Rochester Bankruptcy and Debt Relief

I frequently meet with debtors who tell me that they are thinking about filing for bankruptcy, but have concerns since they may need a new car in the near future.  I am usually asked if a new car or used car should be purchased prior to filing for bankruptcy protection.  As a bankruptcy lawyer, the current status of the law prevents me from counseling debtors from acquiring more debt prior to filing for bankruptcy.  However, if I were in the debtor’s position, I would consider the following.

First, if you planning to file Chapter 7 bankruptcy, and you will need a different car, you should buy the car since it is easier to buy a car prior to filing for bankruptcy, assuming that your credit allows it.  If the car is financed, the loan will have to be reaffirmed, and assuming that the amount of equity does not exceed you New York exemption for a vehicle, you will be able to keep your vehicle.  At the same time, a financed vehicle on your credit report will help you rebuild credit after filing for bankruptcy.

If you are filing for Chapter 13 bankruptcy, and decide to buy the car before filing, you will be able to keep the car and payments on the loan will be a part of your repayment plan.  If anything, since in Chapter 13 bankruptcy the bankruptcy court allows only a certain amount of interest to be paid on secured loans, it is possible that your monthly payments may be reduced.  The situation becomes more complicated if the debtor suddenly needs a car after filing Chapter 13 bankruptcy.  In order to obtain new debt, the debtor would need the bankruptcy’s court’s permission to take on a car loan.  This is likely to require a motion to amend the plan that was previously approved by the bankruptcy court.  If the court approves the purchase, that may change the monthly payments made by the debtor.  A potential benefit to the debtor is that if the payments are made on time, this is likely to improve debtor’s credit.

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.

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.