Will I Lose My Car If I File Bankruptcy?

Chapter 7 bankruptcy is often referred to as a “no asset” bankruptcy. However, the bankruptcy laws do allow you to retain certain assets through bankruptcy. Because chapter 7 is a liquidation of assets, the trustee will sell any non-exempt valuable assets to pay creditors. The bankruptcy laws do not allow the sale of assets that are not covered with an available exemption. The basic idea of chapter 7 bankruptcy is that all your dischargeable debts will be forgiven once your non-exempt assets are liquidated. Many times, people think that because they own a car that the trustee will sell it; however, this is not necessarily the case.

What is an exemption?

An exemption is a very valuable tool in bankruptcy. Basically, an exemption is a bankruptcy law that allows you to retain certain assets through the discharge of the bankruptcy. In chapter 7, there are two sets of exemptions to choose from. These sets are the State exemptions and Federal exemptions. You cannot mix and match some state exemptions and some federal exemptions to use.  You have to choose either state or federal for your case. Your assets usually determine which set of exemptions to use. Each set of exemptions are limited to a certain amount.

New York State Vehicle Exemption

The motor vehicle exemption is how you can save your car from its liquidation. For example, using the New York State exemptions, you can exempt up to $4,000.00 worth of equity. According to New York Debtor & Creditor Law § 282(1), if your car is worth more than $4,000.00 and you don’t owe anything on it, then you may be forced to sell it. However, there is also a wildcard exemption that you can use another $1,000.00. A wildcard exemption is an exemption that you can use to apply to any type of property that you have. You may use it to save your car, money in the bank, or any other valuable property you have. You can combine it with any other exemption. If you use it for your car the total equity you can exempt in a car is $5,000.00. There is one limitation with the wildcard exemption, you can only use the wildcard exemption if you haven’t used the Homestead exemption for your home.  If you are disabled and the vehicle is equipped specifically for your disability then you can exempt up to $10,000.00 in equity. If your vehicle is worth significantly more than the available exemption the trustee will likely sell it to pay creditors.

Federal Vehicle Exemption

According to federal bankruptcy law, the motor vehicle exemption amount for a vehicle is $3,675.00. It works the same way that the State exemption, as long as your equity in your car is less than the exemption amount, then you will be able to retain it through the bankruptcy.  There is also a wildcard exemption for the federal exemption $1,225.00.

Changes in Exemptions

State and Federal exemptions change every few years. Usually, the amounts are increased approximately every 3 years. It is best to check with a bankruptcy attorney to see if the amounts have changed. Because everyone’s finances and assets are different, it is best to discuss your case with an experienced bankruptcy attorney.

 

The above post was written by Joshua C. Sibenik, Esq.

350,000 New Yorkers Settle with Collection Law Firm Mel S. Harris & Associates In A Lawsuit Over Sewer Service

In 2009, a Bronx resident by the name of Monique Sykes was being harassed by debt collectors and decided to fight back. Eventually, Skykes and 350,000 other New Yorkers, joined the class-action suit against Leucadia Corporation, a collection law firm Mel S. Harris and Associates, and process server Samserv Inc.

After several years of litigation, the case has been settled for 59 million dollars and the defendants have agreed to cease their debt collections efforts and businesses as part of the settlement. 

Sewer Service

At the heart of the lawsuit is what we in the legal world call Sewer Service. Essentially, Sewer Service occurs when a false Affidavit of Service, a document alleging that a defendant was properly served with notice of a lawsuit, is filed with the court. The major issue with Sewer Service is that these false Affidavits are  grounds for the plaintiff to enter a Default Judgment against the defendant.  Under New York Law, a defendant only has a limited time to respond to a lawsuit once they are served and the Affidavit of Service is the legal document that proves when and how a defendant was served with notice of the lawsuit.

Another potential issue with Sewer Service is that a defendant might not be notified of the lawsuit until there is an execution in place such as a wage garnishment, bank levy, lien place on real property, etc..

What To Do If This Happens To You

If you believe that you have been a victim of Sewer Service, or other deceptive collection practices, you should immediately contact an attorney.  There are laws that protect consumers and an attorney will be able to help you decide what your best course of action is.

What is Chapter 13 Bankruptcy? The Basics

There are two types of consumer bankruptcy, Chapter 7 and Chapter 13. While chapter 7 is a liquidation and discharge, chapter 13 is a re-payment plan. There are reasons a person may choose chapter 13 over chapter 7 and there are reasons a person must choose chapter 13.

Chapter 13 Basics

Chapter 13 is also referred to as a “wage earner’s” plan. It allows individuals who may not qualify for chapter 7 to still obtain relief of bankruptcy, albeit under different circumstances. Under this chapter debtors propose a repayment plan to the court agreeing to make installment payments to creditors over the course of a 3 or 5-year plan. If the debtor’s income is less than the applicable state median, the plan will last 3 years unless the court approves a longer period “for cause.” If the debtor’s income is above the median income, the plan must be for 5 years. In no case, can a chapter 13 plan extend longer than 5 years. During the repayment plan the law prohibits creditors from starting or continuing collection efforts.

Advantages of Chapter 13

  • Save your Home
    • Chapter 13 offers certain advantages over Chapter 7, one of the main advantages is that it offers the debtor the opportunity to retain their home from foreclosure. By filing under this chapter debtors can cease foreclosure proceedings and cure delinquent mortgage payments over time. But it is important to note that they must make all timely payments on their mortgage throughout the course of the plan.
  • Protect 3rd Party debtors –
    • By agreeing to repay the debt, you protect a cosigner on a loan from the creditor attempting to collect against them.
  • One Easy Payment-
    • Finally, under chapter 13 the plan acts like a consolidated loan where the individual makes the payments directly to the trustee who then distributes the payments to creditors.

Chapter 13 eligibility

Any individual, even if self-employed or operating an unincorporated business, is eligible for chapter 13 relief as long as the individual’s unsecured debts are less than $383,175 and secured debts are less than $1,149,525. These amounts are adjusted periodically to reflect changes in the consumer price index. Only individuals are eligible for chapter 13, not corporations or partnerships.

An individual can’t file chapter 13 if during the preceding 180 days a prior a bankruptcy petition was dismissed due to the debtor’s willful failure to appear before the court, the debtor filed to comply with orders of the court, or the bankruptcy was voluntarily dismissed after creditors sought relief from the court to recover property upon which they hold liens.

An individual may not file chapter 13 if they have not completed the required bankruptcy educational courses, one pre-filing and one post-filing.

What do you need to file?

In order to complete the Official Bankruptcy Forms that make up the petition, statement of financial affairs, and schedules, the debtor must compile the following information:

  1. A list of all creditors and the amounts and nature of their claims;
  2. The source, amount, and frequency of the debtor’s income;
  3. A list of all of debtor debtor’s property; and
  4. A detailed list of the debtor’s monthly living expenses, i.e., food, clothing, shelter, utilities, taxes, transportation, medicine, etc.

What happens once the case is filed?

Once the case is filed, an impartial trustee is appointed to oversee the case. The trustee both evaluates the case and serves as a disbursing agent, collecting payments from the debtor and making distributions to creditors.

Filing the petition “automatically stays,” or stops most collections actions against the debtors or debtor’s property. Filing the petition does not stay all actions, and for certain actions it may be effective for only a short time. Chapter 13 also contains a special automatic stay provision that protects co-debtors as well.

Meeting of Creditors

Between 21 and 50 days after the debtor files the chapter 13 petition, the chapter 13 trustee will hold a meeting of creditors. The debtor must attend the meeting during which the trustee places the debtor under oath, and both the trustee and creditors may ask questions.

Approval of the Plan

A payment plan must be submitted to the court within 14 days of the filing of the original petition.  No later than 45 days after the meeting of creditors, the bankruptcy judge must hold a confirmation hearing and decide whether the plan is feasible and meets the standards set forth in the bankruptcy code.

Once the plan is approved, the individual must then make all the payments under the payment plan. Once all the payments are made, the court will order the discharge and free you from any unpaid debts and possibly other debts

Conclusion

Chapter 13 is a bit more complex and involved than chapter 7, but for those that aren’t eligible for chapter 7, it can be the best way to be relieved from debt that has you feeling buried.

 

 

The above post was written by Joshua C. Sibenik, Esq.