Tuesday, April 14, 2009

Do I Qualify for Chapter 7 Bankruptcy?

The current rules regarding bankruptcy filing in upstate New York have the following general guidelines:

An individual is allowed $50,000 in equity in a homestead and earnings of up to approximately $45,000. You also are allowed to keep certain items of household goods and automobiles. These are called New York State Exemptions which generally are as follows:

Automobile – $2,400
Household goods, library, clothing – up to $5,000

Your pensions and 401k’s are also generally exempt. Dischargeable debts generally include unsecured credit cards and obligations which are unsecured that were not advanced within 90 days of the filing date. A Chapter 7 petition, when filed, will operate as an automatic stay. this term means that efforts to collect or foreclose upon delinquent debts must stop immediately with severe penalties for violations of the automatic stay. The current requirement prior to filing a Chapter 7 petition are as follows:

1. 2 years worth of recent tax returns
2. 6 weeks worth of current pay stubs or the equivalent showing income from any source (or unemployment or disability)
3. A consumer credit counseling certificate (this is a 2-part, online certificate which costs approx 20 and 35 dollars to completes part 1 and 2 respectively)
4. A signed petition along with retainer agreement indicating that you have no assets that could be sold at auction valued at more than 500 to 1000 dollars that are non-exempt.

If you file, approx 30 days after the date of filing you’ll be required to attend a “meeting of the creditors’. This is commonly referred to as a section 341 meeting. Generally, no creditors appear at this hearing unless there have been recent high-value cash advances or luxury purchases on credit within the most recent 90 days of filing. At this hearing you are required to produce a photographic ID along with proof of your Social Security number and placed under oath. A Chapter 7 trustee will ask several questions regarding your assets and whether or not you are entitled to inherit money, whether or not you have the right to sue someone for a personal injury sustained within the preceeding 3 years, and whether or not you have personal goods that you could sell at auction valued at more than 500 dollars.

In short, if you earn less than $45,000 per year, have less than $50,000 equity in your home, have an automobile valued at less than $2,500 (or lease an automobile or make payments on an automobile) and have no other assets as discussed above, you will likely be categorized as a Consumer No-Asset case. This means that the trustee will not have to administer any of your assets. This means, for example, selling off the Harley-Davidson motorcycle in the barn and distributing 10 cents per dollar to your creditors. If this is the case that you are a consumer chapter 7 filer, you will likely receive your discharge within 60 to 90 days from the date of the first hearing.

For any additional information, please feel free to call upon my office at (518) 465-2211.

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