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NYC Bankruptcy Lawyer
Is bankruptcy right for you? Should you file for bankruptcy? Filing for bankruptcy is a major decision, and as with all major decisions, the more you know, the better. Read further to find out more about this process.   

Why shoud I file for bankruptcy?

The word "bankruptcy" for many people trigger negative connotations. It is no wonder why many people are afraid when they hear this word. However, is it a bad word entirely? After all, bankruptcy is not for everyone, it is only designed to help and protect those of us who need protection during hard times. It was not designed to degrade, demean, shame or disgrace its beneficiary. The bottom line is this. Individuals who have racked up excessive debt though no fault of their own are for the most part the main beneficiaries of this process. Without this legal protection, a person who attempted to invest in a failed businesses could have faced foreclosure, garnishment of wages and seizure of their property. People who lost their jobs and could no longer meet their financial obligations could have overnight lost everything they worked so hard for. Bankruptcy is designed to be a financial option. It was designed to give people in financial trouble a new start or at minimum, federal protection from their creditors. Being in uncontrollable debt is not very pleasant. Dealing with bill collectors is a nightmare. You try to avoid them but avoiding them makes them bolder and much more aggressive. Financial debts make you a different person. In the attempt of avoiding the collection aggravation, you stop taking phone calls. Your family and friends can no longer reach you when they want to. Your life changes because you are no longer yourself. Your self-esteem takes a hit and before you know it you start questioning your financial intelligence and that in part affects your confidence. Having your creditors hound you non-stop every second is not exactly anyone's favorite past time.

So why should you file for bankruptcy you ask? Aside from protecting your family's financial future, bankruptcy also has a beneficial side effect as well. It protects your personal health! A recent Associated Press survey found that there is a great connection between debt-related stress and health issues. Such health issues take the form of anxiety, depression, ulcers, headaches and heart attacks. .

Can I still file for bankruptcy?

The new bankruptcy laws brought in a lot of panic and confusion mainly due to the new "means test" factor. The test is used to determine whether you can file a petition under Chapter 7. If you do not qualify then you normally have no option but to file your petition under under Chapter 13. This test is of major importance because under the old law most clients were almost assured a fresh start if they did not have the means to pay their huge debts.  Under the new law, if you do not meet the test then you are found to qualify for a chapter 13, which in essence is a five year payment plan under which you pay all your creditors.  The benefit of chapter 13 is that you still get the protection of bankruptcy, so creditors are still kept at bay for that time period. 

To understand the "test," the Courts look at your average income for the prior six months before filing and compare it to the median income for your state.  As of December 31, 2007, the median annual income for a single wage-earner in New York was $ 43,352.00  If your salary falls under that magic number then you may file Chapter 7.  If you fall slightly over you still may file "IF" 1.  Your IRS allowable expenses when subtracted from your income finds that your "disposable income" over the next five years totals less than $6,000.00.  2. If you are over $ 6,000.00 but fall short of $10,000.00 a third more complicated calculation is required. The final calculation compares your disposable income in the next five years to your unsecured debt, to find whether or not you can pay some of your creditors.  If your disposable income over the five year time is less than 25% of your unsecured, non-priority debts you can file under chapter seven.

How bad will my credit be after I file for Bankruptcy?

Well let me ask you this. How bad is your credit now? If you are reading this is because you are obviously interested in exploring the possibility of filing for bankruptcy. Now, your interest in this process may be as a result of old court judgment entered against you that are now being executed on. Maybe you have discovered that the credit card companies have frozen the funds in your bank accounts or maybe your wages have been seized or garnished. Whatever the reason for your interest, at this point your credit history has been tainted with collection activities and defaults and severe adverse activities that have more likely than not have damaged your credit history very bad. Filing for bankruptcy at this point will not bring your credit score much lower than it is now. The good news is that your credit can dramatically improve once your bankruptcy is finished. You can take advantage of certain offers that are designed for people who have lower credit due to recent bankruptcy. These offers of course may be more expensive in that the interest rate will be much higher than what you have come to expect and the credit limit will not be as high as you would like. However, these limitations are temporary because if you can demonstrate that you are not a high risk by showing that you are credit worthiness, responsible with your new credit, then your credit history will improve and your credit score will show it.

I get asked many times by clients if one can still file for bankruptcy protection under chapter 7.  The answer is YES.  However, you must meet the above requirements in order to do so. Give me a call so we can discuss your options. Please remember not to hesitate to contact me whenever you need a Bankruptcy Lawyer

*Quick footnote, it's interesting to note that the credit card industry spent close to $100 million over the course of eight years to get The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 passed.

*New York Times, December 11, 2005

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