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New York State's Bankruptcy Law was recently changed to provide better protections to citizens of that state who were hit hard by the recent (and seemingly unending) financial crises. A good step by New York's Governor, David Patterson, according to a recent NY Times Editorial; An excerpt of which follows:

Gov. David Paterson put New Yorkers first and the banking and debt collection industries second when he signed a bill that increases the value of property that people can retain when they declare bankruptcy or when...Read more of A Good Bankruptcy Law here!

     

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For individuals with a ton of unsecured debt and very few assets it is usually advised they seek financial relief under bankruptcy Chapter 7. Under this proceeding all debts are eliminated at the time of discharge and the person begins over with a clear financial record. Although the bankruptcy will remain on their credit report for many years following discharge of the debts, even person who have filed bankruptcy Chapter 7 can be eligible for taking out loans and credit cards.

In order to file for bankruptcy Chapter 7 a person must first take a means test to determine if they have the means with which to pay of their debt through a Chapter 13 filing. If they have sufficient income to make payments calculated on their disposable income after paying normal living expenses, they may be required to enter a Chapter 13 agreement with the bankruptcy court and make monthly payments to the court trustee until all outstanding bills have been satisfied.

If the person seeking to file bankruptcy Chapter 7 is unemployed or lacks sufficient income to pay their typical living expenses, they may be eligible for petition the court to discharge their debts. Once this petition is granted and the debts have been removed, they are free to begin accumulating debt all over again.

New Laws Take Side Of Grieved Lenders

Under the old bankruptcy laws, the individual could determine the direction of the their bankruptcy and many creditors were complaining that individuals were accumulating debt over a seven year period and filing for bankruptcy Chapter 7 essentially eliminating all the debt they had accumulated. Most of this debt was unsecured in the form of credit card debt or medical expenses. Additionally, despite steps taken by the court to detect fraud in income and asset reporting, many were able to skirt these areas and maintain control of their assets.

Many of the bankruptcy Chapter 7 rules remain in place such as any sudden income received within six months of filing bankruptcy Chapter 7 has to be turned over to the court for dispersal to the creditors. Another issue that was resolved in bankruptcy proceedings was no longer permitting student loans to be discharged through the court unless certain criteria is met.

Many private lenders pushed for this exclusion in bankruptcy Chapter 7 as many students were taking out large loans to pay for their college education and prior to beginning a high-paying jobs would file for bankruptcy chapter 7, essentially allowing them to receive a free education.
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When a person decides to seek financial relief through the courts, there will seem to be no end to the number of bankruptcy forms that will have to be filled out and filed with the court. Each one of the forms filed in a bankruptcy proceeding is designed to offer the court an overall picture of the individual's finances and their reason for seeking relief through the court. The first of the bankruptcy forms the debtor will need to fill out is the voluntary petition for bankruptcy and well as the application and order to pay the filing fee in installments.

The petitioner can also file bankruptcy forms asking for a waiver of the filing fees, but these are approved only in rare circumstances. You will also need to list creditors with the 20 largest unsecured claims and, if needed, an involuntary petition. On top of the schedules showing your assets, you will need the summary of schedules, which includes the figures of certain liabilities.

Those owning real estate will need to file the bankruptcy forms on real property as well as any personal property and the form claiming some of that personal property as exempt from confiscation for sale to satisfy certain debts. Creditors with secured loans will also have to be listed on certain forms, with a separate form for the three different types of unsecured claims.

Forms Show Order In Which Creditors Are Paid

When property is sold to satisfy non-exempt personal property, creditors are listed as having secured claims, priority claims and unsecured claims with any money received by the court begin divided among them. There are different types of unsecured loans that are not discharged in bankruptcy that will be listed on the appropriate bankruptcy forms.

Student loans for college as well as past due federal taxes are typically not discharged under federal bankruptcy laws and have to be listed on the bankruptcy forms filed with the court. The percentage of any liquidated assets paid on these debts will be determined by the court, but the debtor will remain responsible for any balance owed. Additionally, any debt incurred in the commission of a felony, such as court fines and costs are not discharged.

While the plethora of bankruptcy forms can be purchased through many resources, it is advised against an individual attempting to fill out the forms on their own. Having an attorney work on the case can reduce the chance of the petition being disallowed. If the case is thrown out of court due to the free bankruptcy forms being incomplete, the filing fee is not refunded and you will have to pay the fee again to file the correct forms.

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