Chapter 7 Attorney
Chapter 7 Attorney Serving Nassau & Suffolk Counties, Long Island
A Chapter 7 case commences with the filing of essential documents like a bankruptcy petition, schedules, and a statement of financial affairs. These documents disclose the client’s financial situation, including assets, liabilities, income, and expenses at the time of filing. Our firm gathers this information during initial meetings with clients and conducts thorough intake sessions to collect necessary documentation, such as income proof, tax returns, bank statements, and bills. We also review credit reports and perform judgment lien searches to ensure accurate creditor listings on bankruptcy schedules.
In the midst of a Chapter 7 case, clients must attend creditors’ meetings. Here, a Chapter 7 trustee interviews them to determine whether there are assets with equity that could be liquidated to pay off creditors. Most Chapter 7 cases are considered “no asset” cases since the available assets generally lack significant equity. Factors that reduce the potential equity in assets include existing liens, like mortgages and car loans, and statutory exemptions that shield a certain amount of equity from creditors. These exemptions can be chosen either from New York State law or federal law, depending on the case. Exemptions can protect various assets, such as homes, vehicles, household goods, jewelry, insurance policies, and tools of the trade.
The issue of avoidable transfers is closely linked to potential equity in assets. These transfers can be categorized as “preferences” or payments to creditors made 90 days before bankruptcy for third-party creditors and one year before filing for “insiders,” which includes relatives or close associates. Fraudulent transfers, or transfers for less than reasonable value six years before bankruptcy, can also be classified as avoidable transfers. These transfers aren’t always straightforward and may include transactions that, under bankruptcy law, could potentially be considered avoidable.
Another critical consideration is income level. Clients seeking Chapter 7 relief must meet specific income criteria based on their household size. The means test is used to evaluate their eligibility for Chapter 7, which involves comparing the client’s income and necessary expenses. Median income levels in New York State, which vary by household size, play a key role in determining eligibility. Even if clients surpass the median income, they can still potentially qualify for Chapter 7 if their expenses for basic necessities, such as housing, utilities, food, and clothing, reduce their counted income.
Abuse incurring debt just before bankruptcy and exaggerating budgetary items in Chapter 7 schedules can complicate a case. Acquiring significant cash advances and balance transfers right before filing could be monitored and objected to by creditors or the trustee. In some cases, payments and waiting may be advisable before proceeding with the bankruptcy case to avoid potential issues related to abusive debt.
During a Chapter 7 case, creditors who have obtained judgments and placed liens on the client’s property can have those judicial liens avoided. This is possible when the lien interferes with the client’s exercise of their homestead exemption, protecting the client’s equity in their home
If a client wishes to retain specific debt and remain legally obligated to repay it, they can reaffirm the debt through a legal agreement filed with the bankruptcy court. Reaffirmation is usually necessary for secured debts like car loans. However, many lenders for vehicles, except possibly Ford, are often lenient about requiring reaffirmation agreements, especially if clients remain current on post-petition payments.
Certain types of debt are not dischargeable in bankruptcy. Most student loans, taxes, and child or spousal support obligations are non-dischargeable. However, exceptions exist, such as proving “undue hardship” for student loans or addressing specific criteria for discharging income tax debt.
Impact of COVID-19 on Chapter 7
In every Chapter 7 case, the ultimate goal is to secure a discharge order, providing clients with legal debt forgiveness and a fresh start. A discharge makes the temporary protection of the automatic stay permanent, forgiving most unsecured deb