New York State Bankruptcy Procedure: How It Works

The pandemic has taken its toll on our wallets. If you are unable to pay your bills on a monthly basis, filing for bankruptcy in New York will help you write off your debts and get back to normal. In this post from Nolo you will learn how to do it right.

Basic steps to start bankruptcy proceedings

• Determine the best way for you to file a Chapter 7 or Chapter 13 bankruptcy filing? You will find detailed information on this below.
• Determine if your income is in line with your chosen bankruptcy chapter.
• Find out what will happen to your property after starting the bankruptcy procedure and start preparing the paperwork.

How eligibility for bankruptcy in New York is determined

To find out if you are eligible to initiate bankruptcy proceedings, you must go through a funds verification. This will determine if you qualify for a specific chapter.

Chapter 7

Usually this main is used by people with limited incomes who are not able to pay all or part of their debts. To file for bankruptcy under this chapter, your household income must be below the average income in your state.

Chapter 13

If your income exceeds the limits in Chapter 7, you can pay off part or all of the debt as part of a five-year Chapter 13 debt plan. But you must have sufficient funds to pay off all debts. To determine the amount of the Chapter 13 payment, a special calculation will be made.

If you qualify for Chapter 7, but want to apply under Chapter 13 to take advantage of the benefits (for example, to save your home from dispossession), you can reduce the length of your repayment plan to three years.

You will find the necessary graphs of income and expenses on the website US Trustee Program (select "Information on funds verification" (in English. Means Testing Information).

How to protect property from alienation in bankruptcy

Most people want to keep their property in bankruptcy. To find out which assets can be protected, check out the New York Bankruptcy Relief Law (New York's bankruptcy exemption law).

On the subject: Popular New York supermarket chain filed for bankruptcy and closure

Among other things, you can use federal benefits to prevent bankruptcy.

What's next

Depending on which chapter you file for bankruptcy, it will be determined what will happen to your property, which is not protected from alienation in bankruptcy (from the English Nonexempt property).

Under Chapter 7, an insolvency administrator - a person appointed by an arbitral tribunal to conduct bankruptcy proceedings for an insolvent organization or citizen - will sell any unprotected property and distribute the proceeds to creditors in accordance with the rules for payments in bankruptcy cases.

If you file for Chapter 13 bankruptcy, you can keep all of your assets. But there is one catch: you will have to pay off the debt to your creditors within three to five years.

Property subject to exclusion from alienation in bankruptcy

Here are some commonly used New York bankruptcy exceptions. You can find their full list on the website The New York State Senate.

Protection of housing from alienation

The debtor can protect equity capital in the form of a home, condominium, cooperative or mobile home used as living quarters up to the following values:

• $ 170 in Kings, Queens, New York, Bronx, Richmond, Nassau, Suffolk, Rockland, Westchester and Putnam counties.
• $ 142 in Dutchess, Albany, Columbia, Orange, Saratoga and Ulster counties;
• $ 85 in all other counties.

Vehicle protection

Among other things, you can save your vehicle from alienation in bankruptcy if its value does not exceed $ 4; or $ 550 if equipped for use by a disabled debtor.

Bankruptcy petition process

Steps to take in case of filing a bankruptcy petition:

• Official forms for bankruptcy. Before a New York bankruptcy court can write off a debt, you must disclose all aspects of your financial situation - income, expenses, property, debts, and property transactions - on official bankruptcy filing forms. These forms are free. After completing all the forms, you will submit your documents to your local bankruptcy court.
• Bankruptcy filing fees or exemption from fees. You will pay a filing fee if you are not eligible for a fee exemption. Find out more about it here.
• Bankruptcy Attorney Fees. The cost of hiring a lawyer varies by region. Many refuse the services of a lawyer.

About what debts you will never be forgiven in the USA, even if you declare yourself bankrupt, read in this publication.