New York residents who are considering the possibility of filing bankruptcy protection might be wise to study the relevant laws on the subject. There are several different types of bankruptcy filings, each of which with their own conditions and benefits. It is essential to understand them in order to find the right kind of filing for each individual situation.
Bankruptcy protection is designed to shelter debtors from collection efforts for debts they cannot pay as they reorganize and regroup. There are six general varieties of bankruptcy filings under federal law. One of the best known for individuals is Chapter 7 bankruptcy or “liquidation.” Under this filing a trustee takes over the assets of the debtor and attempts to liquidate them in an orderly manner, repaying creditors as they go. However, since most property can be considered exempt from the bankruptcy process, it is common for little or nothing to be liquidated at all. Since 2005 all Chapter 7 filings have required a “means test,” which will exclude applicants with too much income.
Chapter 13 bankruptcy is another common filing for consumers in debt. It is meant to be utilized by debtors with a job or steady income stream. Chapter 13 allows the filer to propose a repayment plan, usually three to five years, and retain their major assets such as their home or vehicle. This filing requires a confirmation hearing, at which the court will review the repayment plan and either accept it or reject it.
Anyone who seeks bankruptcy protection may find it instructive to consult with an attorney who has experience in this area. The attorney can provide more details about the different types of filings and how the debtor may be able to qualify for them.
Source: US Courts, “Bankruptcy Basics – Process“, US Courts, June 24, 2014