Chapter 7 Bankruptcy in New York

What you must do to help us process your chapter 7 bankruptcy

A. THE STAGES OF THE CASE ARE AS FOLLOWS

1. RETAIN OUR OFFICE: Storobin & Spodek LLP begins preparing your chapter 7 bankruptcy petition for transmittal to the New York Bankruptcy Court. We are speaking to your creditors when they call our office regarding your account. We will confirm to callers that you are a client of our office. True protection from creditor harassment is obtained when your petition is filed with the Bankruptcy Court. You should tell creditors that call that you are filing bankruptcy and that you are represented by Storobin & Spodek, LLP.

2. MEANS TEST ANALYSIS: If your income is “above average” we will analyze your income and expenses by application of the so called “financial means test”. From the results we will advise if chapter 7 bankruptcy is available to you. If it is not then we will discuss your options under chapter 13 bankruptcy.

3. PRE-FILING CREDIT BRIEFING: A precondition of being able to file for chapter 7 bankruptcy is completing a “credit briefing” session. This can be done by telephone or over the Internet. Our law firm will arrange for this service that is provided by an independent credit counseling service.

4. BANKRUPTCY PETITION FILED: Your bankruptcy petition has been accepted at the Bankruptcy Court for filing. A court case number (docket number) has been assigned. A court order is issued that protects you against collection efforts.

5. BANKRUPTCY COURT HEARING: You and your bankruptcy attorney will attend a Bankruptcy Court hearing before the case trustee. This hearing is known as the “meeting of creditors”. At the hearing the facts and circumstances of your case will be reviewed.

6. POST-FILING CREDIT BRIEFING: A precondition of obtaining a Discharge is completing a “financial management class” session. This can be done by telephone or by the Internet. Our office will arrange for this service that is provided by an independent credit counseling service.

7. DISCHARGE GRANTED: The time for any creditors who may have had grounds to object to your Discharge has passed. The Bankruptcy Court issues you a Discharge Certificate. Your case has been successfully completed.

B. HOW TO HANDLE CREDITORS

8. If creditors call, you are to tell them “I am filing bankruptcy, call my attorney,” give them our telephone number 212-748-9243. Then just hang-up. Don’t let yourself be abused on the phone!

9. Send us copies of all collection notices you receive.

10. If you receive telephone calls at work, note the name of the person calling, their company, the date of the call and then tell the person calling, “I am not allowed to receive personal calls at work and you are putting my job in danger.” Then hang up. Keep a log of each call received at work. If a creditor continues to call you at work, contact our office.

C. WHAT YOU MUST SEND US

(Please send us copies only. These items will not be returned to you.)

11. You must send us a copy of these items:
a. Government issued photo ID (for example a driver’s license with your correct address)
b. Social security card,
c. Pay-stubs for the past sixty (60) days and all stubs to the date of filing,
d. Federal tax return filed for the last two years, and
e. Information about each creditor you owe. We must be given the creditor’s name, address, account number and the amount you owe. Please send us the last statement sent to you by each of your creditors

D. YOU MUST HAVE FILED TAX RETURNS PAST FOUR YEARS

12. You can not obtain a discharge unless you have filed tax returns for each of the past four (4) years prior to your bankruptcy petition filing, if you were required to have filed a tax return. If you need to file past due tax returns do so at once. Your petition can NOT be filed unless all of your required tax returns have been filed.

13. Always place your case number on all papers sent to our office.

14. All of your creditors must be listed on the petition. You may not pick and choose which creditors you wish to include on the petition. This applies to all credit card balances, even if you are making monthly minimum payments. Before the filing of your petition you will be asked to sign a certification that all of your creditors have been listed on your petition.

15. Payments to our office may be made by mail or in person. Checks or money orders should be payable to Storobin & Spodek, LLP. Do not send cash. Payments can also be made in person, at the office, by cash, money order or check. Please note there is a twenty-five ($25.00) dollar administrative fee for checks that are returned uncollected (“bounced”).

16. After payments are made to our office an updated account statement will be sent to you.

17. We anticipate that you will complete the payment of your fees within three (3) months. You must pay at least three hundred ($300.00) dollars each month to keep your file active. If your file becomes inactive the financial and other information in your file must be revised. This is known as “reactivation”. The charge for a reactivation is one hundred ($100.00) dollars.

E. BANK ACCOUNTS, GARNISHMENTS and DIRECT DEPOSIT PAYCHECKS

18. Creditors can continue their legal collection efforts until your petition is filed with the court. If they sue you and obtain a judgment the creditor can restrain (“freeze”) your bank account, garnish your paycheck and if your paycheck is direct deposited into a “frozen” bank account that deposit will also be “frozen”.

19. As a precaution, if you are being sued, you should bring your bank account balance to zero and stop the direct deposit of your paycheck until after your petition is filed.

20. Once the petition is filed the collection efforts will stop including lawsuits and garnishments on salary. If a bank account has been “frozen” we will try to have it released after your petition is filed. If too much time has passed between the account being “frozen” and the filing of the petition or if the account balance is too high we may not be able to have your account “unfrozen”.

21. Your best protection is to have your petition filed as soon as possible.

22. If you owe money to the bank where you have your bank account, checking or savings, they may offset against your account balance. They may take your money. Please note that a bank cannot offset against an IRA account

Potential problems – special problems in bankruptcy cases

If any of them exist please discuss them with one of our attorneys.

23. STUDENT LOANS

Student loans are almost never discharged (cancelled) in bankruptcy. Although the law does provide for a “hardship” discharge it has been our experience that one must prove a complete inability to repay the loan. It is very difficult, almost impossible to prove an “inability to repay”. To claim a “hardship” requires that an Adversary Proceeding be commenced. There is a separate fee for this service.

24. CAR LOANS, MORTGAGES AND OTHER PMSI

If you have given a creditor a purchase money security interest in your possession (typically auto loans, mortgages, furniture installment purchases and similar transactions) please note the following: Your bankruptcy will create for you new rights. You may keep the item and continue to make scheduled payments (a reaffirmation agreement will be required), or you may surrender the goods and cancel the debt (surrender and discharge), or you may keep the item and pay the current fair value, today, in a lump sum (redemption motion required). There is an additional fee required for a reaffirmation or redemption service. If you do nothing the creditor may seek to repossess (or foreclose upon) the item.

25. PARKING TICKETS

Parking tickets are not discharged (canceled) in a chapter 7 bankruptcy.

26. CO-SIGNERS

Your co-signers, sometimes called co-debtors, are not protected when you file bankruptcy. If you have a co-signer he/she will continue to be obligated to pay the full amount of the debt even if he/she never received any benefits from the transaction. If you have a co-signer that person must be listed on your petition. A courtesy card holder is different than a co-signer. If you obtained a “complimentary” card for another and that person has not signed an obligation agreement, that person, will not be responsible for your account debt. Likewise if you have a courtesy card from another that person’s account will not be affected by your bankruptcy filing. Sometimes, if you have given a courtesy card to another a creditor will harass that person after the filing of a bankruptcy, by you, the actual cardholder. If this happens contact us for special services to stop the harassment. There is a separate fee for this service.

27. CREDIT CARD FRAUD

It is improper to use your credit cards or credit lines after consulting with our office. The court may consider that you used your credit account without an intention of repaying the debt. Accordingly, once you have decided to file bankruptcy no further use of credit cards or credit lines should be made by you. If you have recently, within the ninety (90) day period before filing for bankruptcy, purchased luxury goods, or within the seventy (70) day period before filing for bankruptcy taken substantial (>$825) cash advances, this will be considered fraudulent. If this applies to your case then please review the facts and circumstances with one of our attorneys.

28. LARGE PAYMENTS TO CREDITORS OR FAMILY

If you have repaid a relative, business associate or close friend a loan, in full or part, within (before) one (1) year from the date your petition is filed (not the date you first retained our office) or have repaid any other creditors more than $600 within (before) ninety (90) days from the date your petition is filed you must review these facts with one of our attorneys.

29. TRANSFER OF PROPERTY

If you have sold or given away any land or buildings within the last 6 years you must review the facts and circumstances with one of our attorneys. If you have sold or given away valuable personal property (car or jewelry) within the last three (3) years you must review the facts and circumstances with one of our attorneys.

30. INCOME TAXES

Most taxes are not discharged (canceled) in bankruptcy, however some income taxes are. If you owe income taxes, and more than three (3) years have passed since your tax return was due, and the tax return has been filed, and the taxes have been “assessed” (a technical event), your taxes (including interest and penalties) may be able to be canceled. Legal research will be necessary to evaluate your particular case. An Adversary Proceeding will be necessary to determine the dischargeability of taxes. There is a separate fee for this service.

34. ALIMONY/SUPPORT PAYMENTS

Obligations to pay child support, maintenance (alimony) or other matrimonial awards are not affected by Chapter 7 bankruptcy. These debts are not discharged.

35. LIENS ON HOUSES

A bankruptcy filing will stop creditor collection efforts. However, if a creditor sues you and obtains a judgment before the petition is filed that lien will continue after the filing with some limited exceptions. Your personal responsibility for the debt will end but the property remains subject to the lien. The lien must be paid if the property is sold or refinanced, even after your bankruptcy discharge.

36. PENSION RIGHTS – GOOD NEWS!

Generally pension rights are exempt. They can be retained and need not be surrendered to the bankruptcy trustee. This includes private and public employer plans, tax deferred annuities, 401-k plans and IRA accounts. All retirement benefits should be specifically discussed with one of our attorneys.

37. ACCIDENT CASES – GOOD NEWS (in part)!

Your rights regarding an accident case, such as a car accident case or worker’s compensation case, come into existence on the day of the accident. Accordingly such claims must be listed on your bankruptcy petition even if the case has not yet gone to court. Money recovered in an accident case is ONLY exempt, net to you, for $7,500.00. If your accident happened before the petition is filed (regardless of when the money is actually paid to you) the Bankruptcy Court may have a claim against that money. If you have an accident claim you MUST speak to one of our attorneys about this special circumstance before your petition is filed.

Required Federal and State Disclosure

Federal and State law mandates that all attorneys providing bankruptcy services provide you, the client, with the information contained in this part III and in particular paragraphs 38 through 41.

38. HONESTY IS THE BEST POLICY:

A. The information that you provide to your attorney, the bankruptcy trustee, and the court in the course of your bankruptcy, both before and after you file your bankruptcy petition, must be complete, accurate and truthful.

B. All of your assets (everything you Own that has value, such as real estate, personal items, vehicles, money, etc.) and all of your liabilities (all of your debts) are required to be completely and accurately disclosed in the documents filed to start your case, and the replacement value of each asset must be stated in those documents where requested after reasonable inquiry to establish their value. The value should be your best understanding of how much it would cost you to replace the item in the same or similar condition.

C. You must provide your attorney with a monthly budget, including your current monthly income, all of your regular expenses, and the amount of your income that is left over after deduction of expenses. In listing your income and expenses, try to avoid guessing or estimating, and do your best effort to be accurate and truthful. For income, you are required to provide information about all sources of your income, including your employment, any government assistance you may receive, social security, pension or other retirement income, income from side jobs, investment income, and similar sources.

D. The information that you provide to your bankruptcy attorney, the bankruptcy trustee, or the bankruptcy judge may be audited and will be available for inspection by the office of the United States Trustee, which is a branch of the U.S. Department of Justice. If you fail to honestly and fully provide information about your property, income, expenses, and other financial circumstances, your case could be dismissed, and you could be subject to criminal sanctions.

39. FRAUD AND CONCEALMENT

If you decide to file bankruptcy, it is important that you understand the following:

A. Some or all of the information you provide in connection with your bankruptcy will be filed with the bankruptcy court on forms or documents that you will be required to sign and declare as true under penalty of perjury.

B. A person who knowingly and fraudulently conceals assets or makes a false oath or statement under penalty of perjury in connection with a bankruptcy case shall be subject to fine, imprisonment, or both. 11 U.S.C. § 342(b)(2)(A).

C. All information you provide in connection with your bankruptcy case is subject to examination by the Attorney General.

40. NOTICE TO INDIVIDUAL CONSUMER DEBTORS UNDER §342

In accordance with § 342(b) of the Bankruptcy Code, this notice: (1) Describes briefly the services available from credit counseling services; (2) Describes briefly the purposes, benefits and costs of the four types of bankruptcy proceedings you may commence; and (3) Informs you about bankruptcy crimes and notifies you that the Attorney General may examine all information you supply in connection with a bankruptcy case. You are cautioned that bankruptcy law is complicated and not easily described. Thus, you may wish to seek the advice of an attorney to learn of your rights and responsibilities should you decide to file a petition. Court employees cannot give you legal advice.
1. Services Available from Credit Counseling Agencies
With limited exceptions, § 109(h) of the Bankruptcy Code requires that all individual debtors who file for bankruptcy relief on or after October 17, 2005, receive a briefing that outlines the available opportunities for credit counseling and provides assistance in performing a budget analysis. The briefing must be given within 180 days before the bankruptcy filing. The briefing may be provided individually or in a group (including briefings conducted by telephone or on the Internet) and must be provided by a nonprofit budget and credit counseling agency approved by the United States trustee or bankruptcy administrator. The clerk of the bankruptcy court has a list that you may consult of the approved budget and credit counseling agencies.
In addition, after filing a bankruptcy case, an individual debtor generally must complete a financial management instructional course before he or she can receive a discharge. The clerk also has a list of approved financial management instructional courses.
2. The Four Chapters of the Bankruptcy Code Available to Individual Consumer Debtors
Chapter 7: Filing fees (combined) are $299.
3. Chapter 7 is designed for debtors in financial difficulty who do not have the ability to pay their existing debts. Debtors whose debts are primarily consumer debts are subject to a “means test” designed to determine whether the case should be permitted to proceed under chapter 7. If your income is greater than the median income for your state of residence and family size, in some cases, creditors have the right to file a motion requesting that the court dismiss your case under § 707(b) of the Code. It is up to the court to decide whether the case should be dismissed.

4. Under chapter 7, you may claim certain of your property as exempt under governing law. A trustee may have the right to take possession of and sell the remaining property that is not exempt and use the sale proceeds to pay your creditors.

5. The purpose of filing a chapter 7 case is to obtain a discharge of your existing debts. If, however, you are found to have committed certain kinds of improper conduct described in the Bankruptcy Code, the court may deny your discharge and, if it does, the purpose for which you filed the bankruptcy petition will be defeated.

6. Even if you receive a general discharge, some particular debts are not discharged under the law. Therefore, you may still be responsible for most taxes and student loans; debts incurred to pay non-dischargeable taxes; domestic support and property settlement obligations; most fines, penalties, forfeitures, and criminal restitution obligations; certain debts which are not properly listed in your bankruptcy papers; and debts for death or personal injury caused by operating a motor vehicle, vessel, or aircraft while intoxicated from alcohol or drugs. Also, if a creditor can prove that a debt arose from fraud, breach of fiduciary duty, or theft, or from a willful and malicious injury, the bankruptcy court may determine that the debt is not discharged.

Chapter 13: Repayment of All or Part of the Debts of an Individual with Regular Income. Filing fees (combined) are $274.
1. Chapter 13 is designed for individuals with regular income who would like to pay all or part of their debts in installments over a period of time. You are only eligible for chapter 13 if your debts do not exceed certain dollar amounts set forth in the Bankruptcy Code.
2. Under chapter 13, you must file with the court a plan to repay your creditors all or part of the money that you owe them, using your future earnings. The period allowed by the court to repay your debts may be three years or five years, depending upon your income and other factors. The court must approve your plan before it can take effect.

3. After completing the payments under your plan, your debts are generally discharged except for domestic support obligations; most student loans; certain taxes; most criminal fines and restitution obligations; certain debts which are not properly listed in your bankruptcy papers; certain debts for acts that caused death or personal injury; and certain long term secured obligations.

Bankruptcy Crimes and Availability of Bankruptcy Papers to Law Enforcement Officials

A person who knowingly and fraudulently conceals assets or makes a false oath or statement under penalty of perjury, either orally or in writing, in connection with a bankruptcy case is subject to a fine, imprisonment, or both. All information supplied by a debtor in connection with a bankruptcy case is subject to examination by the Attorney General acting through the Office of the United States Trustee, the Office of the United States Attorney, and other components and employees of the Department of Justice.
WARNING: Section 521(a)(1) of the Bankruptcy Code requires that you promptly file detailed information regarding your creditors, assets, liabilities, income, expenses and general financial condition. Your bankruptcy case may be dismissed if this information is not filed with the court within the time deadlines set by the Bankruptcy Code, the Bankruptcy Rules, and the local rules of the court.