Understanding the Bankruptcy Process in New York: Step-by-Step Guide
Bankruptcy is a legal process that allows individuals to eliminate or restructure their debts. The bankruptcy process in NY can be complex, but understanding the basics can help you make informed decisions for your financial situation. Sometimes, it’s impossible to catch up on old debts, making bankruptcy the best option for a fresh start.
To help you prepare for the bankruptcy process, here is a step-by-step guide to refer to. While each situation is unique, you can expect the process to look similar to this.
Step 1: Determine if Bankruptcy in NY is Right for You
Before you file for bankruptcy, you should consider other options for managing your debts, as bankruptcy is considered a last resort. This is the case because bankruptcy will cause your credit score to drop, making it more difficult to borrow money in the short term.
Some other alternatives that are worth exploring are credit counseling, debt consolidation, debt settlement and debt management. A qualified and experienced bankruptcy attorney in NY will be familiar with these alternatives and can help determine which option is best.
Step 2: Choose the Right Type of Bankruptcy
Once you determine that bankruptcy is right for you, the next step is to determine which type of bankruptcy to file. Chapter 7 bankruptcy is a liquidation bankruptcy that eliminates most unsecured debts such as credit cards, medical bills and utility bills.
Chapter 13 bankruptcy is a reorganization bankruptcy that allows you to keep your assets and pay off your debts over time, typically three to five years. Once you have made all of your payments on time, the rest of your debt will be discharged.
An experienced bankruptcy attorney will explain both types of bankruptcy to you so that you can determine which one is best. Chapter 7 bankruptcy is most popular because it wipes away most debts and allows people to start fresh.
Step 3: Complete Credit Counseling
Before you can file for bankruptcy in NY, you must complete credit counseling with an approved credit counseling agency. This counseling session will provide more information on bankruptcy and if it’s really the right choice for you.
Credit counseling will also advise you on your money and debts and help with a budget. The goal is to provide you with insight on your spending habits and help you manage your budget more effectively so you don’t end up in the same situation down the line.
Step 4: File the Bankruptcy Petition
Once you have completed credit counseling, you can file the bankruptcy petition with the bankruptcy court. The petition will include information about your income, expenses, assets and debts, as well as any proposed repayment plan if you are filing for Chapter 13 bankruptcy.
Make sure that you include everything in your bankruptcy petition, as leaving any information out can cause your case to be dismissed. And, if you forget to include certain debts in your petition, it’s possible that they will not be discharged later on.
Step 5: Automatic Stay Goes Into Effect
When you file for bankruptcy, an automatic stay goes into effect, which prohibits creditors from taking any further action to collect debts. This includes phone calls, letters, lawsuits and wage garnishments. It’s one of the best parts about filing bankruptcy – all of those harassing phone calls will no longer happen!
Keep in mind that not all debts are covered by an automatic stay. Certain debts can’t be discharged in bankruptcy, including alimony and child support. Therefore, these debts are exempt from an automatic stay.
Step 6: Attend The Meeting of Creditors
After you file the bankruptcy petition, you will be required to attend a meeting of creditors, also known as a 341 hearing. The trustee assigned to your case will preside over the meeting and ask you questions about your finances and the bankruptcy petition.
Before attending a 341 hearing, review your petition and make sure that everything is accurate. If you’ve missed anything, now is the time to file an amendment. You will bring your petition, along with other items like paystubs, Social Security card and a photo ID, to the hearing.
Step 7: Complete a Financial Management Course
Before your bankruptcy case can be discharged, you must complete a financial management course with an approved credit counseling agency. This course will provide you with information on managing your finances and avoiding future financial problems. When you complete the course, you’ll receive a certificate of completion.
Step 8: Receive Discharge Order
When all of the required steps in the bankruptcy process are complete, the court will issue a discharge order, which eliminates most of your debts. This discharge is permanent and cannot be undone, except in certain circumstances, such as fraud or misrepresentation. On average, most bankruptcy cases can be completed in about six months.
Filing for bankruptcy can be a complicated process, but it’s also the best way to get a fresh start. If you are considering bankruptcy, it’s important to consult with a qualified bankruptcy attorney in NY who can help you navigate the process and ensure that your rights are protected. Contact The Law Office of William Waldner for a free consultation.