Here at Law Offices of Robert S. Lewis, P.C., we represent clients in multiple types of cases involving divorce, child custody, child support, bankruptcy, and more. In addition to providing legal help to people in these situations, we also work to inform people about legal issues that may affect them by regularly publishing blogs on topics related to our practice areas. We wanted to highlight the blogs that were read the most by visitors to our website in 2022:

1. Dissipation and Hidden Assets in a New York Divorce - During a divorce, the property division process can become more complicated if a spouse attempts to hide marital assets or if a person has wasted or destroyed marital property. We look at how these issues may affect a divorce case and the steps spouses can take to protect their financial interests.

   ...

Filing for bankruptcy is a difficult decision, and it is one that should not be made lightly. One of the concerns that can affect people who are considering bankruptcy is whether they will lose any of the property they own. However, in many cases, debtors will be able to complete a no-asset bankruptcy and eliminate their debts without being required to turn over any property. 

Understanding No-Asset Bankruptcy

In a Chapter 7 bankruptcy, you will usually be able to eliminate most of your debts, although this type of bankruptcy may require you to turn over certain assets so that they can be liquidated, which will allow some of what you owe to be repaid to your creditors. However, there are certain exemptions that apply that will allow you to keep different types of property. In a no-asset bankruptcy, all of your assets will be exempt under either federal or state laws. This means that there are no assets for creditors to collect from your estate. In other words, you will not have to surrender any of your property, and exempt assets may include real estate, vehicles, furniture, or jewelry. All unsecured debts that you owe will be discharged without any assets being liquidated to repay creditors. 

Anyone can encounter financial struggles, and those who are unable to pay all of their bills temporarily or on a long-term basis may accrue significant debts. This may lead to additional financial difficulties as creditors begin to take action to collect debts, and getting behind on mortgage payments may put a homeowner at risk of foreclosure. This can be a much more serious consequence, since it could result in the loss of a family’s home. There are a number of options that may allow a person to prevent foreclosure, and debtors will need to understand whether filing for bankruptcy may be a good solution.

Stopping Foreclosure Through Bankruptcy

In cases where a lender has begun the foreclosure process, bankruptcy can offer some immediate relief by putting a halt to these proceedings. As soon as a bankruptcy petition is filed, the bankruptcy court will issue an automatic stay regarding all debt collection practices. This means that creditors will be prohibited from taking any actions against the debtor while the bankruptcy case is ongoing. In addition to stopping the foreclosure process, a creditor will not be allowed to contact the debtor and seek repayment of debts. Other creditor actions, such as repossessing a vehicle or seeking a legal judgment that will allow for the garnishment of a debtor’s wages, must also cease.

While filing for bankruptcy can temporarily halt a foreclosure, it may not offer a permanent solution, and a person will need to determine how to address mortgage debt during the bankruptcy process. In Chapter 7 bankruptcy cases, a debtor may be able to eliminate certain debts, although some of their assets may be liquidated to repay creditors. However, exemptions may apply, including a homestead exemption that will apply to a certain amount of equity in the debtor’s home. In Rockland County, New York, the current amount of the homestead exemption is $179,975. By exempting this amount of equity and eliminating other debts, the debtor may be able to continue owning their home. However, they will typically need to reaffirm their mortgage loan, pay off the delinquent amounts and any applicable fees, and continue making mortgage payments after completing the bankruptcy process.

For people who have significant debts, bankruptcy may be the best option for addressing their financial issues and ensuring that they will be able to meet their ongoing needs. Bankruptcy is a form of debt relief that is available to all Americans, and it may allow multiple different types of debt to be discharged, meaning that a debtor will not be required to repay the amounts owed, and creditors cannot take any actions to collect money from a debtor. Multiple different types of debts may be discharged through bankruptcy, including credit cards and medical bills. Secured debts such as a home mortgage or auto loan may also be discharged, although this will typically result in a foreclosure or the repossession of property. However, debtors should be aware of different types of debts that cannot be discharged through bankruptcy. These include:

• Domestic support obligations - If a person is required to pay child support to ensure that their children’s needs will be met, or if they were ordered to pay spousal maintenance (alimony) following their divorce, these obligations will remain in place. In addition to making ongoing payments as required, a person will be required to make up any payments that have been missed, and interest may be charged for these past-due amounts. While bankruptcy cannot eliminate these obligations, it may provide a person with funds that would otherwise have been used to pay off other debts, ensuring that they can meet their ongoing requirements.

• Most tax debts - If a person owes money to the IRS, they will usually only be able to discharge debts from at least three years before they filed for bankruptcy. Failure to file tax returns on time may disqualify these debts from being discharged.

  ...

There are many situations where debts can affect a person or family, making it difficult or impossible to maintain financial stability. When debts become overwhelming, bankruptcy can provide relief by eliminating certain types of debts and giving a person a fresh start. When filing for bankruptcy, a person’s disposable income will be one of the primary factors that will be considered. Understanding how disposable income is calculated and how it will affect a bankruptcy case can help a person determine the best ways to proceed as they work to pursue relief from their debts.

How Disposable Income Affects the Means Test in a Chapter 7 Bankruptcy

For many debtors, Chapter 7 is the preferred type of bankruptcy, since it can be completed fairly quickly, and it will usually allow unsecured debts (such as credit cards or medical bills) to be discharged completely. However, before they can file for Chapter 7, a person will need to pass a “means test.” The first part of the means test compares a person’s income to the median income in their state. If their income is less than the median income for their family size, they can file for Chapter 7.

If a person’s income is higher than the median income, the means test will look at their disposable income to determine whether they will be able to file for Chapter 7 bankruptcy. Disposable income is calculated by taking the average income a person earned from all sources over the previous six months and deducting certain types of expenses, including taxes, living expenses, healthcare costs, transportation costs, life insurance premiums, and domestic support obligations such as child support. If a person’s disposable income over the next five years (their monthly disposable income times 60 months) is lower than 25 percent of their total unsecured debts, they will be able to file for Chapter 7 bankruptcy.