A Chapter 7 Bankruptcy is a liquidation Bankruptcy. It is started by filing a Petition after your Attorney means tests you to make sure your income and assets fits into the guidelines and allows you to discharge your debts. A Trustee administers the Bankruptcy Estate. There is a Meeting of Creditors known as a 341 Meeting where the Debtor shows up at the Federal Courthouse and is examined by the Trustee. The Trustee reviews the Petition and questions the Debtor regarding the information the Debtor put in his/her Petition. Certain property is exempt and those exemptions have values to them in New York. Any property that the debtor has equity in higher than the exemption can be sold by the Trustee to pay the unsecured creditors. The biggest drawback to chapter 7 Bankruptcy other than the hit to a Debtor’s credit is the fact that if a Debtor has any valuable possessions, they may lose some of them.
All property has some value to it but many times the value is trivial and the Trustee abandons the property. There are two (2) sets of exemptions that the Debtor may utilize. The Debtor cannot mix the two. There are the Federal Exemptions which do not provide a large Homestead Exemption for a residence but provide a Wildcard Exemption of $11,000.00 which can be applied to the existing exemption on a piece of chattel like an automobile and allow the Debtor to keep a nice car while discharging unsecured debt.
The State Exemption in NY provides a Homestead Exemption of $170,000.00 per individual in the lower counties of the Hudson Valley and $140,000.00 for Counties in the Mid Hudson Valley. A married couple can file jointly and exempt $340,000.00 equity in their residence while discharging unsecured debt.
Real Estate may be sold if there is value above the exemption and there is no mortgage on the property. Real Estate with a mortgage is considered secure in that if it gets sold, that creditor holding the priority lien after the taxes will realize his full claim before any inferior creditors unlike unsecured creditors who all receive a pro rata disbursement of any distribution. Usually there is no distribution.
A Debtor may enter a Loss Mitigation process under a Chapter 7 Bankruptcy in which the Debtor Mortgagor negotiates with the Bank Mortgagee to see if the mortgage can be re-worked under the supervision of the Court. If so, The Debtor may retain his residence and discharge his unsecure debts.
All Bankruptcy’s have an Automatic Stay that stops creditors from acting adverse to Debtors without the Courts permission. This Automatic Stay stops foreclosure actions. A Debtor who qualifies for a Chapter 7 Bankruptcy under the Means Test may only file one Chapter 7 Bankruptcy every 8 years from the date of filing the last chapter 7 Bankruptcy.
Only an experienced Bankruptcy Attorney can help guide you through you options and tell you what will be required of you and your chance at succeeding in achieving your goals. I’ve been filing Bankruptcies over 22 years, call me and I’ll help you decide what options are best for you.