Domestic / Civil Partnerships and Gay Married Couples in Bankruptcy

Straight married couples can file bankruptcy on the same bankruptcy petition and as such have some benefits from this, such as not having to pay the $299 filing fees twice). As the law stands, gay couples cannot file a joint petition, whether or not they are within a civil partnership or legally married under state law. Bankruptcy is a federal law and the federal Defense of Marriage Act (“DOMA”) prohibits federal recognition of this.

The Obama Department of Justice has said:

With respect to the merits, this Administration does not support DOMA as a matter of policy, believes that it is discriminatory, and supports its repeal. Consistent with the rule of law, however, the Department of Justice has long followed the practice of defending federal statutes as long as reasonable arguments can be made in support of their constitutionality, even if the Department disagrees with a particular statute as a policy matter, as it does here.

However there are currently no immediate signs of this changing. This leaves gay couples the choice of filing joint petitions and facing joint fees, or hiring a bankruptcy lawyer with the aim of challenging the law.

What Happens to My Car in A NY Bankruptcy?

People are rightfully concerned about will happen to their car if they file for bankruptcy in New York City. When you file for bankruptcy, a bankruptcy trustee will sell any nonexempt assets you possess to pay creditors. HOWEVER, in New York State you have a $2,400 exemption amount for a car alone, as well as various other exemptions (such as a $5,000 personal exemption). A good bankruptcy attorney will be able to combine exemption amounts to give you the greatest possible benefit. This way you don’t lose the car (or other possessions). Most people lose nothing.

This exemption DOUBLES if you file with your spouse and both of you own the car, giving you anywhere from $4,800 to $14,800 protection for your car.

But My Car Is Worth More than $10,000 and I Have Other Valuable Possessions!

That’s fine! It just means Chapter 7 bankruptcy isn’t right for you if you want to keep your car. There are other bankruptcy options. If you use Chapter 13 you can keep the car and simply pay off creditors this way with less hassle. Exemptions are less of an issue in Chapter 13. As long as you make payments to creditors, you likely won’t lose anything.

How do I Calculate the Value of My Car?

The simplest way to do this is to get the Kelly Blue Book value of your car- see the link.

Once you have this value, you know what the actual car is worth. If you are paying off the car, subtract whatever value you owe the finance company too. It’s quite likely you will have a negative value. That means bankruptcy is extremely unlikely to affect your car and no exemption will even be required.

For example, you have a 2005 Chrysler Town and Country worth $13,000. You still owe the finance company $14,500. Really that means you have no equity (-$1,500) in the car and almost certainly wouldn’t have to lose it in bankruptcy.

What If My Husband/Wife And I Have a Car Each?

It depends on who owns what (on the title of the car). Then see who is filing for bankruptcy. If both, you can each use the $2,400 exemption. If only one of you, you may still only use one exemption per person filing bankruptcy.

Can Bankruptcy Prevent Me From Obtaining a Student Loan?

The Bankruptcy Network just ran a good blog post asking whether you can be prevented from obtaining a student loan following bankruptcy?

The simple answer is no.  If your loan is government backed or guaranteed then you can not be discriminated upon on the grounds of being a bankruptcy debtor under Bankruptcy code- 11USC§525 (c).

As this post states:

The provision in the code even extends to persons “…with whom the debtor or bankrupt has been associated” (11 USC §525(c)) if the denial was because of the bankruptcy.

Student loans are not necessarily a good way to fund anything, but sometimes they are the only avenue to a decent education.  At least a previous bankruptcy action won’t keep you from getting one if you need it.

Means Test changing at Halloween for New York Bankruptcies

The means test is used in individual bankruptcy cases to test the eligibility of a potential debtor to enter into a Chapter 7 or a Chapter 13 bankruptcy.

If your household income is below the state median average then you don’t have to go through any means test. The current numbers for New York are as follows:

	FAMILY SIZE
STATE	1 EARNER	2 PEOPLE	3 PEOPLE	4 PEOPLE *

New York                 $46,523                                 $57,006                         $67,991                         $83,036

If you earn $1 more than this then you will be subjected to the means test. The means test takes your income and compares it to other people in the same county using hypothetical IRS living standards dollar amounts to determine whether there is a presumption of abuse. If there is a presumption of abuse then you generally cannot file a Chapter 7 bankruptcy.

Come November 1, 2009, these numbers are changing nationwide. The relevant New York numbers are below.

FAMILY SIZE
STATE	1 EARNER	2 PEOPLE	3 PEOPLE	4 PEOPLE *

New York                 $46,485                               $58,109                       $69,421                        $82,487

In some states their income numbers have fallen meaning it is harder for people to file whose income has not fallen. This is also true in New York. For single filers or those with four people in the household (two parents, two children for example) you now have a slightly reduced chance to avoid the means test.

How much does this matter?

It will make all the world of difference if you’re right on the cusp of being able to file, but otherwise it should have little impact. On top of the means test you still must show that your expenses are greater than your income (excluding debt payments).

Can I lose my job or license for filing bankruptcy in New York?

This is a question which arises all too frequently. Fortunately, the Bankruptcy Code explicitly forbids employer related discrimination after a person files for Bankruptcy relief. Section 525 is written in two parts- the first part forbids government units from discriminating against a person in hiring decisions. It also prevents a person being denied a license after filing for bankruptcy (for example Chapter 7) including drivers license or real estate license.

The second part of this section speaks of private employers. It prevents discrimination for current employees, but not for future employee hiring decisions.

If you do come into any contact with problems through bankruptcy and employment, be sure to contact us so we can help.

House of Reps to Discuss Student Loans Bankruptcy

Tomorrow, (Wednesday, September 23rd) the House Subcommittee on Commercial and Administrative Law will hold a hearing entitled “An Undue Hardship? Discharging Educational Debt in Bankruptcy.”

On the agenda is a discussion on whether student loans should be discharged in bankruptcy. Currently student loan debt is extremely difficult to discharge in bankruptcy, as “undue hardship” is not an easy threshold to cross for most people. Read more here.

As one site points out

“Recently, the Eighth Circuit didn’t allow a student to discharge his debts in bankruptcy, even though he racked up $350,000 in educational debts and penalties.”

We hope lending practices in relation to student loans improve and people with $350,000 in educational loans can find some help. Chapter 13 bankruptcy is useful for up to five years reprieve but still far from an ideal longer term solution.

Must My New York Credit Cards Be Delinquent To File Bankruptcy?

Some clients have asked me two related questions lately:

1. Must I be delinquent with my debts, bills and credit cards to file for bankruptcy in NY?
2. If I am delinquent with my bills can I still file for bankruptcy?

The answer is categorically yes to both. It usually makes little difference either way to a Chapter 7 Bankruptcy case, and any arrears can be cured where necessary in a Chapter 13 case. (For example to repay mortgage arrears) Bankruptcy exists to give individuals and businesses a fresh start, so whether you are suffering with phone calls every month, or struggling to make all the minimum payments, bankruptcy may still be the most sensible option.

Can I Give / Transfer My NY Assets To Someone Else Before Bankruptcy?

Sorry- you can’t.

Any asset that you give away or sell prior to bankruptcy is known as a transfer. Transferring your assets within a year of bankruptcy can be illegal or can be reversed.  If you transfer your assets away, there’s a fair chance this will be caught by the trustee or your bankruptcy attorney in usual online/offline checks.

If you have made a transfer, of a car or a house a few months before filing for bankruptcy and the trustee learns of this. He will reverse the sale and sell the asset himself to pay off creditors. (Anyone you owe money to in the bankruptcy). This will result in you losing the car or house and not being allowed to claim an exemption in it.

So if you have made a transfer of a relatively large asset please tell your bankruptcy attorney about this before hand. It may unfortunately prevent you from filing bankruptcy for some time or require a Chapter 13 bankruptcy instead however this is likely a lot less stress than the alternative.

Does this include all assets? Realistically I would start worrying about things over $1,500 in value or more.  There may be no problem, but it’s worth looking at.

Guide for New York Company Considering Chapter 11 Bankruptcy / Reorganization

A brief introduction to U.S. bankruptcy law for CEO’s

Bankruptcy is a procedure governed by federal law in the United States. It is a federal law and thus operates through Federal District Courts because Article 1 of the Constitution says Congress has the power to make bankruptcy law. The vast majority of cases are for individuals seeking a full discharge of their debts who have no assets to distribute. This is a Chapter 7 bankruptcy.

Corporations who have both assets and debts, who wish to “reorganize” their company can utilize Chapter 11 bankruptcy law. Usually in bankruptcy law a trustee is appointed to control the assets of the individual (debtor) in bankruptcy. In a Chapter 11 case, however, the corporation usually retains control and is called the “Debtor-In-Possession”.

What can Chapter 11 do for a New York company?

The short answer is that Chapter 11 reorganization allows the debtor corporation to preserve the business as a going concern, and thereby maximize value for creditors, shareholders, employees and other stakeholders. This would allow jobs to be preserved and creditors to be paid back, at least in part.

It also offers relief from creditor calls and threats that the company will be sued because as soon as the bankruptcy petition is filed, all the company’s debts are “stayed’ or stopped while the bankruptcy processes. Your bankruptcy lawyer would propose a payment plan over a period of years to pay back creditors. Once accepted, the bankruptcy can end and the company can pay back the usually reduced debts at an agreed rate.

This is not an easy process however and is not without difficulties.

Difficulties

Your corporation may be worth less as a going concern than it would in liquidation. This would make it very difficult for a Chapter 11 repayment plan to be agreed with creditors. Without agreement the Chapter 11 may not complete.

Dwyer & Associates- Who are we?

Who are we?
Dwyer & Associates is a New York City law firm practicing bankruptcy law and mortgage modifications.

Most of this blog is about bankruptcy law. We encourage any New Yorkers who are reading and for whom we haven’t answered your question, to give us a call directly or send your question directly via our website.

What is the best way to contact an attorney?
You can give us a call directly on 212-203-4965, or visit our website- www.dwyerlawnyc.com to get more information.

If I contact an attorney am I obliged to use them?
Not at all. We are happy to assist with a quick question and encourage you to come in for a free initial interview if you are more serious.

Where are we based?
Our office is conveniently located at 11 Broadway by the Bankruptcy Court at Bowling Green (Financial District). We are near Brooklyn and are beside various subways (including the 4,5,1, 2,3,N,W) as well as the M1 and M6 bus routes.

What do we look for in a client?
Besides a nice smile and a GSOH, we have experience helping an extremely diverse range of clients, from very high earners to those who… well, aren’t doing so good this year. We work with individuals to file Chapter 7/13 & 11 bankruptcies, and businesses to file Chapter 11 restructuring. We’re friendly, promise to get back to you quickly, and above all else, care about your situation.