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.

I am frequently asked by the debtors how long their bankruptcy filing will remain on their credit report and whether they would be able to obtain credit after the filing.  There is a substantial amount of confusion with respect to when a bankruptcy can no longer be reported on the debtor’s credit report and whether credit becomes available to those who file for bankruptcy relief.

The length of time a bankruptcy can be reported on the debtor’s credit report is governed by the Fair Credit Reporting Act (“FCRA”).  The FCRA orders credit reporting agencies to remove bankruptcy case information from all consumer reports ten years after “the date of entry of the order for relief.”  It does not differentiate between Chapter 7 Bankruptcy and Chapter 13 Bankruptcy.  The order for relief according to §301 of the Bankruptcy Code is entered on the filing date, so the ten year period is measured from the bankruptcy filing date, not the discharge date.

It is usually a good idea to order your credit report after the bankruptcy to make sure that the bankruptcy discharge also shows on the credit report so that potential new creditors understand that the creditors whose claims were discharged in bankruptcy have no remaining legal claims.

In my opinion, bankruptcy is no more harmful to the debtor’s credit score than the financial circumstances that lead to the bankruptcy filing. In today’s lending environment, credit is available to the recently bankrupt. It may be more expensive than prior to the bankruptcy filing, and available with lower limits, but it is likely to be offered. Similarly, according to the credit industry’s studies, 18-24 months after a bankruptcy discharge, bankruptcy debtors can qualify for a mortgage loan on the same terms as if they had not filed bankruptcy. The anecdotal experience of my clients has been that they were able to obtain mortgages within two years of filing Chapter 7 Bankruptcy.  While it takes some effort to rebuild credit after bankruptcy, it is possible to do so.

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.

I have previously written about the requirements that a debtor must meet in order to file for Chapter 7 Bankruptcy.  As long as the debtor is able to meet the means test and disposable income test, the debtor can file for Chapter 7 Bankruptcy. However, there are a number of conditions that would disqualify a debtor from filing Chapter 7 Bankruptcy. The following post will address those conditions.

Generally, any debtor who is qualified to file and complete a Chapter 7 Bankruptcy case is eligible for a Chapter 7 Bankruptcy Discharge, unless the debtor falls into one or more of the following categories:

A person who has been granted a discharge in a Chapter 7 Bankruptcy case that was filed within the last 8 years.  This limitation prevents debtor from filing another Chapter 7 Bankruptcy case despite meeting all other qualifications.  The bankruptcy petition specifically asks debtors regarding any prior bankruptcy filings.

A person who has been granted a discharge in a Chapter 13 Bankruptcy case that was filed within the last 6 years, unless 70% or more of the debtor’s unsecured claims were paid off in the Chapter 13 Bankruptcy case. Therefore, if the debtor’s Chapter 13 Bankruptcy case paid less than 70% of the unsecured claims, the debtor is limited to filing Chapter 13 Bankruptcy within the 6 year period.

A person who files and obtains court approval of a written waiver of discharge in the Chapter 7 Bankruptcy case.

A person who conceals, transfers, or destroys his or her property with the intent to defraud his or her creditors or the trustee in the Chapter 7 Bankruptcy case. This relates to the provisions denying discharge to the debtor who committed that type of conduct.

A person who conceals, destroys, or falsifies records of his or her financial condition or business transactions.

A person who makes false statements or claims in the Chapter 7 case, or who withholds recorded information from the trustee.

A person who files to satisfactorily explain any loss or deficiency of his or her assets.

A person who refuses to answer questions or obey orders of the bankruptcy court, either in his or her bankruptcy case or in the bankruptcy case of a relative, business associate, or corporation with which he or she is associated.

A person who, after filing the case, fails to complete an instructional course on personal financial management. This is the reason that it is critical for the debtor to complete the course within 45 days of the meeting of the creditors.

A person who has been convicted of bankruptcy fraud or who owes a debt arising from a securities law violation.

If the debtor meets on or more of the above conditions, he is not eligible for a Chapter 7 Bankruptcy discharge and should not file a Chapter 7 Bankruptcy.

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.

One question that I am often asked is whether the unsecured second or third mortgage on the property owned by the debtor can be stripped in Chapter 7 Bankruptcy.  In Chapter 13 Bankruptcy, the unsecured second mortgage can be stripped by bringing a Ponds motion.

Unfortunately, in Chapter 7 Bankruptcy, the unsecured second or third mortgage cannot be stripped.  In a recent decision which also applies to the bankruptcy cases in Rochester, New York,  In re Grano, the Buffalo Bankruptcy Judge Bucki held that in Chapter 7 Bankruptcy cases, the debtors cannot avoid wholly unsecured second or third mortgages.

Joseph and Ann Grano owned a residence in the Town of Amherst, New York.  After filing a Chapter 7 Bankruptcy petition, they commenced the adversary proceeding against Wells Fargo Bank, N.A., to avoid a second mortgage.  In their complaint, they alleged that their real estate has a current fair market value of $445,000 and that it is encumbered by two mortgages: a first lien with an outstanding principal balance of $511,000, and the second mortgage of Wells Fargo with a balance of $95,837.60.

Granos asserted that they can avoid the second mortgage pursuant to the authority of 11 U.S.C. § 506(a) and (d).  In lieu of an answer, Wells Fargo moved to dismiss the complaint for failure to state a cause of action.  In relevant part, section 506(a)(1) of the Bankruptcy Code states that “[a]n allowed claim of a creditor secured by a lien on property in which the estate has an interest . . . is a secured claim to the extent of the value of such creditor’s interest in the estate’s interest in such property . . . and is an unsecured claim to the extent that the value of such creditor’s interest . . . is less than the amount of such allowed claim.” Asserting that the first mortgage secures a debt greater than the value of the property, the debtors argue that in its status as a second mortgagee, Wells Fargo retains only an unsecured claim.  Subject to exceptions not here present, 11 U.S.C. § 506(d) states that “[t]o the extent that a lien secures a claim against the debtor that is not an allowed secured claim, such lien is void.” In reliance upon this later subdivision, the debtors commenced their  adversary proceeding to avoid the second mortgage of Wells Fargo.

In Dewsnup, the Supreme Court accepted the position of the secured creditor, that “the words ‘allowed secured claim’ in §506(d) need not be read as an indivisible term of art defined by reference to § 506(a).”  Instead, the language of section 506(d) “should be read term-by-term to refer to any claim that is, first, allowed, and, second, secured.  Because there is no question that the claim at issue here has been ‘allowed’ pursuant to §502 of the Code and is secured by a lien with recourse to the underlying collateral, it does not come within the scope of §506(d), which voids only liens  corresponding to claims that have not been allowed and secured.” 502 U.S.at 415.  Effectively, therefore, the Supreme Court refused to recognize section 506(d) as a grant of authority to a debtor in Chapter 7 to “strip-down” or cancel the lien of an undersecured mortgage.

In contrast to Chapter 7, debtors in Chapter 13 may assert rights under special statutory provisions for the treatment of secured claims.  Specifically, 11 U.S.C. § 1322(b)(2) provides that a Chapter 13 plan may “modify the rights of holders of secured claims, other than a claim secured only by a security interest in real property that is the debtor’s principal residence, or of holders of unsecured claims, or leave unaffected the rights of holders of any class of claims.” InNobelman v. American Savings Bank, 508 U.S. 324 (1993), the Supreme Court held that the language of section 1322(b)(2) precluded the bifurcation of an undersecured homestead mortgage into secured and unsecured claims. Consequently, to the extent that a homestead has value to collateralize any portion of a mortgage, a chapter 13 plan must treat that lien as fully secured.  However, in In re Pond, 252 F.3d 122 (2001), the Second Circuit distinguished those circumstances where the homestead lacks equity to collateralize any portion of an inferior lien. In this special circumstance, because the lien is wholly unsecured, the debtors “are not ‘holders of . . . a claim secured only by a security interest in . . . the debtor’s principal residence,’ 11 U.S.C. § 1322(b)(2), and their rights in the lien are not protected under the antimodification exception of Section 1322(b)(2).” 252 F.3d at 127.

In the present instance, Mr. and Mrs. Grano contended that this court should adopt for Chapter 7 the same exception that the Second Circuit has recognized for cases in Chapter 13, to the effect of permitting the avoidance of secondary liens that are totally undercollateralized. Unfortunately, this argument overlooks the unique statutory predicate of Chapter 13.  In allowing a debtor in Chapter 13 to avoid a fully unsecured homestead mortgage, the decision in In re Pond utilized the authority of 11 U.S.C. § 1322(b)(2). No parallel provision applies in Chapter 7.  The court concluded that notwithstanding the absence of equity beyond superior liens, the debtors may not avoid the second mortgage of Wells Fargo Bank, N.A.

This decision forces the debtors and their bankruptcy lawyer to engage in a cost benefit analysis in a situation where there is a wholly unsecured second or mortgage.  Assuming the debtors can file either Chapter 7 or Chapter 13 Bankruptcy, the benefit of filing Chapter 7 Bankruptcy and discharging all unsecured debt, should be compared to the benefit of a Chapter 13 Bankruptcy plan payments over 5 years, and a likely discharge of the unsecured second or third mortgage.  Assuming the debtors wish to retain their residence, the comparison of two figures should point them in the right direction.

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 meet with debtors who own either second vehicles or motorcycles, and would like to keep them, after either Chapter 7 Bankruptcy or Chapter 13 Bankruptcy filing.  Filing for either Chapter 7 Bankruptcy or Chapter 13 Bankruptcy doesn’t always mean that you have to give up your second vehicle or motorcycle, as long as the payments are considered a reasonable vehicle expense.  The second vehicle, referred to above, is the vehicle that is an extra one for the single debtor, or the third one for joint filers.

How does the debtor know if the second car or motorcycle will be considered a reasonable expense?  The answer to this question initially depends on the type of bankruptcy being considered: Chapter 7 or Chapter 13.

Since with Chapter 7 Bankruptcy there is no repayment plan for creditors, the secured debts, like vehicle loans, are either continue to be paid by the debtor or the vehicles are surrendered. The debtor is obligated to list his/her income and expenses in the bankruptcy petition. The purpose of listing income and expenses is to show that after deducting reasonable expenses, the debtor has no money with which to repay his creditors. If there is any significant money left over in the budget (more than about $100), the debtor will not qualify for Chapter 7. Instead, he will be required to file a Chapter 13 Bankruptcy where creditors are repaid some or all of what they are owed.

If the Chapter 7 debtor’s monthly income equals to his/her monthly expenses, the debtor has no money with which to repay his creditors in a Chapter 13. However, those expenses must be reasonable or the trustee will object to the bankruptcy. This is the critical issue in whether the debtor will be able to keep the second vehicle or motorcycle.  Usually if teh budget shows that even befor the payment on the second vehicle or motorcycle, the debtor is either at break-even, or is in the negative territory, the bankruptcy court will not require him to give it up.  If the debtor wants to spend less on other expenses, the debtor can do that.  If the debtor wants to make the payments, he can keep the second vehicle or motorcycle.  An additional caveat has to do with any equity in such second vehicle.  If there is any equity, the trustee is likely to demand that such equity be paid to the bankruptcy estate since it would not be protected by teh bankruptcy exemptions.

The above also applies for Chapter 13 Bankruptcy.  In Chapter 13, any vehicle payments allowed in the repayment plan take money away from what the unsecured creditors receive.  So a payment for the second vehicle or motorcycle will reduce the money the trustee has available to repay other claims and is likely to be objected to.  Here in Rochester, the bankruptcy trustee will permit the debtor to keep the second vehicle or motorcycle if the plan repays all unsecured debtors at 100%.  So, if the joint debtors, for example, are a couple with three vehicle payments, three vehicle payments are not necessary for “the effective reorganization of the debtor” required by the bankruptcy statute.  The second vehicle or motorcycle is likely to be toy, and allowing the toy to be paid off in the plan reduces the amount the unsecured creditors receive.

The easiest way to determine whether the second vehicle or a motorcycle will be viewed as an allowable expense in Chapter 7 bankruptcy or Chapter 13 Bankruptcy  is to discuss these issues with a bankruptcy lawyer prior to making a decision to file.

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.

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.

I have previously written about automatic stay in Chapter 7 Bankruptcy and Chapter 13 Bankruptcy, and divorce, and domestic support obligations.  While divorce is handled in the New York State Supreme Court, once in a while, a family court petition seeking child support or spousal support is filed against one of my bankruptcy clients in New York State Family Court.  When this happens, usually I am asked whether the automatic stay prevent the filing or continuation of the family court proceedings.  My answer to that question will depend on the type of bankruptcy filed.

While the debtors tend to believe that the automatic stay prevents creditors from proceeding with collection activities, it does not stop most family court matters.  The Automatic Stay, in Chapter 7 Bankruptcy, which is governed by §362(a) of the Bankruptcy Code, will terminate any collection activities.   However, one of the exemption included in §362(b) allows for actions in Family Court matters and also in Supreme Court involving domestic support obligations.

Specifically,  Bankruptcy Code §362(b)(2)(A)(ii) provides:

The Automatic Stay created by a bankruptcy filing bars the commencement or continuation of most legal proceedings, but it has no effect on a proceeding for –

the establishment of paternity,

the establishment or modification of an order for a Domestic Support Obligation such as child support,

the determination of child custody or visitation issues, or

the dissolution of marriage, except to the extent that such proceeding may seek to determine a division of marital property in which the bankruptcy estate also has an interest.

While the divorce can be granted in Supreme Court without first obtaining relief from the Automatic Stay, the marital property cannot be divided without obtaining such relief.  The Automatic Stay also does not prevent the post-petition collection of Domestic Support Obligations such as alimony or child support.

from any property belonging to the debtor, providing that the bankruptcy estate does not also have an interest in said property,

from automatic wage deduction orders created by a statute or judicial or administrative order,

from the interception of debtor’s federal or state income tax refunds, or

from the withholding, suspension or restriction of a debtor’s driver’s license or professional or occupational license.

Thus, there is no protection in bankruptcy court from the obligations imposed by a Domestic Support Obligation which can be brought in either the Family Court or Supreme Court.  The above is true with respect to Chapter 7 Bankruptcy, however, in Chapter 13 Bankruptcy the answer is not the same.

The reason for this is the way Chapter 13 Bankruptcy treats debtor’s earnings after the filing of the bankruptcy petition. The property of the Chapter 13 Bankruptcy estate, which is broadly defined, specifically includes “earnings”.  See 11 U.S.C. §541 [a] [6]; §1306 [a].  Because payments to creditors must come from the debtor’s post-petition earnings, those earning are property of the Chapter 13 estate pursuant to 11 U.S.C. §1306 [a] [2].  Thus, the claimant seeking to collect arrearages in support obligations is not free to pursue the Chapter 13 debtor’s post-petition earnings in Family Court.

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.

One of the most common questions I hear from clients is whether they are able to keep their bank accounts while they are in bankruptcy, or to open new accounts after bankruptcy.   My usual answer to that question is that there is nothing under bankruptcy code that would prevent a debtor from having or keeping bank accounts.  While there is nothing under the bankruptcy law that prohibits it, there are may be some practical complications.

As I have discussed previously, a typical bankruptcy requires planning and preparation.  One of the possible situations I prepare my clients for is a possibility that their bank may close their bank accounts or withdraw money from their accounts.  If the debtor has a bank account with a bank or credit union that has also loaned him or her money, that bank has the right of set-off.  That is the bank has the right to set-off the money in the debtor’s account against any debt owed to the bank.  This is true even if the debt was not delinquent and the funds would be protected by the debtor’s cash exemption. Under a typical lending agreement, a bank or a credit union is usually cross-collateralized.  That means that any assets you have securing the loan, including any accounts you may have at that institution, secure all of debtor’s debts with that bank or credit union.  If the debtor files for bankruptcy, the bank may take any funds and apply them to any outstanding loan.  Even if the debtor is planning to continue to pay on the loan, and sign a reaffirmation agreement, the funds may be frozen or suddenly become unavailable.  It is usually my advice to open a back-up account elsewhere, at an institution where the debtor didn’t borrow any money.

If the debtor has accounts which might be subject to set off, there is no need to close such accounts.  If there is a small amount of money left in the account, those issue can be resolved after the bankruptcy filing.  With respect to opening bank accounts after bankruptcy, the debtor may run into some problems with the Chex Systems which is utilized by most banks.  Chex Systems operates similarly to credit bureaus and receives reports from its member institutions.

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.

I often receive phone calls from people in Rochester and elsewhere in Western New York who are facing a potential eviction involving a commercial or residential lease.  Usually the debtors do not know what their bankruptcy options are and are seeking advice how to proceed.

A bankruptcy filing by the tenant, either residential or commercial, immediately stops any pending eviction proceedings as a result of an “automatic stay.”  Automatic stay, as I have written previously, is a mandatory injunction that arises by operation of law without the need for a hearing or order of the Bankruptcy Court.  The automatic stay stops all of creditor’s efforts to pursue collections, litigation or judgment enforcement.  The automatic stay protect the debtor and the property of the debtor’s bankruptcy estate.  However, with respect to leases, it is critical to know at what stage the eviction proceedings are.

In the case of a lease, whether commercial or residential, the critical issue is whether a writ of eviction has already been issued from the landlord-tenant court. There is a significant body of case law holding that once a writ of eviction has issued from the landlord-tenant court the interest of the tenant in the lease has terminated.  As result, if the lease is considered to be terminated by the bankruptcy court, the tenant can be evicted and the automatic stay will not stop the eviction.  Thus, if a bankruptcy is being considered to prevent to postpone the eviction, it is critical for the debtor to contact a bankruptcy lawyer as soon as the eviction petition is served.

For a tenant who files for bankruptcy, the available options depend upon what chapter (type) of bankruptcy the debtor may be filing.

If the debtor is filing Chapter 7 bankruptcy, it may provide a delay in being evicted, and discharge the tenant from any liability under the lease.  At the same time, the filing will not allow the debtor to either cure the default or give extra time to make payments under the lease.

For an individual debtor who has a lease, and has not kept up with the payments, Chapter 13 bankruptcy can provide the opportunity to cure the arrears (past due rent) over time.  In a Chapter 13 bankruptcy, the arrears can be paid over a 5 year period, depending on the terms of the plan.  If the tenant doesn’t stay current with post-bankruptcy rent, the landlord can seek “relief from the automatic stay” from the Bankruptcy Court to permit the landlord to move forward to evict the tenant in state court.

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.

If you are contemplating filing Chapter 7 or Chapter 13 bankruptcy, you should stop using your credit cards.  Once you’ve decided to file for bankruptcy, any credit card use after that point will be highly scrutinized by both the credit card issuer and the bankruptcy trustee, and is likely to be viewed with a great deal of suspicion.  The reasons for this are obvious.  If the debtor decides that he is seeking to eliminate his credit card debt through Chapter 7 bankruptcy, or pay a lesser amount though a Chapter 13 filing, then incurring additional credit card debt can be considered fraudulent.  Specifically, the credit card issuer will make an argument that the additional debt was incurred without intention to repay, then the discharge can be objected to. Also, the issuer will also look at all of the transactions to verify that the money was not spent on such things as vacation trips, or that other unnecessary spending didn’t take place.  If a credit card issuer learns that a debtor used a card without any intention of making full payment, then the credit card company has the right to object to the debtor’s discharge of that particular debt.

Also, if the bankruptcy trustee, or United States Trustee, learn that the debtor intentionally ran up his credit cards before filing, then either trustee can seek to have the debtor’s discharge denied or move to have the case dismissed.  There is also the possibility that the debtor can be found to have engaged in bankruptcy fraud, which is a criminal offense.

While consumer Chapter 7 bankruptcy allows the debtor to eliminate all credit card debts and get a fresh new financial start, the debtor should not jeopardize his ability to seek bankruptcy protection by engaging in self-serving or foolish behavior.  There is simply no reason to create problems for the upcoming bankruptcy filing.  Therefore, don’t use your credit cards once you’ve decided to file bankruptcy.

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.