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Bankruptcy Questions

What debts will not be erased in bankruptcy?

Debts not discharged in bankruptcy include debts for alimony and child support, certain taxes, debts for student loans made or guaranteed by a governmental unit, debts for willful and malicious injury by the debtor to another entity or to the property of another entity, debts for death or personal injury caused by the debtor’s operation of a motor vehicle while the debtor was intoxicated from alcohol or other substances, and debts for certain criminal restitution orders. The debtor will continue to be liable for these types of debts. Even debts incurred for money or property obtained by false pretenses, debts for fraud or defalcation while acting in a fiduciary capacity, and debts for willful and malicious injury by the debtor may be discharged in a bankruptcy case.

Can I keep my home and/or car after I file for bankruptcy?

Yes, in many circumstances. One of the primary purposes of bankruptcy is to discharge certain debts to give “an honest individual debtor a fresh start.” The Bankruptcy Code allows an individual debtor to protect many kinds of property from the claims of creditors because it is exempt under federal bankruptcy law or under New York State law. For example, a person who files for bankruptcy may keep personal effects such as clothing, furniture, books, etc. Almost all retirement accounts and I.R.A. accounts are protected in bankruptcy. A car with equity over and above its liens in an amount no more that $2,400 is exempt in bankruptcy as well. If you are current on the mortgage payments, depending upon the amount of equity in your home, you may be able to take the homestead exemption and remain in your home after filing bankruptcy. In New York, the homestead exemption is $50,000 per person or $100,000 per couple.

Will filing bankruptcy stop bill collectors from calling?

Yes. Once a bankruptcy case is filed, the bill collectors must stop calling. A bankruptcy discharge releases individual debtors from personal liability for most debts and prevents the creditors owed those debts from taking any collection actions against the debtor. Lawsuits must stop as well.

What is Chapter 7 bankruptcy?

A Chapter 7 bankruptcy case will discharge most debts in order to give an individual debtor or married couple a “fresh start.” This means that the debtor has no liability and does not have to pay back these discharged debts.

What is Chapter 13 bankruptcy?

Individual debtors who have regular income may seek an “adjustment of debts” under Chapter 13 of the Bankruptcy Code. Under Chapter 13, a debtor or debtors will make payments to a bankruptcy trustee who will use this money to pay off part or all of their debts. In particular, a Chapter 13 bankruptcy case gives individual debtors an opportunity to save their homes from foreclosure by allowing them to “catch up” on past due payments through a payment plan.