How to File Bankruptcy in New York: A Step-by-Step Guide

You’re probably here because you are facing difficult financial times. Learning how to file for bankruptcy in New York might feel overwhelming, but it can provide a fresh financial start. We’ll walk you through the entire process, from whether bankruptcy is right for you to navigating the paperwork and court procedures. This will help you decide what’s best for your situation. Keep in mind that this article only offers general information.

Understanding Bankruptcy: Is It the Right Path for You?

Bankruptcy, a legal process under federal law, helps people with debt gain a fresh financial start. Although different types of bankruptcies exist, Chapter 7 and Chapter 13 are the most common. Several factors determine which chapter you qualify for, like income, assets, and debt types, so it’s important to understand all options. To help you decide if you need a lawyer, take this short quiz.

Chapter 7 Bankruptcy:

Chapter 7, or “straight bankruptcy”, discharges many unsecured debts in exchange for giving up certain non-exempt assets. In many cases, people don’t own much beyond what’s exempt, and no property is taken. However, even if you qualify, Chapter 7 might not be right for you. Talking to a financial advisor about your specific circumstances will help guide your decision.

Chapter 13 Bankruptcy:

Unlike Chapter 7, where eligible debts are discharged, Chapter 13 requires establishing a court-supervised repayment plan. This chapter typically takes three to five years and is generally used by individuals who earn more than the state’s median income or have assets they want to keep.

Seeking Legal Counsel

While you can file for bankruptcy in New York without a lawyer, a seasoned bankruptcy attorney can impact your case. Bankruptcy law is intricate and carries serious financial and legal consequences. Hiring an attorney who understands both federal and New York State laws is strongly recommended. They can help you understand your options and safeguard your rights throughout the process. 

Taking the First Steps in a New York Bankruptcy

First, certain debts, known as non-dischargeable debts, can’t be erased in bankruptcy. Those typically include, but aren’t limited to: child support, some taxes, most student loans, and criminal fines and restitutions. Also, be aware of potential consequences: a bankruptcy discharge remains on your credit report for ten years.

There are two key requirements that apply when filing either Chapter 7 or Chapter 13.

Credit Counseling Requirement

Before filing, federal law requires you to participate in credit counseling from a government-approved agency. This course, which can generally be completed online or by phone, must be done within 180 days of filing your bankruptcy petition. It helps you fully explore your options before deciding to file.

If you need help paying for counseling, a fee waiver might be available. Even if you don’t file for bankruptcy, these agencies often provide budget and debt management advice. The United States Trustee Program maintains a list of government-approved providers.

The Bankruptcy Means Test:

This test uses your income and expenses to determine if it is low enough for you to file Chapter 7. If your income is too high, Chapter 13 may be an option. This online calculator can give you an idea of whether or not you qualify.

Filing Bankruptcy in New York:

Once you’ve taken the first two steps, gather all necessary financial documentation and complete the official bankruptcy forms. Depending on your jurisdiction, you can file these forms online through the court’s electronic filing system, by mail, or in person at the court clerk’s office.

Understanding the Chapters and What Happens in Each

Once filed, a bankruptcy trustee is assigned to your case to administer it and ensure the provided information is accurate. Both Chapter 7 and 13 cases require attending a 341 Meeting of Creditors.

Chapter 7 Procedure:

After filing, the bankruptcy court issues an order that prevents creditors from collecting on or pursuing actions against you for the duration of the Chapter 7 case. You’ll attend a meeting of creditors (also known as a 341 meeting). During this meeting, the bankruptcy trustee appointed to your case, and any creditor that chooses to be present, will have the opportunity to question you, under oath, regarding your financial history.

This typically takes place between twenty and forty days after your case is filed. Once all required steps in the Chapter 7 process are complete, including attending the 341 Meeting of Creditors, a determination of discharge will be made, usually within approximately ninety days after the meeting. The timeline can vary depending on individual cases. Filing for bankruptcy in New York under Chapter 7 usually takes just a few short months.

Chapter 13 Procedure:

Unlike Chapter 7, Chapter 13 bankruptcy requires debtors to propose a plan to repay a portion or, sometimes, all of their debts to creditors. This is typically done over three or five years through payments to a trustee who distributes the funds. You’ll propose a repayment plan based on your income and allowable expenses.

Chapter 13 often appeals more to people behind on their car loans or mortgage payments because it allows you to catch up on missed payments while keeping your house or car. This differs from Chapter 7, where you must be current on all payments to avoid the bankruptcy trustee from seizing your property for sale.

Although it can be more complex and costly to file than a Chapter 7, Chapter 13 might be the lifeline or second chance someone needs. Filing Chapter 13 doesn’t guarantee its success. Your repayment plan must be approved by the court, which can take months, and this chapter typically has more stringent requirements.

Legal and Procedural Nuances When Filing in New York:

It’s critical to understand New York’s bankruptcy court system and jurisdiction, especially the electronic filing procedures for those wanting to file pro se (without an attorney).

Navigating Court Jurisdictions and e-Filing Rules in New York

New York State has four United States Bankruptcy Courts: Northern, Southern, Eastern, and Western Districts. Each district serves specific counties, and you’ll need to file your bankruptcy petition in the district where your county resides. Make sure you understand your district’s local rules, such as keeping your contact information current and the proper filing procedures if you are pro se. Let’s take the Northern District as an example: if filing there without an attorney, you would need to understand and follow local rules, such as this rule which requires pro se debtors to provide notice of any change of address, including a local address within the Northern District of New York to the Court and parties involved.

Providing your current address ensures all parties can properly serve legal documents. This rule further mandates how address changes should be filed to ensure adherence to procedural guidelines. Failure to comply may result in delays or even dismissal of the bankruptcy case. Understanding and complying with these rules is crucial, highlighting the complexities and legal ramifications associated with filing for bankruptcy, especially without legal representation. It is also vital to determine your District’s specific rules since each may have requirements impacting those opting to self-represent, which emphasizes the significance of seeking legal guidance.

For example, those filing pro se in the Eastern District since May of 2022, need to familiarize themselves with the newly implemented Electronic Self Representation System, or (eSR) system, as the new online filing platform is mandatory for any non-emergency Chapter 7 or 13 bankruptcies. Although, the Southern District had temporarily accepted cash payments at its Manhattan location, keep in mind that has been temporarily suspended since COVID. The Western District still allows cash payments at its Buffalo branch office.

Property Exemptions

Both Federal and State laws provide exemptions to safeguard your essential assets during bankruptcy proceedings. Choosing between federal and New York bankruptcy exemptions is a critical part of filing. Your bankruptcy lawyer will analyze both options with you to decide which is best for your situation.

Western District Filing Requirement

You must understand any additional requirements. As an example, when figuring out how to file bankruptcy in New York’s Western District and deciding to self-file Chapter 7, individuals must submit their filing packets to the court with three photocopied petitions plus their original signed petition, which shows the Western District’s emphasis on accurate record-keeping.

Disputing a Debt

Under the Fair Debt Collection Practices Act, you have consumer rights and protection from unfair debt collection practices. If you’re facing aggressive collection efforts or are uncertain about the legitimacy of a debt, remember your rights. Consumer laws grant you the right to challenge a debt and request that the creditor provide proof supporting their claim.

You are within your rights to request debt validation before making payments. Furthermore, until the creditor provides satisfactory documentation supporting their claim, they must cease collection attempts. They are also prohibited from reporting negative information to the three major credit bureaus (Equifax, Transunion, and Experian). You can read this sample dispute letter for reference.

After Filing for Bankruptcy:

Post-Filing Requirements:

When you have successfully filed your bankruptcy petition, you must fulfill the post-filing requirements.

Debtor Education Course

Like the pre-filing credit counseling course, you must finish a debtor education course. Your attorney can guide you, or you can check out the United States Trustee program, which has a list of qualified providers. Once completed, file the certificate with the court; otherwise, your case could be closed without your debts being discharged.

Tax Transcripts

Keep copies of your recent tax transcripts readily available, particularly if you are filing without an attorney. Doing so will save time when pulling together the financial documents for the court with your petition. It might also speed up the filing process by ensuring a smoother, and hopefully faster, submission with fewer delays. This preparation highlights the importance of being organized when filing for bankruptcy.

Federal Court Finder

Need to know which courthouse in your assigned District your case will be handled in? Use the online court finder tool. By entering basic information, you’ll be provided with the court to go to and other important details such as links to their website, directions, and hours of operation.

FAQs About Filing For Bankruptcy in New York

How Do You Qualify for Bankruptcy in NY?

To qualify for bankruptcy in New York, you need to meet several requirements, such as living in New York state for at least two years or residing in the district for at least 180 days prior to filing and undergoing credit counseling. Passing a “means test“, which assesses your income, will determine your eligibility for either Chapter 7 or Chapter 13.

How Long Does Bankruptcy Take in NYS?

The time it takes to file bankruptcy can vary. A Chapter 7 bankruptcy in NY typically takes 4-6 months, while Chapter 13 can range from 3-5 years.

Do I Need a Lawyer to File for Bankruptcy in NY?

While you aren’t legally required to have a lawyer, due to the complexities, hiring one is strongly recommended. An attorney can ensure your rights are protected throughout the process, all required documents are filed properly, and can help guide your decision-making every step of the way.

What Assets Are Exempt From Bankruptcy in NY?

New York allows debtors to choose from federal or New York state exemptions that can protect various assets. However, exemption amounts for items like a house, car, or jewelry can and often do change every few years. These updates to the law won’t always appear in the written statutes themselves. If your case involves retaining assets above those covered by exemptions, contact New York’s Department of Financial Services for up-to-date information about your exemptions. This department handles exemptions for money judgments in NY, ensuring you receive accurate and relevant legal protection for your specific assets.

Conclusion

Understanding how to file bankruptcy in New York requires exploring every aspect of your personal and financial situation. Whether choosing Chapter 7 or Chapter 13, remember that filing offers a way to manage your debt and achieve long-term financial stability. To schedule a free consultation regarding bankruptcy, contact The Law Office of William Waldner today.