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Will my spouse be affected?

Your wife or husband will not be affected by your bankruptcy if they are not responsible (did not sign an agreement or contract) for any of your debt. If they have a supplemental credit card they are probably responsible for that debt. Day to day debts, such as credit cards, do NOT require both spouses to have signed.

If you are married and filing without your spouse, proof of his or her income will be required by the Court.  He or she, however, will not have to appear at the Meeting of Creditors unless required by the Trustee.

Bankruptcy will not affect the credit of your spouse.  Any joint debts however, will not be completely discharged.  They will become the responsibility of your spouse.


The Anatomy Of A Chapter Seven Bankruptcy

The most common (and most popular) type of bankruptcy is defined by Chapter 7 of the Bankruptcy Code.  This type of bankruptcy is available both to most individuals and businesses, including corporations that are no longer operational.  A debtor (the term used to describe the party filing for bankruptcy) may not file a Chapter 7 bankruptcy petition if he or she has filed one within the previous eight years.

Chapter 7 Bankruptcy eliminates most debts.  The most common exceptions are student loans, taxes, child support, civil fines and criminal fines.  Student loans and taxes as a general rule are not dischargeable. (Although under rare circumstances certain income taxes and student loans proven to be a “hardship” may be discharged). Child Support payments, civil and criminal penalties such as punitive damages can never be discharged in bankruptcy under any circumstances.

A bankruptcy starts with the filing of the official petition, schedules and Statement of Financial Affairs with the bankruptcy court. In order to complete the Bankruptcy Forms, you must provide a list of all of your creditors and the amount and type of their claim; the source, amount, and the frequency of your income; a list of all of your property; and a detailed list of your monthly living expenses.

A debtor that files a Chapter 7 Bankruptcy is permitted to keep certain property, which is defined as “exempt” property.  New York has implemented it’s own laws to determine which property is deemed exempt.  Among the most commonly exempt assets are the following:  (All married couples may file a joint petition and double the exemption amounts)

  • $2,500 in cash and $2,500 in wearing apparel and household goods, or $50,000 in equity in a home that is located in New York and the principal residence of the debtor (an appraisal may be required);
  •  a car with up to $2,400 in equity (an appraisal may be required),
  • all qualified retirement plans and IRA plans, including all 401k and 403b plans,
  • personal injury compensatory recoveries to up to$ 7,500 (not including pain and suffering), and,
  • all rental security deposits.  

Chapter 7 Bankruptcy is available to individuals with incomes at or below the median income of the state in which the debtor resides. For the year 2008 the median incomes in New York are as follows: 

  •     Family of one $44,803;
  •     Family of two $54,898;
  •     Family of three $65,477;
  •     Family of four $79,966.
  •     Husband and wife with no children: (approximately $67,000.00)

For households larger than four, $6,900 is added for each additional family member. These figures are revised at the beginning of each year.

In the event the debtor’s income is above the median income, a “means test” is applied to determine whether Chapter 7 Bankruptcy is allowed under the Bankruptcy Code. If the debtor fails the “means test,” Chapter 13 Bankruptcy may still be a viable option.

A Credit Counseling class (pre-filing) and a Financial Management Class are mandated for all Chapter 7 filings by the Bankruptcy Code. The credit counseling and educational course can only be given by a court-approved organization. The courses are given over the internet or telephone, and can be completed in our offices. (The call generally takes between 30-45 minutes). The credit counseling must be completed within the 180 days (6 months) prior to the filing of the bankruptcy petition. The Personal Financial Management class must be completed after the filing of the bankruptcy petition within 45 days of the First §341 Hearing. (This too lasts between 30-45 minutes). Failure to file this certificate in a timely manner will result in the dismissal of your bankruptcy petition.

Ordinarily, there is only one hearing before the Bankruptcy Trustee, which is known as the “first meeting of creditors.” (also referred to as a  §341 Hearing).  It is very unusual for creditors to actually appear at the meeting. A creditor must show the bankruptcy judge, after a hearing, that there is "cause" for the creditor to be allowed to continue with collection action (for instance, by showing that the property might deteriorate in value during the bankruptcy period).

If there is property that isn't exempt, the trustee takes control of it. From the sale of your property, the trustee pays the expenses of the administration of the case, and then gives any remaining money to creditors with allowed claims, according to the priority of the claims. Any wages you earn after you file the case are yours, beyond the reach of creditors who had claims on the date you filed for bankruptcy.
After all the trustee’s questions have been asked and answered satisfactorily, the trustee will close the meeting.  If the trustee does have further questions, he or she will schedule a second meeting date.  On most occasions, if the proper documentation as requested by the Trustee is forwarded in the interim and deemed satisfactory by the Trustee, the second meeting will not be required.

If a debtor wishes to keep a debt, he or she must sign a reaffirmation agreement, stating that the debtor shall continue to be liable for a debt.  Reaffirmation agreements are usually used by debtors who wish to keep a home or car.  The reaffirmation agreement must be signed by the debtor, creditor and if the debtor is represented by an attorney, then by the attorney as well.  The reaffirmation agreement must then be filed with the bankruptcy court.

Approximately three months after filing the bankruptcy petition, a discharge is usually issued by the bankruptcy court.  The discharge releases the debtor from liability for all dischargeable debts.

Creditors have two months from the first meeting of creditors in which to file an objection to the discharge. Objections are typically made when a debtor has made significant use of credit shortly before filing for bankruptcy.  If an objection is not made within the allowed period of time, the creditor will forever be barred from making an objection to the debt being discharged.

When Is A Chapter 13 A Better Alternative Than A Chapter 7?

There are several situations where a chapter 13 is preferable to a chapter 7. A chapter 13 bankruptcy is normally for people who have too much income to file a Chapter 7 bankruptcy or have the kind of debt that is non­ dischargeable in a Chapter 7 (e.g. certain taxes). Also, people file Chapter 13 because they are behind on their mortgage or business payments and are trying to avoid foreclosure. A chapter 13 bankruptcy allows them to make up their overdue payments over time and to reinstate the original agreement. Also, where a debtor has valuable nonexempt property and wants to keep it, a chapter 13 may be a better option. However, for the vast majority of individuals who simply want to eliminate their heavy debt burden without paying any of it back, Chapter 7 provides the most attractive choice.
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