If an individual has decided to file for bankruptcy, he or she is probably experiencing financial turmoil and the emotional effects that come along with it. Further, there are several steps involved in filing for bankruptcy in New York. As a result, it is best to know and understand the rules of bankruptcy before you begin the process.
The 2005 Bankruptcy Act mandates that all individuals filing for bankruptcy undergo credit counseling. This is an added safeguard to ensure the debtor understands bankruptcy and reaffirms that bankruptcy is the correct path for the debtor. The credit counselor will try to figure out whether the debtor can resolve debt issues by an informal debt repayment plan or some alternative to bankruptcy. Once the counselor is convinced bankruptcy is the route to take, the credit counselor will issue a certificate of completion, which allows the debtor to file bankruptcy documents in court.
Once the debtor files bankruptcy documents in court, there is an automatic stay placed on all debts. This means all creditors’ collection efforts must cease.
Then, an analysis of the debtor’s income and expenses will determine whether the debtor can file for Chapter 7 where many debts can be discharged, or Chapter 13 bankruptcy where a repayment plan will be negotiated. If the debtor’s average income in the six months prior to filing is below the median income for the state, the debtor may file for Chapter 7. Other determining factors may also be considered.
Roughly a month after filing for bankruptcy, the bankruptcy trustee over the case will call a 341 Meeting of Creditors. The debtor must attend, although creditors may not be there. Any issues with the debtor’s bankruptcy plan may be disputed at this meeting. If the issues cannot be resolved, a judge will intervene.
After the bankruptcy case is resolved, debtors must complete a financial management instructional course after filing for bankruptcy.
The above steps to filing for bankruptcy just scratch the surface of the requirements and detail that goes into the entire process. The process is very involved. Those contemplating filing for bankruptcy should contact a qualified attorney to determine whether bankruptcy is a good option for them and to help them navigate the process.