Chapter 7 Bankruptcy

Are you overextended with too much credit card debt? Or perhaps you are behind in paying student loans, are unemployed or burdened with medical bills? If these situations sound familiar, you may feel there is no way to avoid creditor harassment, garnishment or a mortgage foreclosure. But there is.
A chapter 7 bankruptcy is the form of bankruptcy that most consumers file. Its purpose is to eliminate overwhelming debt, which may include credit cards, bank loans, medical bills, most court judgments, and deficiencies on repossessed cars or rent arrears. The debts that are not eliminated in a chapter 7 bankruptcy include certain child support and alimony or spousal maintenance, student loans, any debts obtained through fraud (if your creditor raises an objection) , some taxes and most government fines.

When you file a chapter 7 bankruptcy in New York, some property is protected; other property is not protected and would be liquidated or sold.

Protected property includes:

  • most household items and furnishings
  • one automobile worth no more than $2,400 after deducting debt
  • cash or bank accounts not exceeding $2,500
  • qualified retirement accounts (401K or IRA for example)
  • clothing and minor jewelry
  • other valuables

Property that is not protected includes:

  • home with more than $50,000 equity per person (See Chapter 13)
  • personal injury recovery more than $7,500
  • cash in excess of $2,500
  • income above your reasonable needs
  • stocks, bonds, certificates of deposit and funds NOT in a qualified retirement account
  • equity in vehicles above $2,400

The good news is that if you file a Chapter 7 consumer Bankruptcy, most actions against you, including garnishment, foreclosure, bank restraint, lawsuits, harassment by creditors, cease immediately. A hearing is held to verify the your bankruptcy petition, which lists your assets and liabilities and a discharge of debts is issued approximately 90 days after your court hearing unless a formal objection is raised. To prevent a discharge an objecting party must normally prove fraud or -material bankruptcy abuse on your part-a difficult threshold to meet.

If your medical bills are piled up, you’ve lost your job or are overextended with credit card debt, a chapter 7 consumer bankruptcy is a way to avoid continued creditor harassment. After filing, a bankruptcy notice will replace the debts on your credit report, and will stay on your credit report for 10 years. You cannot be fired from a job because you filed for bankruptcy. There are some negative consequences such as the fact that you need to 2 years before applying for a new mortgage. A chapter 7 consumer bankruptcy filing can usually be accomplished during three office visits. One court appearance is required about 30-40 days after bankruptcy has been filed with the court.