The thought of filing for bankruptcy might cause you frustration and anxiety, but it can be the best way to eliminate crushing debt levels due to circumstances beyond your control. For many New York residents, filing Chapter 7 is an appropriate step with long-term financial benefits that outweigh the temporary credit concerns. We often help clients determine if bankruptcy is the right step for regaining their financial health.
According to Experian, debtors must pass a means test that establishes their eligibility for Chapter 7. This test demonstrates that the filer does not have the resources or “means” to repay their debts and prevents abuse of the bankruptcy code.
What is chapter 7 bankruptcy?
Chapter 7 can remove the burden of debt and help individuals get a fresh start. Known as straight or liquidation bankruptcy, a court-appointed trustee, assigned to your case evaluates your household’s financial position. If he or she concludes you have insufficient resources, the next step includes inventorying all assets and liquidating (selling) the nonexempt property. The proceeds of which pay creditors.
What is exempt property?
The goal of bankruptcy is to help honest people get back on their feet financially. This means you can keep certain property that enables you to do so. Exempt personal property includes cell phones, TVs, home goods, clothing, wedding rings and pets. Additional exempt property includes:
- Car/truck
- Non-retirement bank accounts
- Home
- Earned but unpaid wages
- Social Security benefits
- Veterans benefits
Specific guidelines apply for exemptions, and each case is unique. New York bankruptcy law encompasses different homestead exemption benefits in each county, making it a complex, detailed legal process. Depending on your circumstances, the state or federal statutes may meet your needs best.