What is Bankruptcy?

What is Bankruptcy?

Bankruptcy allows individuals, couples, and businesses that cannot meet their financial obligations to be excused from repaying some or all of their debt. Bankruptcy has been in existence since ancient times. In the United States, the rules and procedures for filing bankruptcy are governed by federal law. States are prohibited from legislating in this area of the law.

Generally speaking, there are two types of bankruptcy. In a liquidation bankruptcy, debtors must surrender their property, which is sold, and the proceeds distributed to creditors. In return, all debts are permanently discharged. In a reorganization bankruptcy, debtors are allowed to keep their property. But the debtors must agree to an installment plan to repay creditors a portion of the amount they owe.

Filing for bankruptcy involves submitting a petition and fee to the bankruptcy court. The fee is close to $300 for most personal bankruptcies. The petition will contain sworn statements by the debtors concerning the amount of money they owe, their income and expenses, as well as a complete list of all of their assets. After filing, a court hearing is held to review the information in the petition.

Chapter 7 bankruptcies are by far the most common. These are liquidation bankruptcies in which the debtors must turn over all “non-exempt” property to a supervising officer known as the bankruptcy trustee. Property is exempt if it falls within specific categories of assets that debtors are allowed to keep, such as a certain amount of clothing, household items, tools for work, and in some instances, vehicles and the family home.

The Chapter 7 trustee will take the debtor’s non-exempt property (if there is any), and sell it. The money will be paid to the debtor’s creditors. This may result in creditors receiving a small fraction of their claims. The balance of the debtor’s loans and obligations are forgiven and can never be collected. Creditors who attempt to collect debts that have been discharged face severe penalties under federal law.

Keep Your Property

The fact that a liquidation bankruptcy wipes out debt completely is obviously attractive to anyone who cannot afford to pay their bills. But what about people who have non-exempt property that they do not want to give up? Chapter 13 is a reorganization bankruptcy. It allows debtors to keep their property by agreeing to make monthly payments toward their debt over the course of three to five years.

Chapter 13 bankruptcies offer a number of benefits besides allowing debtors to keep their property. For example, certain types of secured debt, like a car loan, can be restructured by reducing principal to the market value of the collateral, and lowering payments by extending the repayment period to 60 months. Other obligations, like mortgages, student loans, and tax liabilities can be modified as well. Creditors are given no choice in the matter.

Bankruptcy is not available to everyone. Those who have had their debts discharged in a Chapter 7 within the past eight years cannot re-file. For Chapter 13, the waiting period is six years. Too much disposable income is also a problem. Congress has established a “means test” for this purpose. Debtors who make enough money to repay their creditors will be barred from filing a liquidation bankruptcy, though reorganization may be an option.

Businesses that have become insolvent but want to stay in business may be able to file a Chapter 11 bankruptcy. Like a personal reorganization, Chapter 11 allows businesses to obtain protection from their creditors while they put together a repayment plan. Liabilities can be reduced and restructured to give the business another chance at achieving profitability.

Whether a debtor is considering filing under Chapter 7, 11, or 13, they must comply with a vast number of federal laws and regulations. An error at any step of the process can result in the court refusing to discharge the debtor’s liabilities. When the bankruptcy process ends this way, the consequences are disastrous. With so much at stake, hiring an experienced  bankruptcy attorney is a wise investment.

At Fridlin & Associates P.C we have 17 years of experience in Bankruptcy Law.  Please contact our office at 718-372-4400 and find out your rights.

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What is Wage Garnishment?

Wage garnishment is a legal order that allows a plaintiff to collect monetary judgment from a defendant. Meaning- if you owe someone money (for child support, student loans, taxes, or unpaid court fees)- the court can legally withdraw a certain amount directly from your paychecks. There are only 4 states in the U.S. that do not allow wage garnishment unless it is tax-related debt.

The most dangerous incident occurs when an individual does not pay taxes on time. The IRS only has a few requirements it must meet prior to having the right to garnish wages. These requirements are:

1. The IRS must have assessed an individual’s taxes and sent a written Notice and Demand for Payment.

2. The tax paying individual must have refused or neglected to pay the ordered tax within the allotted time as described in the written notice

3. The IRS must have sent a written Final Notice of Intent to Levy along with a Notice of Your Right to A Hearing 30 days prior to the hearing.

On top of this- the Final Notice does not have to be received by the offender. So, plenty of individuals are not even aware of the fact that they have been served until they begin experiencing wage garnishment.

What should you, the taxpaying individual, do in such a scenario? Immediately contact an experienced debt attorney who has dealt with wage garnishment. Explain your situation and disclose all information he/ she requests of you. If you or a loved one is facing or experiencing wage garnishment- give us a call today!

Fridlin & Associates, P.C. 

(718) 372- 4400

1517 Voorhies Ave. 4th Floor

Brooklyn, NY 11235

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What is a loan modification?

A loan modification is a change made to the amount that one may have to pay monthly. It is also known as a mortgage modification, a workout plan, and “restructuring.” One may get a loan modification if the borrower is facing financial hardships or has an issue keeping up with monthly payments. A loan modification sets up payments so that the borrower can comfortably pay back what he/ she owes. The lender may let this happen in a variety of ways. Lenders can allow homeowners to pay at a lower interest rate, skip payments, and possibly even extend the term of a plan so that the monthly payments are less.

If you are having trouble keeping up with monthly payments, and want to avoid foreclosure, come in for a consultation. New York Top Attorney Elaine Fridlin may be able to help. Call (718) 372-4400 for more information or to schedule your appointment today.

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Chapter 13 Bankruptcy and its Benefits

If you are in over your head with debt, and can’t pay your bills, filing for Chapter 13 Bankruptcy may be the solution to your problems. Although filing for bankruptcy is a scary thought at first, this tool is created to work with you and your debt instead of creating more.

Chapter 13 Bankruptcy makes way so that you and your family’s debts are adjusted according to your income. You can keep your property and have a three to five year window of time to pay back a portion of your debt without any interest or fees.

“What good is it if I’m still paying back my debt after five years?!” Chapter 13 bankruptcy allows you to pay what you can afford. You have the chance to meet with an experienced attorney who will sit down and map out what is possible to pay back with your income. It won’t be such that you’re expected to pay $2,000 dollars a month for example, and only get paid $1,500 monthly.

Secondly, your property is protected. Since you are making a working effort to pay back your debts, in most cases you won’t have to give up your car and your home won’t go into foreclosure.

Last but not least, after your three to five year time frame is up, debts you do not pay in full are discharged and forgiven. If you are considering filing for bankruptcy, hiring an experienced bankruptcy attorney is your best option. Pick someone who is knowledgeable, will let you know of your risks and who will walk you through the process with as much ease as possible. Contact Elaine Fridlin at Fridlin & Associates, P.C. to set up a free consultation today.

Fridlin & Associates, P.C.

1517 Voorhies Ave, Suite 4

Brooklyn, NY 11235

(718) 372-4400

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