If you are one of the millions of Americans that are no longer able to keep up with minimum payments on credit cards, payday loans, and other debt, you may be able to seek protection from creditors under the U.S. Bankruptcy code. These Federal provisions allow consumers that are overwhelmed with debt to keep their home, automobile, and other personal property to be forgiven or reorganize unsecured debt. There are two main options for consumers (non-businesses) and these are generally known as Chapter 7 and Chapter 13 bankruptcy. For those who qualify, filing bankruptcy can often be a more affordable, permanent alternative to credit counseling.
To file for protection from creditors under Chapter 7 of the bankruptcy laws, you must first qualify. Bankruptcy is a federal lawsuit and each applicant’s petition must pass through a stringent test based on established rules. A petitioner cannot, for example, have purchased luxury goods on credit in the past 90 days. A couple filing for Chapter 7 can only have a certain amount of equity in a home. Students loans are not able to be forgiven, in most cases. These rules do change from time to time – most notably in 2005 when federal student loans were no longer able to be included in a bankruptcy – so it is always advisable to consult with an experienced bankruptcy attorney that is admitted to practice in your district. To determine if you can keep your home, automobile, and other personal property, you must pass a Means Test which will be calculated depending on where you live, how much money you make, how many dependents you have in your household, etc. NoLo has a good Means Test Calculator based on numbers from the U.S. Trustee’s Office that you can use as an preliminary estimate for Chapter 7 qualification.
Before You File
In order to file, you will be required to complete a Chapter 7 Bankruptcy Petition, submit your past two years of income tax returns, 6 weeks worth of your current pay stubs (or an equivalent if you are on Social Security/Disability, or are self-employed). You need a recent copy of your credit report (that you can get for free here – no credit card required), and you will also be required to complete a Credit Counseling course that can be taken online or over the phone. The court also charges a filing fee of $307.00 (as of the date of this article) which must be paid prior to filing. If you do hire an attorney to represent you, his fees must also be paid in full prior to filing as your attorney cannot be listed as a creditor in your petition.
The minute your petition is filed with the bankruptcy court, creditors are no longer allowed to attempt to collect debts from you. You will receive a unique case number that you can provide to anyone who calls you from a collection agency. Notify them that you have filed for bankruptcy and refer them to your attorney for any additional questions. They can no longer bother you or “attempt to collect a debt”! Pending lawsuits must also stop, although you will want to make sure you do not already have any judgments against you or attached to your property. You can have judgments removed, but it will require a separate petition. When you file, your attorney can also apply to have any existing wage garnishments lifted. If your car is being repossessed or home is being foreclosed on, you can make decisions about renegotiating, affirming, or giving up these other debts.
After You File
Once your petition is in and fees are paid, you still have a few more responsibilities before your debts are officially discharged. You must complete a second Credit Counseling course. This second class is a bit longer, but can also be completed online or over the phone. There are many companies that offer these courses and most charge somewhere around $30.00. Approximately 30 days after you file, you will also be required to attend a brief conference with the Bankruptcy Trustee called a 341 Meeting or “Meeting of the Creditors”. You can learn more about this meeting watching this short video from the U.S. Bankruptcy Court’s “Bankruptcy Basics” series. If you file in the Northern District of New York, your meeting will probably be held in either Albany or Utica, depending on where you live. You should bring proof of government I.D. as well as your Social Security card. If you hired an attorney they will usually attend the meeting with you, though it may not be necessary. Approximately 90 days after your 341 Meeting, you will receive a letter from the Bankruptcy Court, officially discharging your debt. You can begin rebuilding your credit immediately and enjoy your fresh start to life. If, for any reason, you need to file bankruptcy again you can file the same Chapter of bankruptcy every 8 years in New York.
If you need a bankruptcy lawyer in the Northern District of New York, please feel free to contact my office. I have been practicing bankruptcy law for over 20 years and offer affordable fees. You can call me personally at (518) 465-2211 or add me to your circles on Google+.
The Law Office of Randall E. Kehoe has been representing clients in the Capital Region for over 20 years, offering affordable legal fees for bankruptcy, divorce, criminal defense, and other types of cases.