Monthly Archives: January 2016

Do I Qualify For Bankruptcy?

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In order to file Chapter 7 bankruptcy you must qualify by passing the means test. The “means test” was designed to limit the use of chapter 7 to only those who truly cannot repay their debts. To qualify, your household income must lower than your states median income, or you must pass the means test formula.

How does the “means test” work?

If your household income is below your states median income then you automatically pass the test and qualify for chapter 7. However, if you make above the median income then additional calculation must be done. The calculation can be done using a particular formula. This formula considers all your expenses and household income for the previous 6 months and determines if you have enough disposable income to repay some of your debts.

What is the median income for New York?

The median income for New York is $49,028.00 annually. Form 22A-1 requires you to list your last six months of your income, if it is lower than $24,514, then you are presumed eligible for Chapter 7 under section 707(b)(2) of the Bankruptcy Code. If you make over this amount, you must continue on to Form 22A-2, which calculates your expense deductions. This is the first step of the means test, which is simple: if your household annual income is lower than the median income for your state, you pass. Period, you’re done. You don’t need to complete the rest of the test; you can file chapter 7.

What if my income is above the median income? What do I do then?

The test can get slightly more complicated if your household income is higher than your state’s median income. The further calculation determines whether you have enough income left over after paying all allowed expenses (disposable income), to pay at least a portion of your unsecured debt (credit card bills).

What is household income?

Household income considers all the income from all persons in the household. This obviously increases your annual income according to the means test calculation. The good thing is that the median income of your state is higher depending on how many people are in the household. This usually includes dependant children and spouses, not roommates. For example, if you are a single parent with 3 dependant children, the median household income limit is increased to $88,642 annually.

What are allowed expense deductions?

Allowable expenses vary depending on what county you live in, each county has different allowed amounts for categories of expenses such as: housing, transportation, and basic necessities. If you live in New York County it’s highly likely that your monthly expenses are higher than someone with similar means that lives in Niagara County. Examples of expenses that are considered are your rent, public transit costs, out of pocket health care costs, and living expenses such as food, clothing, and household supplies.

How do I do the expense deduction calculation?

You can find calculators online to enter your income and expenses to see if you qualify; however, these are not always up to date and accurate. Don’t rely on these calculators, but it can help give you a ballpark of whether or not you would likely qualify. It is always best to speak with an attorney to determine whether or not you qualify for chapter 7.

What if I don’t qualify?

If you don’t qualify that doesn’t mean you can’t file for bankruptcy. It just means you can’t file chapter 7. You may still likely file chapter 13; however, that is a different type of bankruptcy. If you are not sure about what chapter 13 is, please refer to: https://balmerblack.com/what-is-chapter-13-bankruptcy-the-basics/.

Conclusion.

Qualifying for chapter 7 is a requirement that can determine if you are eligible to have your debts discharged. This does not always mean that if you do qualify it is in your best interests to file. Sometimes even if you qualify, it may not be best for you to file. It is important to remember that everyone situation is different and to be advised of all your options it makes sense to speak with an experienced bankruptcy attorney.

 

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

 

Will I Lose My House or Apartment If I File For Bankruptcy?

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If you, like many others, are dealing with a substantial amount of debt then you might be considering filing for Bankruptcy. A very common question that many of our potential Bankruptcy clients ask us is: What Will Happen to My House? And, Will I Lose My Home If I File For Bankruptcy?

Filing for Chapter 7 Bankruptcy

For purposes of our article we will focus on Chapter 7 Bankruptcy. For more information on Chapter 7 and Chapter 13 Basics you can take a look at our blog post “Bankruptcy 101” https://balmerblack.com/bankruptcy-101/

As discussed in the above article, Chapter 7 is a total liquidation of qualifying debts and as part of your Petition, the documents filed with the Bankruptcy Court, you must list your assets; which is where your home can come into play.

So What If I Rent My Home or Apartment?

If you rent your home or apartment bankruptcy should have no effect in regard to your current lease. Technically, your home, condo, or apartment, if it is rented, is not an asset because you do not own it and you do not have the ability to sell or borrow against a rental property.

So What If You Own Your Home?

The short answer is…. Maybe. I know that is not the answer that you were looking for, but there are some factors that we have to consider before determining whether or not you will be able to keep your home and still file for a Chapter 7.

It is all about the Equity That You Have In Your Home

No Equity? – First off, the Trustee will not require that you sell your home if there is no equity in it. Basically, if the balance due on your mortgage is more than the current fair market value of your home then you have no equity.

Equity in your home? – Having equity in your home is a good thing! This means that the balance due on your mortgage is less than the fair market value of your home. So, technically, if you were to sell your home today you would walk away with some cash. Now, in regards to Chapter 7 Bankruptcy, this could cause a potential issue. Why is that? Because the Trustee sees the equity as a way that you can pay back some of your creditors if you were to sell or borrow against your home. Therefore, the Trustee can force you to sell your home to pay back your debts.

The Homestead Exemption Can Save Your Home!

If it is determined that you do in fact have equity in your home it does not automatically prohibit you from filing for Chapter 7 Bankruptcy, but does potentially give the Trustee the ability to sell your home to pay back your creditors. The Homestead Exemption is very important because it allows a debtor with under a certain amount of equity to file for Chapter 7 and save their home.

How much is the Homestead Exemption and How Do I Know If I Qualify?

If the home in question is your primary residence, federal and state laws may allow you to exempt the equity in your home; thus, preventing the Trustee from selling your home to pay creditors.

In New York, the Homestead Exemption is up to $165,550.00 for the following counties: Kings, New York, Queens, Bronx, Richmond, Nassau, Suffolk, Rockland, Westchester, and Putnam; $131,325 for the following counties: Dutchess, Albany, Columbia, Orange, Saratoga, and Ulster; $82,775 for the remaining counties in the state.

Conclusion

If you are considering Bankruptcy and you worried about saving your home an experienced bankruptcy attorney can help you determine whether or not the Homestead Exemption applies to your situation. Also, if your primary concern is saving your home and the Homestead Exception doesn’t apply to you, our expected team of attorneys can discuss with you alternatives to bankruptcy.

 

 

5 Major Myths of Bankruptcy

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Many people do not understand how bankruptcy works and have many misconceptions about the process. Bankruptcy often is looked at as a big scary life-changing event, and as such, comes with embellishment and exaggeration of the truth. Unfortunately, these false facts can scare people away from bankruptcy when they could seriously benefit from the benefits. The following are a list of myths that are commonly accepted as fact by consumers.

  1. I Will Lose Everything I Have.

Many people don’t file for bankruptcy relief because they incorrectly think that they will lose everything they own. This is not true. There are things called exemptions that can cover your things allowing you to keep them. For an example of how exemptions are used to protect a car that you own please refer to: https://balmerblack.com/will-i-lose-my-car-if-i-file-bankruptcy/

Exemptions can cover much of the assets you do have, such as household goods, money in savings (up to a certain amount), money in retirement accounts, family photos and videos, religious texts and other books & magazines, as well as a vehicle and home. If the assets you have are not too valuable you will likely be able to retain all of your things.

  1. Everyone Will Know I Filed Bankruptcy.

Although it is true that Bankruptcy is a public legal proceeding, the practical aspect is that it is very private. Unless you are a prominent person, it is highly unlikely that the media will pick up your filing and publicize it. There are simply too many people filing bankruptcy that very few publications have the manpower, space, and interest to publish all the names. For the vast majority of people the public filing of bankruptcy remains private.

  1. It’s Difficult to File Bankruptcy.

In reality filing bankruptcy can be relatively simple. Technically, you can do so on your own without an attorney. However, it is advised that you do not go through the process on your own in case any issues come up. Depending on your particular income and assets, bankruptcy can be straightforward and easy. You will need to provide some documentation like pay stubs, bank statements, tax returns, and liens or titles of assets. Then the bankruptcy petition has to be completed and filed, which is followed by a meeting with the trustee. As a whole, it’s not a complicated process.

  1. Bankruptcy is Too Expensive.

Although it’s true that there are some costs to file bankruptcy, the court understands that people with the need for bankruptcy are insolvent so they make the costs reasonable. Depending on what attorney you choose, the entire process can cost anywhere from $1,400.00 – $2,500.00. If you decide not to retain an attorney, your case can be completed for as little as $400.00. This is no small sum of money, but it is often worth the piece of mind that comes with a bankruptcy discharge.

The costs are broken down into the filing fee ($335.00), debtor education and credit counseling courses (anywhere from $30 – $100 for both courses), credit report ($25-$50), and legal fee, which can range depending on the attorney and your location.

  1. I’ll Never Get Credit Again.

Many people believe that if they file bankruptcy that they won’t be able to get good credit again. Bankruptcy is considered “credit suicide” and is the biggest “negative” you can have on your credit report, which remains for 10 years. However, it is essentially rock bottom, which will allow you to move your credit in the right direction, up.

Once your discharge has been granted, you will be able to slowly but consistently build your credit score back up. It is very common for debtors to receive credit card offers shortly after bankruptcy, although they are often from subprime lenders with ridiculously high interest rates. It may take a few years to build your credit again, but with smart budgeting and financial management you can achieve great credit quicker than you would think.

The bankruptcy process may be relatively simple, but everyone’s situation is different; therefore, it is always advisable to speak with an experienced bankruptcy attorney to discuss all the options available to you.

 

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