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Bankruptcy Advice Are you drowning in debt? Are creditors harassing you day and night? Bankruptcy is a viable option to start over with a clean slate or repay your obligations under a reorganization plan. It may seem like credit death to ask the court for help, but it's one of the best choices if you need help stopping wage garnishments, foreclosures, and repossessions. Here are some of the most asked questions we receive, but if you have any further inquiries that you cannot find here, please don't hesitate to call us directly for assistance. We understand how significant this decision is to you and your family.

How Bad Is Declaring Bankruptcy?

Declaring bankruptcy is a decision that you shouldn't take lightly. This public record will remain in your credit report for up to ten years. However, most folks that need this type of court assistance already have credit problems that have impacted their score, so it’s one of the best options to get debt relief. There comes tremendous stress with being in debt and not having enough money to make ends meet. Many can’t get a reorganization loan from a bank, so it’s one of the few options left. Sadly, you can run yourself right back into the same situation if you’re not careful, so you must attend credit counseling and incorporate better financial practices in the future. However, you shouldn’t beat yourself up over filing bankruptcy as Debt.org reported that 774,940 people filed in 2019 alone.

When Is Declaring Bankruptcy the Best Option?

If you don't have enough money to pay your bills each month, then you should consider bankruptcy. You should be behind on your debts by a couple of months to show that there is a genuine need. Many people use credit cards to live on and have huge balances. If you feel that you cannot sustain your life anymore without the court's intervention, then it's a good choice. However, it should be the last option and not the first choice for debt relief.

Is There a Limit or Minimum Amount of Debt You Need to Declare Bankruptcy?

The US Bankruptcy court doesn't have any minimum debt for filing a chapter 7 or 13 case. However, when it comes to chapter 13, the maximum amount that you can have is $1,184,200 in secured debt or $394,725 in unsecured.

What Are Some Things That Most Won’t Tell You About Declaring Bankruptcy?

There are many things that people don’t know about asking the court for help in erasing or reorganizing their debts. Here are just a few of the most overlooked facts:

•It Takes Two Years or More to Rebuild
One person that you should familiarize yourself with if you are filing for bankruptcy on Long Island is the trustee. Their official roles are to review your income, debts, assets and distribute any property that you might own to the creditor. They are a neutral third party that is not there for you or the creditor; instead, they want to act as a mediator in your case.

Understanding the Role of The Bankruptcy Trustee

The official in this role has control over your property that is held in trust. They have a fiduciary responsibility to act impartially towards both person and business. They act as the overseer for the court, so this individual must be well versed in legal issues with bankruptcy, accounting, and management. Think of them as the “watchdog” over your case.

For those who are contemplating filing bankruptcy, some of the terms can be confusing. The following information may help clarify some of the terms.

What Does a Discharged Bankruptcy Mean?

An order of discharge in bankruptcy means that the debtor is free of liability for a debt that was incurred. The legal obligation for repayment has been nullified by a permanent court order, and the creditor can no longer pursue the debtor for satisfaction of the debt. This also means that the debt cannot be sold to a collection agency since, in essence, the obligation no longer exists.

Which Debts May Be Discharged?

Not all types of debts are dischargeable in all types of bankruptcies. Chapter 7 and Chapter 13 bankruptcy filings are generally used for personal or sole proprietor debts. Although secured debts may be discharged in a bankruptcy filing, the creditor may have the option of reclaiming the security. Unsecured debts that can be discharged in both Chapter 7 and Chapter 13 include:
  • Credit card debts
  • Debts from a vehicular accident
  • Judgments from lawsuits
  • Leases and contractual obligations
  • Medical bills
  • Personal loans and promissory notes
  • Some types of miscellaneous debt
  • Some types of tax debt
Debts that aren't dischargeable in Chapter 7 but can be discharged in Chapter 13 only include:
  • HOA fees, condo and co-op fees
  • Court fees
  • Debts that weren't discharged in a prior bankruptcy
  • Loan debt that was used to pay a tax debt
  • Loans from a retirement plan
  • Marital debt from a divorce or property settlement agreement

What Types Of Debts Can Be Discharged?

Not all types of debt can be discharged in a bankruptcy filing, whether it's Chapter 7 or Chapter 13. Types of non-dischargeable debt include:
  • Alimony
  • Child support
  • Debts incurred as a result of driving under the influence
  • Debts for luxury items purchased within specific time frames prior to filing for bankruptcy
  • Debts from fraudulent activities
  • Monetary penalties and fines incurred as a result of breaking the law
  • Some types of tax debt

What Does a Bankruptcy Dismissal Mean?

If a bankruptcy case is dismissed, it has the same result as if the case were never filed. There is no discharge of indebtedness and the debtor remains responsible for the debt. Dismissal can occur due to filing errors or other types of errors. When a bankruptcy case is dismissed, the automatic stay is terminated and creditors can resume their efforts to collect their debt up to and including foreclosures, placing liens on real and personal property, and seizure of tangible assets.

What's The Difference Between A Voluntary And An Involuntary Dismissal?

Voluntary Bankruptcy Dismissal

When an individual files for Chapter 13, they can request a voluntary dismissal if they decide that filing bankruptcy was an error in judgment. This could be due to finding successful employment or learning that a particular debt isn't dischargeable or for another reason. The court can then order a dismissal of the case. Under Chapter 7, however, once the case is filed, only the judge can order a voluntary dismissal.

Involuntary Bankruptcy Dismissal

If an individual doesn't make the required payments on a bankruptcy or otherwise fails to meet the requirements of the court, then the court may file an involuntary dismissal. Although the decision to no longer make payments or otherwise meet the court-mandated requirements is voluntary, the dismissal is not considered voluntary. Sometimes, an involuntary dismissal can be reversed and the bankruptcy reinstated, but this must be done in an expedient manner, and reinstatement is ultimately up to the court's discretion.

Filing for Bankruptcy Again After a Dismissal

When re-filing to have a bankruptcy case reinstated, the individual must meet specific time limitations. It's imperative to learn the reason for the dismissal before proceeding with the request for reinstatement. Involuntary dismissals can occur due to simple clerical errors or missed deadlines or other issues. If the dismissal occurred due to information supplied by creditors, then it may be more challenging to have the case reinstated. Whether the case is voluntarily or involuntarily dismissed, the protection and automatic stays cease at the time of dismissal, and the creditors will be notified of the dismissal so that they can resume their collection efforts. If the dismissal was involuntary, then it may be possible to file another bankruptcy case, but there are time constraints and federal restrictions that must be met. As long as the requirements are met, it doesn't matter whether the original case was a Chapter 7 or a Chapter 11 bankruptcy. However, the second filing may appear on the credit report as a separate bankruptcy filing, which may result in a significant reduction of an individual's credit score.

Can Your Bankruptcy Discharge Be Denied?

Although bankruptcy cases can be denied, it seldom occurs. When it does, it's usually due to fraud on behalf of the debtor, and it's usually committed against one or more creditors. The most common reasons for having a bankruptcy denied include:
  • Defrauding a creditor: When personal property is transferred, sold, destroyed, or concealed within the year immediately preceding the bankruptcy filing, it may be evidence of an attempt to defraud. The decision to assign fraudulent intent is at the discretion of the judge.
  • Deficiency in assets: When there's no satisfactory explanation for a deficiency in assets, then a judge may decide that there's an intent to defraud.
  • Misrepresentation of facts: Also called lying, bankruptcy forms require the filer to state under penalty of perjury that the information is true and accurate to the best of their knowledge. If this is subsequently proven to be false, then the petitioner can be deemed to be attempting to perpetrate a fraud, and their bankruptcy case can be denied.
  • Misrepresenting or hiding financial information: Failure to disclose financial information or assets can be considered an attempt to defraud and result in the denial of the bankruptcy case.
  • Non-compliance with court orders: If a debtor doesn't complete the courses required by the court or doesn't obey other lawful court orders, they can be considered fraudulent debtors and their bankruptcy case denied.

Can Creditors Still Call After A Bankruptcy Has Been Discharged?

When a debtor files for bankruptcy, whether it's Chapter 7 or Chapter 11, an automatic stay of collection is put into place. When the case is discharged, then creditors have no legal right to continue their collection efforts. Those creditors who continue to call after the debtor has filed Chapter 7 or Chapter 11 bankruptcy or after the debt has been discharged are in violation of the law. The debtor may have legal recourse against them unless the court has granted the creditor the right to continue their collection activities. If a creditor continues to attempt collection efforts despite being informed of the bankruptcy, then they may be liable for legal action, especially if they threaten to place a lien or garnish wages. It's essential to keep detailed records of their activities, including names, dates, times, and types of contact, whether it's email, phone, text, or U.S. mail.
If you have already filed for chapter 7 relief or you are considering doing so, then you should be aware that you will be required to go to the bankruptcy court and attend a Section 341 Meeting of Creditors.

In every bankruptcy case, regardless of whether it is Chapter 7 or Chapter 13, there is always a 341 Meeting of Creditors. This meeting, often referred to as a 341 hearing, is not held in a courtroom. There will be no judge. It usually takes place in a meeting room, presided over by a trustee, appointed by the Office of the United States Trustee (a Government Agency which oversees all bankruptcies in the USA), approximately one month after a case is filed. Although it not held in a court room, 341 meetings are nonetheless legal proceedings, and anyone who is examined or questioned, will be under oath.
Are you facing judgement, repossessions, or a foreclosure on your home? Do you know that you need to file for bankruptcy protection, but you are apprehensive about the process and going to court? You don't have to let your payment history or credit utilization hold you back anymore. We are facing a unique time in history with the Covid-19 pandemic that’s occurring. Just as it has changed many things in your life, it’s also changed the court processes for the safety of the staff and those seeking debt relief. Following tips from the CDC, the court is protecting you while still servicing your needs. While the pandemic hasn’t stopped the court from processing bankruptcy requests, it has altered things dramatically. The first step is to see if you qualify for a Chapter 7 bankruptcy or if you will be required to file a Chapter 13. The deciding factor is whether you have any disposable income and a method to repay some of the debts you owe.

Credit Counseling and Debtor Education

When bankruptcy reform occurred in 2005, the rules change significantly. Credit counseling is something that was added to the requirement list. Before you can file for bankruptcy protection, the court wants to see that you have a certificate where you have completed credit counseling. Before you can get a discharge from your debts, you must complete debtor education. Due to Covid-19, you can take these classes over the phone or on the internet, and many companies are waiving fees to people who cannot afford these services.

The Means Test

During your consultation with our Long Island bankruptcy team, we will use the information you give to decide which chapter will be right for you. However, if we believe that you will file a Chapter 7, we will issue you this expenses and income evaluation. The Means Test is an examination given when a person wants to file for complete liquidation. To file for Chapter 7, you must show the court that you have no way to pay back your debts. This test will evaluate your income versus your outgoing and see if there is any disposable income. Due to the number of people out of work and the drastic hit to credit scores, many people are looking to the court for help. You can only file for a complete liquidation once every eight years, but it’s the perfect time to take care of this now that everything has been simplified.

Chapter 13 Repayment Plan

If you have told us that you have disposable income, or if the Means Test has shown that you can repay some debts, you must file for a Chapter 13. Additionally, if you have filed for bankruptcy in the previous eight years, the court will require you to file this method. During a Chapter 13, your disposable income will be used to pay back some of your debts. The amount of disposable income will dictate how much you will pay. Many just pay pennies on the dollars, but it’s all dependent on your situation. The benefit of using this chapter over others is that you can keep assets like cars and homes through reaffirmation of the debts. Though it’s also possible in Chapter 7, it’s easier when you have money and can prove to the court you can repay the debt. Additionally, the fees paid for our services can be worked into the plan so that you less out of pocket.

The Petition

The petition is quite lengthy, and it has several schedules that must be completed. This paperwork is essential to your case because if anything is left out, then you won’t get protection from the bankruptcy court for this debt. It’s vital that you take your time, gather your bills, pull your credit reports, and have a complete list of all your debtors. Any charge-off debts that are on your Experian, Equifax, or FTC reports must be reported. The trustee assigned to your case will go through your petition and check for any inaccuracies. If you leave anything off this petition or attempt to hide debts, it can be considered fraud. So, before your first meeting with us, make sure you have an accurate list of all your debts as well as income. Transparency before the court is of the utmost importance. If you cannot pay for the filing fee, we can ask the court to split the payment into four smaller installments. They usually approve these if they see that a person is struggling financially and unable to pay it. They are also more understanding of financial suffering during this Covid-19 crisis. So, a lack of money should never be the reason you don’t file for the court’s protection.

The 341 Meeting of Creditors

About 20-40 days after we file your petition, the court will schedule your Meeting of Creditors. Traditionally, you would go to the courthouse, and any lender that wanted to appear against you would come and file an objection to their debt being discharged. You would sit at a table and be sworn in by the trustee of the court. This process makes people very anxious even though we are standing beside you the whole time. Due to the Covid-19 pandemic, these meetings are now being conducted over the phone. You will be in a recorded session and answer the trustee’s questions. Your creditors can still file an objection, but nothing will be done in person. The good news for you is that you can take care of these matters in the comfort of your own home. You don’t have to go to court, deal with the nauseating nerve issues, and worry about finding parking. If you tend to be a bit shy and don’t like confrontation or appearing in front of others, then this is the time to take advantage of the court’s assistance during these unprecedented times. You don’t even need to worry about getting dressed in court attire.

Receiving a Discharge

If no one files an objection to the liquidation of their debt, then you will be granted a discharge from the court. They will typically issue a discharge 4-6 months after you file for a Chapter 7. If you successfully complete your Chapter 13 payment plan, then they will give a discharge within 60 days after your last payment. Keep in mind the repayment plan can last anywhere from 3-5 years, so it will take some time to get discharged using this method.

The Benefits of Bankruptcy

One thing that many people don't consider is that they can repair their credit through this process. We can give you many tips and develop a strategy to help you fix your score. Your payment history and credit utilization won't be erased, but the bankruptcy will go on your report drawing a defining line of debt forgiveness. You can start rebuilding your credit right away. Those inquiries and negative marks on Experian, Equifax, and FTC will not have such an impact moving forward. Yes, your charge-off debts and foreclosures also will not have the effect on your score as this strategy will help you fix and repair your credit. Though a bankruptcy will stay on your record for 7-10 years, it’s not going to stop you from rebuilding. While Covid-19 has brought unprecedented issues, it has helped those who want to file for bankruptcy.

The Law Offices of Adam C. Gomerman can help navigate you through this process. While you’re dealing with all these issues, the last thing you want to handle is the financial debts on top of everything else. Thankfully, this horrific time in history has led some assistance in seeking debt relief. Call today at 631-549-1111 to schedule your appointment for a consultation to get rid of your debts. 
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