Bankruptcy Law FAQs

What is bankruptcy and how does it work?

Bankruptcy is a legal process that allows individuals and businesses to restructure or eliminate their debts under the protection of the bankruptcy court.

To file for bankruptcy, you must file a petition with the bankruptcy court and provide information about your debts, assets, and income. You must also attend a meeting of creditors, where you will be questioned about your bankruptcy petition by the bankruptcy trustee and your creditors.

If your bankruptcy petition is approved, the bankruptcy court will issue a bankruptcy discharge, which releases you from the legal obligation to pay certain debts. However, not all debts are dischargeable in bankruptcy, including certain taxes, student loans, and domestic support obligations.

It’s worth noting that bankruptcy can have significant consequences, including the loss of certain assets and damage to your credit score. It is generally considered to be a last resort, and you should consult with an attorney or financial advisor before deciding to file for bankruptcy.

It’s worth noting that even if you meet the eligibility requirements for bankruptcy, it may not always be the best course of action for your specific situation. Bankruptcy can have significant consequences, including the loss of certain assets and damage to your credit score. You should consult with an attorney or financial advisor to determine if bankruptcy is the right option for you.

What are the different types of bankruptcy and how do I know if I qualify?

There are several different types of bankruptcy, each with its own specific eligibility requirements and rules:

Chapter 7 bankruptcy: Chapter 7 bankruptcy, also known as a “liquidation” bankruptcy, is available to individuals and businesses. It involves the sale of non-exempt assets to pay off creditors, and any remaining debts are typically discharged. To qualify for Chapter 7 bankruptcy, you must pass a “means test,” which compares your income to the median income in your state. If your income is below the median, you will generally qualify for Chapter 7 bankruptcy.
Chapter 11 bankruptcy: Chapter 11 bankruptcy is available to individuals, businesses, and municipalities. It involves the reorganization of debts and the creation of a repayment plan to pay off creditors over time. There are no income requirements for Chapter 11 bankruptcy, but you must have the ability to pay off a portion of your debts through a repayment plan.
Chapter 12 bankruptcy: Chapter 12 bankruptcy is similar to Chapter 11 bankruptcy, but it is specifically designed for family farmers and fishermen. It involves the reorganization of debts and the creation of a repayment plan to pay off creditors over time. To qualify for Chapter 12 bankruptcy, you must be a family farmer or fisherman with regular income.
Chapter 13 bankruptcy: Chapter 13 bankruptcy, also known as a “wage earner’s” bankruptcy, is available to individuals with regular income. It involves the reorganization of debts and the creation of a repayment plan to pay off creditors over a period of three to five years. To qualify for Chapter 13 bankruptcy, you must have a regular income and your debts must fall within certain limits.

It’s worth noting that not all debts are dischargeable in bankruptcy, and the specific debts that can be discharged depend on the type of bankruptcy you file. For example, certain taxes, student loans, and domestic support obligations are generally not dischargeable in bankruptcy.

Filing for bankruptcy is a serious decision that can have significant consequences, including the loss of certain assets and damage to your credit score. You should consult with an attorney or financial advisor to determine if bankruptcy is the right option for you.

If you are considering filing for bankruptcy in New York, please contact an experienced bankruptcy attorney to discuss your situation. An experienced attorney will keep you apprised of your rights while ensuring that you understand all of your debt relief options. Please contact O’Connell and Aronowitz for a free consultation.