal obligations on a second mortgage. To better understand the inferences and long-term impact on your credit score it is strongly suggested to contact either a bankruptcy lawyer or foreclosure lawyer.foreclosure and bankruptcy  assistance

FHA Rescues Homeowners

The Federal Housing Authority (FHA) is coming to the rescue of more than 3000 homeowners whose homes were damaged by Superstorm Sandy. Under a new program, the FHA is allowing these homeowners whose homes were damaged by Superstorm Sandy to apply for mortgage loan modifications. The purpose of this program is to help reduce the monthly mortgage payments of homeowners whose homes were damaged by Superstorm Sandy.

Mortgage Moratorium Ends

Initially, after Superstorm Sandy hit the northeast, there was a mortgage moratorium program established. That program is coming to an end. However, homeowners whose homes have never successfully been repaired are still entitled to the moratorium under this former program. At a news conference which took place at New York Senator Charles Schumer’s Manhattan office, United States Housing and Urban Development Secretary Shaun Donovan stated “this will give homeowners the breathing room and they need.” “Many are still struggling and it is heartbreaking to know that people who lost their homes because of this natural disaster can now lose their homes from a man-made disaster: a foreclosure.”

Loan Modifications

A new loan program will now allow more than 1/4 million New Yorkers to obtain “stream lined loan modifications.” This program will apply to areas affected by Superstorm Sandy.

Additional measures to help families of damaged homes are being considered by Fannie Mae and Freddie Mac. New York Senator Charles Schumer is also urging private financial institutions to develop programs of a similar nature to assist homeowners whose homes were damaged by Superstorm Sandy recover from this difficult situation. Senator Schumer specifically stated “it is time for the banks to step up and assist homeowners who have been doing the right thing all along.”

About The Author

foreclosure assistanceElliot S. Schlissel is the former President of the Commercial Lawyers Conference of New York. He has more than three decades of legal experience litigating foreclosure related cases, dealing with predatory lending issues and foreclosure related bankruptcy problems. Elliot and is dedicated staff of attorneys are available seven days a week to talk to prospective clients. Call for a free consultation at 1-800-344-6431, 516-561-6645 and 718-350-2802.

Bankruptcy Fallacies – Part I

new york bankruptcy lawyerOne of the most widely held beliefs concerning individuals who file bankruptcy is they will never be able to obtain credit again. This is simply untrue. Although a bankruptcy filing will be maintained on your credit report for 10 years, most individuals who file bankruptcy can rehabilitate their credit within 18 months. A debtor who files for chapter 7 bankruptcy can eliminate all of his or her debt.

If the debtor obtains a secured credit card after filing bankruptcy and makes credit card payments on a regular basis he or she can reestablish credit. When this debtor files a new credit application, the financial institution will see all prior debt was discharged in bankruptcy and the individual, for the past 18 months, has been paying his or her debt on time. This makes this individual less of a credit risk to the financial institutions.

In my legal practice, I have represented individuals who have filed for bankruptcy three times during the course of my career. This means after the first and second bankruptcy they are able to establish credit all over again, run their credit up, go bankrupt again and then do a third time.

Individuals Who File Bankruptcy Can’t Have Assets

It is a mistaken belief that before someone can file bankruptcy they have to have virtually no assets. This is untrue. New York State has an exemption statute of $150,000 for equity in a home (this statute depends on which county the home is located in). There are also exemptions under New York State law for $5,000 in cash and a car with up to $4,000 in equity in it. New Yorkers can also choose to utilize Federal exemptions. Under Federal exemptions, there is a $21,625 exemption for the value of a home and $10,825 for cash held by the individual filing for bankruptcy.help in filing for bankruptcy

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