The decision to file for bankruptcy is both personal and complex. Because of this, you need experience of a skilled and dedicated bankruptcy attorney. An experienced bankruptcy attorney will analyze the specifics of your personal debt situation, explain your bankruptcy options, and assist you in taking the steps toward a fresh start. There are two primary types of personal bankruptcy: 1) Chapter 7, and 2) Chapter 13. The purpose of this post is to explain the benefits and consequences of filing for Chapter 7 bankruptcy.
Understanding Chapter 7 Bankruptcy in New York
Chapter 7 bankruptcy is a type of bankruptcy under the federal Bankruptcy Code. In theory, Chapter 7 bankruptcy results in liquidation of one’s assets in order to resolve one’s debts. Importantly, however, this type of bankruptcy, in reality, does not result in a total liquidation. This is because Chapter 7 bankruptcy allows for certain property exemptions. “Exempt” property, in other words, is property that you are allowed to keep and own even during and after filing for bankruptcy. Your ability to take advantage of these exemptions depends on your unique personal situation. This is one of the reasons why an experienced Bankruptcy attorney is important in filing for Chapter 7 bankruptcy; you need someone who understands the laws concerning exemptions, and how to utilize them. Depending on your specific situation, exemptions might be applied to most, or even the entirety of your property. To determine the full extent of exemption coverage, consult with an experienced Bankruptcy attorney.
Estimating Property to Be Exempted Under the Chapter 7 System
While specifics require consultation with a Bankruptcy attorney, it can be said the exemptions, in most states, allow one to retain a certain amount of equity in one’s home or car, as well as cash saved in the bank. The exact amount depends largely on the total assets in the bankruptcy estate. as well as the types of property one owns and the value of each type.
Chapter 7 Bankruptcy Applies To Unsecured Debts
Just as one may exempt some types property in Chapter 7 bankruptcy, one is only able to wipe clean some types of debt. The primary type of debt absolved by Chapter 7 is “Unsecured” debt. Unsecured debt is not backed by collateral. Collateral is what “secures” a debt, and is thus sometimes referred to as a “security interest.” Absent collateral to secure a debt, most creditors cannot take any of one’s property without first filing suit and obtaining a court judgment. Debt secured by collateral is not wiped clean by Chapter 7 bankruptcy. In addition, Chapter 7 bankruptcy is ineffective against certain tax debts, child and spousal support, and, frequently, student loan debt.
When To Consider Filing For Chapter 7 Bankruptcy in New York
While Chapter 7 is not the answer to child support and student loan obligations, it is an option to seriously consider in the wake of medical emergencies, natural disasters, lost jobs, divorces, and other tragedies that wreak havoc on one’s financial situation. If you are considering Chapter 7 bankruptcy, reach out to an experienced New York Bankruptcy attorney today.