Welcome to Simon Haysom LLC

1. What are the different Chapters and which one is right for me?

Chapter 7 is the most frequently used. The basic idea is to sell off any unencumbered assets you may have. Usually, however, your attorney can protect your house, car and personal possessions (see section 6 below). If any assets are sold, the proceeds are distributed to your creditors, paying out the "secured" creditors (such as your mortgage or car loan) in full before paying out the unsecured creditors. Usually however, you can protect your house, car and household possessions by using special "exemptions" (see 4 through 6 below.)

Chapter 13 is used when you have enough future earnings to create a plan to pay off your creditors to a reasonable extent. This may be the only way to save your house or business, for example. Sometimes, if you are too rich to file Chapter 7, Chapter 13 can be a safe harbour provided you pay at least ten percent to unsecured creditors like credit card balances. (Another advantage: Interest and fees stop.)

Chapter 11* typically enables you to continue running your business. After about a year or more, you should begin paying out your creditors according to a "plan" confirmed by the court and voted on by the creditors.

Chapters 9 (Government Entities) and 10 (Railroads) are rarely used.

*Chapter 11 is not covered here. Contact Simon Haysom directly for business bankruptcy options.

2. What are the advantages of filing for bankruptcy in most cases?

Reduction of debt. In most Chapter 7 cases, all the credit card debt and trade debt (called unsecured debt because the debts are not secured by collateral) are discharged.

An end to creditor harassment. Once the petition for bankruptcy has been filed, creditors must cease badgering the debtor for payment. Lawsuits including foreclosures are usually stopped ("stayed").

A fresh start without threats of lawsuits and wage garnishments. The purpose of bankruptcy is to obtain a discharge or "wiping out" of past indebtedness. This usually is formally issued by the court within two to three months. Some debt is not discharged-certain taxes, mortgage rights and student loans, for example.

3. What about the disadvantages?

Credit Ratings. A Chapter 7 (straight bankruptcy) remains on your credit report for up to ten years. A Chapter 13 (readjustment of debts) remains for up to 7 years.

Possible loss of assets. The trustee may sell all assets of value that are not protected.

Possible lawsuit by creditors. An experienced bankruptcy attorney will typically avoid this threat.

4. Can I keep my home?

In most cases, YES. The trustee of your bankruptcy estate has to decide whether to sell your assets. By the time the trustee has sold your house and paid off the mortgage, paid the commissions, selling costs and your exemptions, there is usually nothing left. So, in most cases, the trustee abandons the house to you provided you agree to keep current with the mortgage payments. The homestead option protects $50,000 of the equity in your home, or $100,000 if both spouses own the house. If you have substantially more equity in your home, you'll need to consider Chapter 13.

5. Can I keep my car?

In most cases, YES. As with the house, the trustee will only sell your car if this results in money for creditors. The exemption for cars in New York is $2,400 per person. If you have a late model Mercedes Benz for which you paid cash, the trustee will have to sell it for the creditors. Under recent law you may have to consider reaffirming the car loan.

6. Will they come in and take my possessions?

In most cases, NO. Personal possessions such as clothing, appliances and furniture are the least economically valuable parts of the bankruptcy estate. Again, New York Law protects you with exemptions on most personal property. But, if you have five race horses, expensive jewelry or Chippendale furniture, you can be sure that the trustee will want to sell these assets for your unpaid creditors.

7. Will I lose my bank account, cash or investments?

Up to $2,500 in cash is protected by an exemption if you do not use the homestead exemption. You are entitled to up to $2,500 in cash/bank accounts or income tax refunds. This allowance, to the extent used, is deducted from your personal possession allowance. Pensions, IRA's, Annuities, 401(k)'s, insurance etc. are usually 100% protected. Ordinary stocks and bonds will be forfeited.

8. Who will know? Will they tell my employer? Will my neighbors know?

Not usually. The court does not provide anyone except the creditors with notice. The petition is open for public inspection, but there is not a great interest in the record numbers of individuals filing.

9. What happens to my credit rating?

It is marked for up to ten years with most credit rating agencies. But all is not lost. While we cannot guarantee how any one creditor will behave, the FNMA will underwrite home loans if you can show 24 months of perfect payments after bankruptcy. And car loans are surprisingly easy: The lender knows you cannot refile for bankruptcy for 8 years, and that you have substantially reduced your debt load. You can get a secured credit card. Also, the law prohibits discrimination against you by employers, the government and student loan programs. Chapter 13 is viewed more favorably than Chapter 7 by the big credit agencies. You may wish to clean up any inaccuracies on your record. Speak to your attorney. You can even place a statement on your record if a dispute is unresolved.

10. What actions take place when I file? Do I have to appear before a judge?

The typical process for a Chapter 7 case is as follows:

First, of course, come in to the office and speak with the attorney in a free consultation. After going over the particulars of your situation, the attorney will determine which chapter you should file.

File the petition. This is a lengthy document which includes much information about your creditors and possessions.

A hearing 20 to 30 days later. No judge is present. You will appear in a meeting to answer questions with the bankruptcy trustee (typically an attorney) presiding. Your lawyer will be with you and creditors have the right to be present.

After your hearing, you enter a waiting period before your discharge is processed. During this time, any unfinished business relating to your hearing is completed, and you also must complete the second portion of the credit counseling requirement, and file any reaffirmation agreements for secured loans you wish to continue paying.

The Discharge is 60 to 90 days later. If you filed Chapter 7, then all dischargeable debts are wiped out. If you filed Chapter 13, they are wiped out subject to your fulfillment of a repayment plan.

11. How much does it cost?

Court filing fees, which increase occasionally, were at time of publishing:

$299 for Chapter 7 $274 for
Chapter 13; $1039 for Chapter 11.

Attorney fees in this geographic region (assuming an experienced competent law office) range:

From $1500 to $2000 for non-business Chapter 7.

From $2000 to 3000 for business Chapter 7

$15,000 and up for Chapter 11 depending on the business.

$2900 to $3900 for Chapter 13 reorganization.

12. Can anything go wrong?

Yes, and this is why it is important that you work with an experienced bankruptcy attorney. You will be granted a discharge unless there is abuse. Sometimes "abuse" consists of a continuing lavish lifestyle. Another problem is that you transferred cash or assets to a "preferred" person, or you loaded up your credit cards before filing. Although uncommon, these are complicated issues and you should talk to an experienced attorney about it. Your attorney will also advise you on protecting against unnecessary loss of assets in bankruptcy.

If you are not truthful about your assets and liabilities, the entire bankruptcy can be set aside and you may even be charged with a crime, perhaps even serving jail time