People experience financial hardship for a variety of reasons: divorce, illness and medical care, unemployment/underemployment, loss of a business, family obligations, and so on. The bankruptcy laws were enacted to protect everyone because no one is immune from life’s unexpected circumstances. Therefore, regardless of the reason, if you are thinking of filing for bankruptcy protection, the following information may be helpful.
What is a Chapter 7 ?
A Chapter 7 bankruptcy discharge means the debtor (the person filing bankruptcy) is no longer required by law to pay those debts that are discharged. The creditors of the bankruptcy debtor must stop taking any form of collection action on those discharged debts, including law suits and communications with the debtor, such as those harassing telephone calls and letters. All of that stops when the bankruptcy petition is filed. This is known as the “automatic stay” and it applies to most creditors. However, the automatic stay does not apply to collecting alimony, maintenance and/or child support.
What are exemptions?
Exemptions are the assets a debtor can keep, free from the claims of a creditor, even in bankruptcy. Typical examples of exemptions are a house, certain amounts of cash, furniture, television, a computer, clothing, and other household goods.
What debt will bankruptcy not erase?
Money owed for child support or alimony, fines, and most taxes;
- loans you got by knowingly giving false information to a creditor, who reasonably relied on it in making you the loan;
- debts resulting from “willful and malicious” harm;
- student loans owed to a school or government body, except if the court decides that payment would be an undue hardship;
- mortgages and other liens which are not paid in the bankruptcy case (but bankruptcy will discharge your obligation to pay any additional money if the property is sold by the creditor).
Can a married debtor file without the other spouse?
Yes, but your spouse will still be liable for any joint debts. If you file together you may be able to double your exemptions. In some cases where only one spouse has debts, or one spouse has debts that are dischargeable, then it might be advisable to have only one spouse file. If the spouses have joint debts, the fact that one spouse discharged the debt may show on the other spouse’s credit report.
Is it too late to file bankruptcy if I’m being sued or already have a judgment against me?
No. It is almost never too late to file bankruptcy. Assuming that it is a dischargeable debt, you can still get rid of the debt even if a creditor has filed a lawsuit against you and/or obtained a judgment for money.
Can I transfer assets out of my name into someone else’s name before filing bankruptcy?
Not unless they are sold for “reasonably equivalent value”. Otherwise it can be recovered as a Fraudulent Transfer. In New York, the “look back” time frame is six years, meaning that any asset transferred out of the name of the person filing bankruptcy must have been transferred more than six (6) years prior to the filing, unless it was transferred for “reasonably equivalent value.” This often happens with the transfer of a house or bank accounts.
What do I do after I get a discharge in bankruptcy?
Once you get your discharge in bankruptcy, then you will need to start rebuilding your credit. There are many ways to do this, and your bankruptcy attorney will discuss your various options. Be aware, once you have filed a Chapter 7 bankruptcy and received a discharge, you cannot file another Chapter 7 bankruptcy petition for eight (8) years.
Helpful credit information
The three major credit reporting agencies:
You are entitled to one free credit report a year but that report may not contain your fico score, only the credit information — there is a small fee to obtain a credit report with the FICO score
If you are a victim of fraud and want general information and sample letters/forms, visit Federal Trade Commission