8 Confusing Bankruptcy Terms Explained by an NY Bankruptcy Lawyer

You need to be an active participant in your NY bankruptcy proceedings. Even though an NY bankruptcy lawyer from Simon Haysom, LLC is with you every step of the way, it is crucial you understand the process, laws, and requirements of an NY bankruptcy case. When you do, the path through bankruptcy is smoother and the outcome substantially better.

Yet, the legal system doesn’t make it easy for a non-lawyer to quickly understand the bankruptcy process. A major hurdle for most people is the language used by an NY bankruptcy lawyer, the bankruptcy courts, and bankruptcy trustees throughout the process. Sometimes it can feel like these legal professionals are speaking a whole different language.

This shouldn’t be the case, and as a top NY bankruptcy lawyer in Goshen NY, our team is here to dispel some of the mystery around bankruptcy terminology, phrases, and legal jargon.

#1: Automatic Stay

When you file for bankruptcy an automatic stay goes into effect concerning any outstanding debt and attempts to collect. This means all creditors must stop contacting you or making other attempts to collect payment on the debts you owe. Phone calls, emails, in-person contact must all cease immediately and you aren’t allowed to make any payments once the automatic stay is in place. Your NY bankruptcy lawyer can help you identify when the automatic stay is in place and how to handle any creditors that disobey the restriction.

#2: Bankruptcy Estate

When you file for bankruptcy, a trustee takes control over all of your property and assets. You retain legal ownership of the property, but you can no longer sell it, give it away, or destroy it. When property is owned by one person but controlled by another, it is called an “estate.” The only property not placed in the bankruptcy estate is exempt property under NY law.

#3: Bankruptcy Petition

NY bankruptcy is a formal legal process that begins with a bankruptcy petition. This is the first filing you need to make with the bankruptcy court and is prepared with the assistance of your NY bankruptcy lawyer. The bankruptcy petition must state your name, address, and other personal information, it must have what chapter you are filing under, and include an estimate of your debt. NY bankruptcy petitions also require disclosure of any bankruptcy pending by a spouse or business partner, whether you are facing an eviction, and whether you have any consumer debt, business debt, and nonexempt assets. 

#4: Discharge

At the conclusion of a successful bankruptcy case, your remaining debt is discharged. You are not required to repay this debt and you can start with a clean slate. The creditors that you owe outstanding debts to at the end of an NY bankruptcy are forbidden from trying to collect that debt. This release of an outstanding debt is called discharge.

#5: Exempt Property

During Chapter 7 bankruptcy all property and assets are placed in the bankruptcy estate, except those that the NY government has found to be exempt property. Exempt property is a list of necessities, such as a primary residence and basic income, that can’t be sold or collected to pay creditors. Rather, throughout the bankruptcy process, you are allowed to keep this property and continue to exercise control over it.

When it comes to identifying exempt and nonexempt property, it helps to have an NY bankruptcy lawyer by your side. Your lawyer will have your best interest in mind and monitor the court’s decisions on exempt property.

#6: Fraudulent Transfer 

There are strict rules over repaying debts or selling any property immediately before filing for bankruptcy. These restrictions are in place to prevent fraud or improper payments to specific creditors. Another purpose of the restrictions is to prevent a debtor from giving away or selling property just to keep it out of the bankruptcy estate. Any transfer of property that is made in violation of these restrictions is called a fraudulent transfer.

Before you file for bankruptcy an NY bankruptcy lawyer can guide you through the exact restrictions on transfers and gifts. If you have made a fraudulent transfer prior to filing, an NY bankruptcy lawyer can also help you restructure or unwind this transfer. 

#7: Priority

 During bankruptcy, the bankruptcy court must determine what order creditors are paid because at the conclusion of bankruptcy any outstanding debts are erased or discharged. The specified order for paying creditors out of the bankruptcy estate is called priority. Priority is the hierarchy for all creditor claims.

The claims that are paid first, including outstanding child support and taxes, are called priority claims. However, the claims that are given highest priority can change. The bankruptcy law is altered from time-to-time and it is important to speak with your NY bankruptcy lawyer regarding any restructuring of priority. 

#8: Secured Debt

When it comes to the protection and assurances offered to creditors, you have two types of debt: secured and unsecured debt. Secured debt is backed by a lien on your property. A lien gives the creditor the right to take ownership of that property if the debt is unpaid.

In effect, you give the creditor the right to collect specific property, such as your car, if the debt is unpaid. Almost any property can act as this assurance you will repay a debt. Bankruptcy treats secured and unsecured claims very differently, so it is important your creditor, the court, and your NY bankruptcy lawyer determine which claims are secured and which aren’t.

Other Bankruptcy Terms

If you are wondering about other legal terms used in the bankruptcy process, feel free to contact an NY bankruptcy lawyer at Simon Haysom, LLC. We are happy to take your questions on confusing terminology, legal jargon, or help you break down the procedure of your case. Contact us at (845) 294-3596.

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