All the recent news about high-profile corporate bankruptcies including, Toys "R" Us, Gibson Guitars and Weinstein Companies, can obscure the remedies that bankruptcy may provide for individuals. Individuals in Rockland County and other suburbs of New York City should remember that portions of the federal Bankruptcy Code are specifically tailored for them. This post will review the fundamental remedies that consumer bankruptcy provides for individuals.
The nation's bankruptcy laws are intended to provide a fresh financial start for people whose accumulated debts are greater than their ability to make regular payments. People seeking bankruptcy protection have two main options. A filing under Chapter 7 asks the court to collect the debtor's assets, to use those assets to settle with creditors and to discharge -- that is, declare no longer collectible -- many of the debtor's obligations.
The other option is a filing under Chapter 13, often called a wage-earner bankruptcy. A filing under Chapter 13 seeks court approval of a plan prepared by the debtor to use anticipated income to pay off existing obligations over a three- or five-year period. A plan of reorganization under Chapter 13 is subject to review and approval by creditors. In the end, the court will decide whether the plan is reasonable and whether to allow any creditor's objections.
New York law protects certain assets from attachment to satisfy debts, and the Bankruptcy Code provides similar protections. Deciding which exemptions to use may necessitate detailed knowledge of which exemptions are available and which will help the debtor the most.
Choosing between Chapter 7 and Chapter 13 often involves a thorough evaluation of the debtor's financial situation and a knowledge of how each type of proceeding deals with debts. Once a person has this information, they may be able to decide how to move forward towards a brighter financial future.
Source: United States Bankruptcy Court, Southern District of New York, "Understanding Bankruptcy," accessed May 7, 2018