New York Bankruptcy: How State Laws Impact Filings

Filing for bankruptcy can be a complicated process, especially when you’re trying to navigate all the diffrent state laws and exemptions. Here in New York, we’ve got our own set of rules that can really impact how a bankruptcy case plays out. Let’s walk through the basics so you understand how it works in NY.

Choosing Between Chapter 7 and Chapter 13

The two most common types of bankruptcy for individuals are Chapter 7 and Chapter 13. Chapter 7 is what’s called a “liquidation” bankruptcy – the court appoints a trustee who can sieze some of your assets, sell them off, and distribute the funds to creditors. The upside is that most remaining debts are wiped out completely. Chapter 13 is more of a debt reorganization/repayment plan. You get to keep all your assets but have to commit to a 3-5 year repayment plan to creditors. Which one is right for you depends on your specific situation.

Here’s some factors to think about:

• Chapter 7 – Best if you have few assets or if your assets are fully exempt. Gets rid of debts quickly.
• Chapter 13 – Best if you need to catch up on mortage/car payments and want to keep assets. Takes 3-5 years.

Talk with a bankruptcy lawyer to understand which makes sense for your situation.

New York Exemptions – What You Can Keep

A big factor in deciding between Chapter 7 and 13 is understanding exemptions – assets the trustee can’t sieze and sell. New York has its own set of exemptions that let you protect more assets, including:

• Up to $89,975 equity in a primary residence
• $4,825 equity in an automobile
• Jewelry, furniture, appliances up to $13,800
• Tools of trade up to $15,000

There’s a full list of NY exemptions here. Compare them to federal exemptions to see which gives you the best protection.

The Chapter 7 Process in New York

Here’s an overview of how Chapter 7 bankruptcy works in NY:

1. You file a petition with the bankruptcy court, along with financial forms detailing assets, debts, income, expenses.
2. The court appoints a trustee to oversee your case.
3. The trustee reviews your finances and may ask you to surrender certain non-exempt assets to be sold.
4. Most debts are discharged – credit cards, medical bills, personal loans, etc. Exceptions are student loans, alimony, and more.
5. After 3-6 months, you receive a discharge order from the court releasing you from discharged debts.

It costs $306 to file Chapter 7 in New York. You’ll probably want to hire a lawyer, which will add legal fees on top – often $1,500-$3,000 total. The process seems complicated but a good lawyer will handle most of the heavy lifting for you.

The Chapter 13 Process in New York

Chapter 13 can be more complex because it involves a 3-5 year repayment plan. Here are the basic steps:

1. File petition and financial forms, just like Chapter 7.
2. Your lawyer proposes a repayment plan based on your income and expenses.
3. The court reviews and approves the repayment plan.
4. You make monthly payments to a trustee who distributes them to creditors.
5. After all plan payments complete, remaining debts are discharged.

The repayment plan allows you to catch up on mortgage, car loans, and other secured debts so you can keep assets. Unsecured debts like credit cards often get only partial repayment.

Chapter 13 costs $281 to file. Attorney fees range from $3,000-$5,000. It’s more work but allows you to catch up on payments while keeping assets.

The Impact on Your Credit Score

Filing bankruptcy definitely hurts your credit score – there’s no way around that. A Chapter 7 bankruptcy can remain on your credit report for up to 10 years. Chapter 13 falls off after 7 years. The specific impacts include:

• Credit score drops 100-200 points after filing.
• Public record of bankruptcy filing damages credit.
• Foreclosures and repossessions also hurt credit.

Your score starts recovering after about 12 months of responsible credit management (paying bills on time, keeping credit card balances low, etc.). Be patient and focus on rebuilding credit slowly.

Alternatives to Bankruptcy

Bankruptcy is a last resort – it damages your credit and has long-lasting impacts. Before filing, be sure to explore alternatives like:

• Debt management plans – Work with a credit counseling agency to negotiate and consolidate debts into one monthly payment.
• Debt settlement – Hire a company to negotiate directly with creditors and settle debts for less than you owe.
• Sell assets – Downsize your home, sell valuables, or liquidate assets to pay off debts.

The right alternative depends on your specific situation. Talk to a credit counselor or financial advisor to understand all your options.

Bankruptcy laws can be overwhelming but take it one step at a time. Learn the exemptions, understand the processes, and always consult an experienced bankruptcy attorney. With the right help, you can get the fresh start you need here in New York.