Are you or your business contemplating bankruptcy? Filing for bankruptcy is not an easy decision to make and there are a lot of questions that need to be answered. Questions like which type of bankruptcy is right for me? Or where do I start? In order to clarify some questions about the different types of bankruptcy NY Law Professionals has created a helpful guide to the types of bankruptcies and the guidelines for filing in New York State.
The explanations of each type of bankruptcy are the same throughout the United States, as per the Federal Bankruptcy Act. However, each state has its own laws regarding the details of bankruptcies and the qualifications. First and foremost, is it necessary to establish the two parties concerned when a bankruptcy claim is filed. The party that is filing for bankruptcy is the “debtor” and the party that the debtor owns money to is referred to as the “creditor”.
There are two types of debt that a debtor can have; secured and unsecured. Unsecured debts are often less complex than secured debts. With an unsecured debt the creditor does not hold any collateral to keep if you do not pay back you debt. Debt is considered to be secured when creditors have collateral. For example, a mortgage loan is considered to be secured debt because the lender can take your home if you fail to pay your mortgage payment. Credit card debt is an example of unsecured debt, where the creditor has no collateral at all.
There are four different types of bankruptcy detailed in the United States Code. They are:
Chapter 7:
Chapter 7 bankruptcy is often referred to as “liquidation bankruptcy”. Individuals, partnerships or corporations can file for this type of bankruptcy when they cannot pay off their debts. A trustee will sell all of the debtor’s assets that can be sold by law in order to pay off debts. Essentially, all of the debtor’s assets are liquidated, hence the name “liquidation bankruptcy”. There are many exemptions that exist in the State of New York when it comes to the liquidation of assets in Chapter 7 bankruptcy. Trustees cannot sell clothing, household furnishings, a wedding ring, domestic animals worth up to $450, as well as other specific items.
Chapter 11:
This type of bankruptcy is most often filed by businesses. Business owners will create a plan to “reorganize” their debt and pay it back. This plan must be furnished within 120 days of filing. In exchange, debtors are permitted to carry on with the normal operation of their business and keep their profits. This is done so that business owners can continue to collect funds to repay creditors.
Chapter 12:
Chapter 12 bankruptcy was designed for farms and fishermen with seasonal income. It is structured similarly to Chapter 11, but is less intricate and has fewer requirements.
Chapter 13:
In Chapter 13, debtors do not have to liquidate their assets. Just like in Chapter 11, debtors are asked to design a plan to reimburse creditors within three to five years. It is similar to Chapter 13 but is designed for individuals rather than businesses.
Under New York State law, when a Chapter 7 is file, a fraction of a debtor’s assets can be kept. These exemptions are extended to certain pieces of real estate and one vehicle valuing up to $2,400 and a percentage of wages among other household items (see the description of Chapter 7 above for more examples).
In the State of New York you are not responsible for your spouse’s debts unless you have cosigned any type of agreement with your spouse (i.e.: a lease agreement). If you and your spouse find that you need to declare bankruptcy in the State of New York, only one spouse will need to file. New York is not a community property state.
It is normal to have many questions concerning your individual case, as bankruptcy can be a complex concept to understand. NY Law Professionals can assist you in finding the best bankruptcy attorney in New York, based upon your special needs. You can search our online database of bankruptcy law professionals in your area at any time, every day of the week. You can also read reviews and visit the firm’s website all from one site.
If you are ready to take back control of your finances, log on to NY Law Professionals today!
Before you select your bankruptcy attorney, be sure that you Know the types of bankruptcies and the laws of New York State.. This article, A Guide to Bankruptcy in New York State is released under a creative commons attribution license.