An Alternative To Bankruptcy In New York

According to the United States Bankruptcy Court for the Southern District of New York, which includes Manhattan, the Bronx, and Westchester County, the total number of bankruptcy filings in 2020 was 6,942. As of September 2021, the total debt of New York State was approximately $70 billion. This includes both general obligation debt and outstanding bonds issued by various state entities such as public authorities and local governments. New York City, which is a separate entity from the state, has its own debt as well. As of June 2021, the total outstanding debt of New York City was approximately $98 billion, including both general obligation debt and outstanding bonds issued by various city agencies.

Bankruptcy Laws In New York

Bankruptcy laws in New York are governed by both federal and state law. In general, bankruptcy is a legal process that allows individuals, businesses, and other entities to eliminate or restructure their debts when they are unable to pay them.

The main federal law governing bankruptcy is the United States Bankruptcy Code, which applies to all states including New York. The Bankruptcy Code provides for different types of bankruptcy, including Chapter 7, which involves the liquidation of assets to pay off debts, and Chapter 13, which allows for the reorganization of debts and the development of a repayment plan over a period of several years.

In addition to the federal law, New York also has its own set of bankruptcy laws and regulations that apply within the state. For example, New York has its own exemptions that determine which assets are protected from creditors during bankruptcy. In New York, some of the assets that may be exempt from bankruptcy proceedings include personal property such as clothing, furniture, and appliances, as well as certain types of retirement accounts and life insurance policies.

What Types Of Bankruptcy Are There For You Personally?

In the United States, there are two main types of bankruptcy that individuals can file: Chapter 7 and Chapter 13 bankruptcy.

Chapter 7 bankruptcy, also known as “liquidation” bankruptcy, is the most common type of bankruptcy filed by individuals. It involves the liquidation of a debtor’s assets, with the proceeds used to pay off creditors. Certain types of property, such as a primary residence, personal belongings, and retirement accounts, may be exempt from liquidation under federal or state law. Most unsecured debts, such as credit card debts and medical bills, are discharged or eliminated under Chapter 7 bankruptcy, meaning that the debtor is no longer obligated to pay them.

Chapter 13 bankruptcy, also known as “reorganization” bankruptcy, involves the development of a repayment plan over a period of three to five years, during which the debtor makes payments to a bankruptcy trustee who then distributes those payments to creditors. The amount of the payment is based on the debtor’s income, expenses, and the amount of debt owed. Chapter 13 bankruptcy is often used by individuals who have a regular income and want to keep certain assets, such as a home or car, but need help getting caught up on missed payments.

What Types Of Bankruptcy Are There For Your Business?

In the United States, there are several types of bankruptcy that a business may file depending on its specific circumstances. The most common types of bankruptcy for businesses are Chapter 7 and Chapter 11.

Chapter 7 bankruptcy, also known as “liquidation” bankruptcy, involves the sale of a business’s assets to pay off creditors. In a Chapter 7 bankruptcy, the business typically ceases operations and a trustee is appointed to oversee the sale of assets. The proceeds from the sale are used to pay off creditors, and any remaining debts are discharged.

Chapter 11 bankruptcy, also known as “reorganization” bankruptcy, allows a business to restructure its debts and operations in order to become profitable again. In a Chapter 11 bankruptcy, the business continues to operate while it develops a plan to reorganize its finances and operations. The plan must be approved by creditors and the bankruptcy court, and may involve reducing or restructuring debt, renegotiating contracts, or selling assets. Chapter 11 bankruptcy is typically more complex and expensive than Chapter 7 bankruptcy.

In addition to Chapter 7 and Chapter 11 bankruptcy, there is also Chapter 12 bankruptcy, which is designed specifically for family farmers and fishermen, and Chapter 13 bankruptcy, which may be available for sole proprietors and certain types of small businesses.

Learn More about the 3 main types of bankruptcy

Things To Keep In Mind When Considering Business Bankruptcy In New York

If you are considering filing for business bankruptcy in New York, here are some things to keep in mind:

1. Types of bankruptcy: There are several types of bankruptcy, including Chapter 7, Chapter 11, and Chapter 13. Each type of bankruptcy has its own requirements, benefits, and drawbacks. It is important to understand the differences between them and choose the one that is best suited for your business.
2. Eligibility requirements: To file for bankruptcy, your business must meet certain eligibility requirements, such as being incorporated in New York, having a certain amount of debt, and being able to demonstrate that you are unable to pay your debts.
3. Bankruptcy exemptions: Some property and assets may be exempt from bankruptcy proceedings, such as personal property, certain retirement accounts, and tools of the trade. It is important to understand which assets are exempt and which are not.
4. Bankruptcy fees: There are fees associated with filing for bankruptcy, including court filing fees and attorney fees. It is important to budget for these costs and understand how they will impact your finances.
5. Impact on credit: Filing for bankruptcy can have a significant impact on your business credit score and ability to obtain credit in the future. It is important to understand how bankruptcy will affect your credit and make a plan to rebuild your credit after the bankruptcy is discharged.
6. Alternatives to bankruptcy: Bankruptcy should be a last resort option. There may be alternatives, that can help you avoid bankruptcy and address your financial issues.
7. Legal assistance: Filing for bankruptcy can be complex and requires legal assistance. It is important to work with a qualified bankruptcy attorney who can guide you through the process and help you make informed decisions.

What Debts Are Not Discharged In Bankruptcy?

While bankruptcy can discharge many types of debts, there are some debts that cannot be discharged through bankruptcy. Here are some common examples:

1. Certain tax debts: In general, most tax debts cannot be discharged through bankruptcy. However, there are some exceptions, such as if the tax debt is more than three years old or if the debtor filed a tax return for the debt at least two years prior to filing for bankruptcy.
2. Student loans: Most student loans are not dischargeable in bankruptcy, unless the debtor can demonstrate “undue hardship” in repaying the loan. This standard is very difficult to meet and requires a separate legal proceeding.
3. Child support and alimony: Debts related to child support and alimony cannot be discharged in bankruptcy.
4. Debts incurred through fraud or illegal activity: Debts incurred through fraud or illegal activity, such as fines or penalties imposed by a government agency, cannot be discharged in bankruptcy.
5. Debts owed to government agencies: Debts owed to government agencies, such as taxes or fines, cannot be discharged in bankruptcy.
6. Debts incurred after filing for bankruptcy: Any debts incurred after filing for bankruptcy are not dischargeable.
7. Debts that were not listed in the bankruptcy petition: If a debt was not listed in the bankruptcy petition, it may not be dischargeable.

How Bankruptcy In New York Affects Your Credit Score

Bankruptcy can have a significant negative impact on your credit score in New York. The exact impact on your credit score depends on a variety of factors, such as your credit history before the bankruptcy, the type of bankruptcy you file, and how much debt you discharge. In general, a bankruptcy filing will remain on your credit report for seven to ten years, depending on the type of bankruptcy you file. During this time, it can be difficult to obtain credit or loans, and you may be subject to higher interest rates or less favorable terms.

How Bankruptcy In New York  Affects Your Ability To Get A Loan In The Future

Filing for bankruptcy in New York can have a significant impact on your ability to get a loan in the future. While it is not impossible to obtain a loan after bankruptcy, it may be more difficult and you may be subject to higher interest rates and less favorable terms. Lenders view bankruptcy as a significant negative factor in assessing creditworthiness, and it may take several years after the bankruptcy discharge for lenders to consider extending credit to you again. 

Statute Of Limitations For Collections In New York

The statute of limitations for collections in New York varies depending on the type of debt. The statute of limitations is the time period during which a creditor or debt collector can sue a debtor for an unpaid debt. After the statute of limitations has expired, the debtor can no longer be sued for that debt.

Here are the statute of limitations for collections in New York:

1. Oral contracts and open-ended accounts (such as credit cards): 6 years
2. Written contracts and promissory notes: 6 years
3. Judgments: 20 years

It is important to note that the statute of limitations can be “reset” under certain circumstances, such as if the debtor makes a payment on the debt or acknowledges the debt in writing.

Cons Of Bankruptcy In New York

While bankruptcy in New York can be a helpful tool for individuals and businesses to discharge their debts and start fresh, there are also some potential drawbacks to consider. Here are some cons of bankruptcy in New York:

1. Damage to credit score: Filing for bankruptcy can have a significant negative impact on your credit score and can remain on your credit report for up to 10 years. This can make it difficult to obtain credit, loans, or favorable interest rates in the future.
2. Loss of assets: Depending on the type of bankruptcy you file, you may be required to liquidate certain assets to pay off creditors. This can include real estate, vehicles, and other personal property.
3. Public record: Bankruptcy filings are public record, which means that anyone can access them. This can be a potential embarrassment or cause discomfort for some individuals or businesses.
4. Legal costs: Filing for bankruptcy can be expensive, with legal fees and court costs adding up quickly. This can be a significant burden for those who are already struggling financially.
5. Limitations on future credit: Even after the bankruptcy is discharged, some lenders may be hesitant to extend credit to individuals or businesses with a bankruptcy on their record.
6. Stigma: There is still a social stigma associated with bankruptcy, which can be difficult for some people to deal with.

Compare the Pros and Cons of Bankruptcy: Pros and Cons of Filing Bankruptcy

Why People Regret Filing Bankruptcy:

People who have filed for bankruptcy regret the decision based on a number of factors, including:

1. Damage to credit score: Filing for bankruptcy can have a significant negative impact on a person’s credit score, which can make it more challenging to secure credit in the future. This can make it difficult to get a loan, rent an apartment, or even find a job.
2. Loss of assets: Depending on the type of bankruptcy filed, a person may have to liquidate their assets to pay off debts. This can mean losing possessions that are important to them, such as a home or car.
3. Social stigma: There is often a social stigma attached to filing for bankruptcy, which can lead to feelings of shame and embarrassment.
4. Long-term consequences: Bankruptcy can have long-term consequences on a person’s financial life. For example, it can be challenging to get a mortgage or other loan for several years after filing for bankruptcy.
5. Potential for fraud: Some people may regret filing for bankruptcy if they discover they made errors or omissions in their bankruptcy paperwork, which could result in allegations of fraud or other legal issues.

Will You Lose Your Home Or Car In Bankruptcy In New York?

Bankruptcy laws in New York provide certain protections for individuals who file for bankruptcy. In general, whether or not you will lose your home or car in bankruptcy in New York will depend on a number of factors, including the type of bankruptcy you file for, the value of your assets, and the exemptions you are eligible for.

If you file for Chapter 7 bankruptcy in New York, your non-exempt assets may be sold by the bankruptcy trustee to pay off your creditors. However, New York has relatively generous exemptions that can protect some or all of the equity in your home and car. For example, as of 2021, you can exempt up to $165,550 of equity in your primary residence under New York law, and up to $4,425 of equity in one motor vehicle.

If you file for Chapter 13 bankruptcy in New York, you will typically be able to keep your home and car, as long as you continue to make your payments on your mortgage and car loan. Under Chapter 13, you will create a repayment plan to pay back your debts over a period of three to five years, and you will keep your assets while you make these payments.

How Does Bankruptcy In New York Affect Tax Debts?

Bankruptcy in New York can have an impact on tax debts, but the specific effect will depend on a number of factors, including the type of tax debt you have and the type of bankruptcy you file.

Here are a few things to keep in mind about how bankruptcy in New York may affect tax debts:

1. Chapter 7 bankruptcy: In a Chapter 7 bankruptcy, your non-exempt assets may be sold to pay off your creditors. However, tax debts may be treated differently. Some tax debts may be eligible for discharge in a Chapter 7 bankruptcy, while others may not. Generally, tax debts that are more than three years old and meet certain other criteria may be dischargeable, but more recent tax debts are usually not.
2. Chapter 13 bankruptcy: In a Chapter 13 bankruptcy, you create a repayment plan to pay back your debts over a period of three to five years. Tax debts may be included in this repayment plan, and you may be able to pay back less than the full amount owed.
3. Automatic stay: When you file for bankruptcy, an automatic stay goes into effect, which temporarily stops most collection actions by your creditors, including the IRS. This means that the IRS cannot continue to pursue tax collection activities, such as wage garnishment or bank levies, while the bankruptcy case is pending.
4. Tax liens: Bankruptcy may not eliminate tax liens, which are legal claims against your property to secure payment of a tax debt. In some cases, you may be able to have a tax lien removed through bankruptcy, but this can be complex and will depend on the specific circumstances of your case.

What Happens If You Do Not Qualify For Bankruptcy In New York?

If you do not qualify for bankruptcy in New York, it means that you do not meet the eligibility requirements for filing bankruptcy under the relevant chapter of the bankruptcy code. The eligibility requirements for bankruptcy vary depending on the chapter of bankruptcy that you are considering, as well as your income, expenses, and other financial circumstances. If you do not qualify for bankruptcy, there are other options available to you, such as debt settlement.

If you do not qualify for bankruptcy, you may need to explore other debt relief options, such as debt settlement.

Why Debt Settlement In New York Is Better Than Bankruptcy:

Debt settlement involves negotiating with creditors to reduce the amount of debt that is owed, typically through a lump sum payment. One advantage of debt settlement is that it allows individuals to avoid the negative consequences of bankruptcy, such as a bankruptcy affected credit score, difficulty obtaining credit in the future, and the potential loss of assets. Debt settlement can also be less expensive and less time-consuming than bankruptcy.

It is important to note that bankruptcy can have serious and long-lasting consequences on your credit score and financial future. 

Bankruptcy vs. Debt Relief: What’s Right For You and How We May Be Able To Help

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