Rochester Bankruptcy and Debt Relief

Whenever there are judgments against real property, owned by the debtor who files Chapter 7 Bankruptcy, those judgments, under appropriate circumstances, can be removed by filing 522(f) motion.  The judgment can be removed provided that the debtor’s equity in the property does not exceed $50,000.00 per single filer, or $100,000 per married couple.  The $50,000.00, otherwise known as a homestead exemption, comes from the present version of New York’s Debtor and Creditor Law.  Prior to August 30, 2005, New York’s homestead exemption was $10,000.00 per single filer, or $20,000.00 per married couple.

One issue that was not conclusively resolved in Western New York bankruptcy court was what happened in a situation where the creditor’s judgment was perfected prior to August 30, 2005.  If the judgment was perfected prior to the effective date of the increase in the homestead exemption, would the new homestead exemption or old homestead exemption would apply if the debtor filed Chapter 7 Bankruptcy?

According to the United States Bankruptcy Court Judge Bucki in Buffalo, the applicable homestead exemption amount is the new $50,000.00.  In Re Calloway, Judge Bucki held that once the New York statute was amended, the homestead exemption amount became $50,000.00, and it would apply regardless of the date it was perfected.  Judge Bucki wrote that to hold otherwise, would disregard the meaning of the statute and its interpretation under New York law.  Specifically, he wrote that “C.P.L.R. § 5206 was immediately changed to provide that a homestead “not exceeding fifty thousand dollars in value above liens and encumbrances, owned and occupied as a principal residence, is exempt from application to the satisfaction of a money judgment, unless the judgment was recovered wholly for the purchase price thereof.””

Pursuant to the Debtor and Creditor Law § 282, the debtor has exercised her right to exempt her property from the bankruptcy estate.  Therefore, pursuant to 11 U.S.C. §522(f), the debtor may now avoid judgment liens that impair a homestead not exceeding $50,000 in value.

Therefore, debtor’s bankruptcy attorney does not need to be concerned with the date when the judgment was perfected.  As with most §522(f) motions, the biggest concern that a lawyer would have is the value of the property and whether debtor’s equity in it does not exceed the homestead exemption.

If you contemplating filing Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, or are dealing with debt problems in Western New York, including Rochester, Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation with a Rochester, NY, bankruptcy lawyer.

Periodically, I see debtors who have moved recently to Rochester, New York, or nearby, from another state who wish to file either Chapter 7 Bankruptcy or Chapter 13 bankruptcy. The critical issue in those situations is to determine what state’s bankruptcy exemption laws, if any, will apply.

Under BAPCPA, which passed in 2005, the initial question is how long the debtor has resided in the present state of residence. If the debtor has lived in the same state for the two years prior to filing, then New York’s exemptions will apply. However, if the debtor has moved to New York from another state during the prior two years, then the following rules will apply.

If the debtor resided in the same state for at least 730 calendar days continuously (two years) prior to the filing of the bankruptcy petition, then the debtor can use that state’s exemptions. If the debtor did not live in the current state continuously for at least 730 days, then the debtor must pick the state in which he lived most of the time during the 180 days prior to the 730 days. In other words, the state that must be selected is where the debtor lived most of the time between 2 and 2 ½ years before filing.

If no state qualifies using the above rules (i.e., the debtor has lived in abroad) or if the 180-day state requires current residency or being a domiciliary to use its exemptions, then the debtor must use the federal exemptions. The default rule will only apply if the debtor did not live in any state during the 180 day period that began 730 days before filing, or if the state requires current residency or domiciliary. Under some circumstances, it is advantageous to the debtor to use the federal exemptions since they are typically more generous than New York’s exemptions.

If you contemplating filing Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, or are dealing with debt problems in Western New York, including Rochester, Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation with a Rochester, New York, bankruptcy lawyer.

While bankruptcy appears to be a straight forward process, there are many pitfalls for the unwary.  Some actions taken by the debtor before filing Chapter 7 or Chapter 13 bankruptcy in New York, may result in serious consequences.  Here are some areas where mistakes are commonly made

1. Debts owed to family and friends.  I would strongly recommend that you don’t try to pay back the debts owed to family and friends in anticipation of your bankruptcy filing.  A trustee in a bankruptcy case can reach back and undo any such transactions that took place within one year prior to your bankruptcy filing.   The concept is known as preference.  It is intended to prevent debtors from favoring some creditors over other creditors by transferring assets to a third party and then claiming they have nothing left.  While you may not be aware of preference, and your actions are responsible and just, they are likely to be undone by the bankruptcy trustee.

2. Disclose your financial affairs to your bankruptcy lawyer.  Always be honest with your lawyer about your assets and your financial transactions.  I am on your side and am able to help you, but I need to know everything that has taken place in order to take full benefit of the bankruptcy law.  I can’t do that unless I have all the information available.  Also, if I am not aware of certain facts, and if they come to light during the case or even after your discharge that you’ve withheld information or hid assets, you’ll not only lose the assets that were hidden, but the entire discharge can be undone.  This means all of the bankruptcy protection created by your bankruptcy is lost and creditors can once again pursue you.

3. Don’t withdraw your retirement money.  Sometimes, this is the easy route out of financial difficulties since the debtor may think that he or she may need more cash on hand if you’re getting ready to file for bankruptcy.  However, since retirement plans such as IRAs and your 401(k) are actually protected from creditors by bankruptcy exemptions in New York.  If you take the cash out and try to keep it, it will become part of the debtor’s estate.  Additionally, you’ll owe pay taxes on the money you withdraw.

4.  Don’t disregard pending lawsuits against you.  While the automatic stay will protect you from any pending actions, once the bankruptcy is filed, any lawsuits pending prior to the filing should not be allowed to go into default.  Lawsuits, if permitted to go into default have consequences and may result in adverse finding that may be difficult to undo during the bankruptcy.  Do not treat law suits the same way as creditors.  While the creditors will primarily call you and send you letters, lawsuits can have serious consequences that can be implemented before you file.  Therefore, make sure that you, or your attorney, respond to any pending actions.

Of course, the most important step in all of this is to make sure you’re working with a knowledgeable, experienced and trustworthy bankruptcy lawyer.  A good bankruptcy lawyer will help you successfully navigate the bankruptcy process and help ensure that you avoid all of the potential problems.

If you are dealing with debt problems in Western New York, including Rochester, Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation with a New York bankruptcy lawyer.

If you are in debt, does it always make sense to file either Chapter 7 or Chapter 13 bankruptcy?  If your only source of  income is Social Security or Social Security Disability, you can file for bankruptcy, but it may not be necessary.  Because of the exemptions under both federal and New York State law, if your sole source of income is either Social Security Retirement or Social Security Disability, you are generally considered to be judgment proof and your income is exempt from garnishment or other collections actions by the creditors.  While your creditors still have the right to sue you and obtain judgments, they are not likely to be able to enforce them against your income or any bank accounts that contain solely the money from either Social Security Disability or Social Security Retirement.  At the same time, the debtor may still have other assets, either personal or real property, that a creditor may reach once it obtains a  judgment.

Even if you are judgment proof, you may still need to file a Chapter 7 or Chapter 13 bankruptcy.  If you have secured debt, such as a mortgage or car payment, and you are behind on your payments, Chapter 13 may give you the ability to bring these secured debts current, while still discharging most or all of your revolving credit debt, personal loans or medical debt.  Another benefit of filing for bankruptcy is that either Chapter 7 or Chapter 13 bankruptcy will stop harassment by the creditors.

If you are dealing with debt problems in Western New York, including Rochester, Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation with a bankruptcy lawyer.

When a debtor files for bankruptcy under Chapter 7 or Chapter 13, all of the debtor’s assets pass under control of the bankruptcy trustee.   The reason for this transfer of control is so the debtor will be able to discharge their debts and receive the benefit of automatic stay.  As I discussed previously, once a bankruptcy is filed, a bankruptcy estate is created by operation of the Bankruptcy Code which states that the bankruptcy estate is “comprised of all the following property, wherever located and by whomever held: (1) Except as provided in subsections (b) and (c)(2) of this section, all legal or equitable interests of the debtor in property as of the commencement of the case.” 11 U.S.C. § 541(a)(1) (2008).  Under the definition of the property of the estate, it also includes any interest in property that would have been property of the estate if such interest had been an interest of the debtor on the date of the filing of the petition, and that the debtor acquires or becomes entitled to acquire within 180 days after such date. This particular provision dealing with assets acquired within 180 days addresses inheritances and bequests.  Therefore, if the debtor receives an  inheritance, or a bequest, within 180 days of the filing for bankruptcy, that inheritance or bequest, become property of the bankruptcy estate.

Since a typical Chapter 7 or Chapter 13 bankruptcy runs its course within less than 180 days, a bequest or an inheritance may come within 180 days of the filing, but after the debtor receives his or her discharge or a confirmed plan.  Under those circumstances, the debtor has an absolute obligation to notify the bankruptcy trustee of the bequest or inheritance.  Once the money is actually received, the debtor must turn over the funds to the trustee.  Here in Rochester, Chapter 7 and 13 trustee specifically tell debtors during 341 meetings that any inheritance or bequest received within 180 days of the filing must be disclosed to the bankruptcy trustee.  While most of the time, debtors can protect their personal or real property through the use of exemptions and pre-filing planning, inheritances or bequests do not provide this opportunity.

If you are dealing with debt problems in Western New York, including Rochester, Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation with a bankruptcy lawyer.

In New York, the debtors can protect the equity in their residences by utilizing their homestead exemption. Equity is typically defined as the difference between the market value of the property and the debt owed on it. The homestead exemption is one of the most ways to protect your biggest asset, your home, from the claims of your creditors. In New York, an individual debtor can protect up to $50,000 of equity in home by filing Chapter 7 bankruptcy, $100,000 if the debtor spouses are filing jointly. In order to take the benefit of the homestead exemption, the property has to be your residence when you file the bankruptcy.

I am often asked if the debtor can lose the benefit of the homestead exemption.  My usual response is that the debtor could lose the benefit of the homestead exemption only in extreme circumstances. Typically, in order to lose the benefit of the exemption, the debtors must engage in fraudulent conduct or a clear showing of bad faith.  Further, the wrongful conduct must be related to the homestead exemption.

If, for example, you own a $300,000 investment property in addition to your $100,000 residence, but you wrongfully claim in your bankruptcy petition that you live in the $300,000 property, you may lose the right to claim the exemption. As long as the debtor does not lie or attempt to hide the property from the bankruptcy court, the debtor will not lose the homestead exemption.

If you are dealing with debt problems in Western New York, including Rochester, Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation with a bankruptcy attorney.

When you file your bankruptcy case,the creditors must stop calling you.  They can’t continue garnishing your wages.  They must stop all collection activities because every bankruptcy case protects the debtor with the “automatic stay.”   The automatic stay prohibits creditors from taking  actions against you, unless they obtain a permission from the bankruptcy court.

While there are some exceptions, primarily for matters involving marital obligations, otherwise known as “domestic support obligations”, for most people and most debts, bankruptcy provides real relief.

If creditors keep calling you, mailing you, garnishing your wages or taking other actions against you, call your lawyer immediately.  Regardless of whether the creditors acted with or without the knowledge of your filing, a bankruptcy lawyer make them stop.  Also, regardless of whether the creditors acted with or without the knowledge of your filing, the creditors may be liable for actual and even punitive damages as well as attorneys fees.

Section 362 of the US Bankruptcy Code states that § 362. Automatic stay states that the filing of a petition in bankruptcy operates as a stay “applicable to all entities, of the commencement or continuation, of any action against the debtor.” Section 362(k) states that an individual injured by any willful violation of a stay shall recover actual damages, including costs and attorneys’ fees, and, in appropriate circumstances, may recover punitive damages.

So what’s a willful violation of a stay? The creditor needs to know that you have filed for bankruptcy. It must take an action to collect against the debtor after that stay is in effect. The creditor doesn’t need to willfully violate the stay, it needs to willfully take the action. That means the creditor needs to send out the collection letter after that creditor knows of the stay.

Here in Rochester, Judge Ninfo addressed the issue of willful violation of automatic stay in In re Engel, holding that mailing of a billing statement after the bankruptcy was filed was a willful violation of automatic stay.  In Engel, the creditor was listed in bankruptcy schedules and was also contacted by the debtor’s attorney who demanded that the creditor stop any and all contact with the debtor. Even after the debtor’s attorney notified the creditor, the creditor mailed two additional billing statements.  While the creditor claimed that the contact with the debtor was an unintentional mistake, the court found that the creditor’s actions were intentional and ordered a hearing on damages.    

If you are dealing with debt problems in Western New York, including Rochester, Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation with a bankruptcy attorney.

If you file a Chapter 7 bankruptcy, what happens if you have a pending workers’ compensation claim?  Generally, if you file for bankruptcy in New York, any money received as certain public benefits is usually exempt.  However, workers’ compensation claims can result in significant lump-sum awards and a bankruptcy trustee may file an objection to the debtor claiming such award as exempt.

Here in Rochester, Judge Ninfo dealt with a similar situation in In re Herald, and his decision resolved these issues in Western New York. In order to resolve this issue in favor of the debtor, Judge Ninfo had to find that worker’s compensation award fell within the scope of §282.2(c) of New York’s Debtor Creditor Law, which exempts benefits received as a result of “disability, illness or unemployment benefit.”

After analyzing the legislative history of §282 of New York’s Debtor Creditor Law, Judge Ninfo concluded that the legislative intent was to exempt workers’ compensation proceeds.  He further noted that in some situations this may give a debtor a head start, as opposed to a fresh start,  where the debtor will receive a significant award after the bankruptcy filing, but found that any such award to be exempt nonetheless.

Thus, if you have a workers’ compensation case pending or your are receiving worker’s compensation payments, you can file a Chapter 7 bankruptcy and keep the award when you receive it.  It is important to tell your bankruptcy lawyer about it in advance, so that the workers’ compensation claim is listed as exempt on your bankruptcy petition.

If you are dealing with debt problems in Western New York, including Rochester, Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation with a bankruptcy attorney.

If you file a bankruptcy case between January and April, you may be expecting a tax refund.  Your Chapter 7 bankruptcy trustee may try to take your tax refund from you.  Tax refunds are probably the largest single type of asset which debtors lose in bankruptcy.   In New York, the tax refund may protected by your cash exemption up to $2,500, if you are not claiming a homestead exemption.

If only one spouse is filing for bankruptcy, and they file a joint tax return, Rochester Chapter 7 trustees usually take position that one half of the refund belongs to the trustee, subject to the applicable exemption.

In addition, here in Rochester, some of the Chapter 7 trustees frequently ask for a copy of the debtor’s income tax return for the year the bankruptcy is filed in.  This request may make place early in the year, even though the tax return would not be filed several months later.  The trustees’ goal is to see whether or not  a portion of the income tax refund can be pro rated from the beginning of the year to the date of filing bankruptcy.  If this prorated portion of the income tax refund is large enough, the trustee may make a demand that a portion fo the refund be turned over to the trustee.

One way of dealing with these issues is to wait to file your bankruptcy until after the tax refund was spent on family necessities.  It is important to disclose the tax refund to your lawyer and the trustee, since a bankruptcy trustee can simply write to the Internal Revenue Service and have it send the tax refund directly to the trustee, and a deliberate failure to disclose information can be a basis for a denial of discharge.

If you are dealing with debt problems in Western New York, including Rochester, Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation with a bankruptcy attorney.

If a creditor obtains a judgment against a debtor, that judgment, if filed, becomes a lien against any real property owned by the debtor.  Any such judgment lien against real property can be removed from the property, if the lien impairs an exemption you claim in your bankruptcy.  In New York State, you can only remove a judgment lien against your personal residence.  Debtor’s bankruptcy attorney usually files a motion pursuant to section 522(f) of the Bankruptcy Code.  A typical motion includes a number of attachments such as a copy of the deed, mortgage, current mortgage statement, a recent appraisal of the property, and copies of the judgment filed in the local County Clerk’s office.

Typically,  the debtor is faced with the following situation.  The debtor owns a home with the total equity of less that New York’s homestead exemption, which is currently $50,000 for a single debtor and $100,000 for a married couple filing jointly.   What a $50,000 homestead exemption means is that the debtor can have up to $50,000 of equity in the residence ($100,000 for a married couple) and your home will not be taken or threatened by the bankruptcy trustee or other creditors.   If there are judgments against the debtor, they are viewed as impairing debtor’s exemption in the property and gives the debtor the right to remove them.

If you do not own a residence when you file your bankruptcy, you cannot set aside the judgment in the County Clerk’s office, but the underlying debts are discharged.  This may become a a problem if you purchase (or inherit) real property after your bankruptcy.  In that situation, even though there is no actual lien against the newly acquired property, it may appear that there is to someone searching the Clerk’s office.  This is because they will see a judgment against you, and they will see that you own the property.  Without knowing about the intervening bankruptcy and the discharge of the debt that underlies the judgment, they could draw the conclusion that the judgment was in fact a lien against the property.

The problem often surfaces if there comes a time that you want to borrow against, or refinance the property.  Most lenders are sophisticated enough to recognize that any pre-bankruptcy judgments are usually discharged and a typical judgment search, or a title search, in Monroe County will include a check of the Bankruptcy Court’s records.  It is also the reason to keep a copy of your discharge after the bankruptcy so that the lender can have easy verification that the bankruptcy resulted in a discharge.

If you are dealing with debt problems in Rochester, New York; Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation with a bankruptcy attorney.