Consumer Bankruptcy

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Overwhelmed by consumer debt? With the right advice and help, filing for protection under the US Bankruptcy Code may be the answer.

Chapter 7 is the ‘liquidation’ chapter of the Bankruptcy Code. Under Chapter 7, some or all of your debt may be discharged. (If the debt is discharged, you will never have to pay it back).  However, a trustee is appointed to collect and sell, if economically feasible, all non-exempt property.

Much of your property may be exempt from liquidation, though. Exemptions vary from state to state, because many states have opted out of the federal exemptions. New York State provides an equity exemption for your residence: in the Capital Region the exemption is $125,000 for a home in Columbia, Albany or Saratoga County, and $75,000 for a home in any of the surrounding counties.  You are entitled to $4,000 of equity in a motor vehicle, and up to $10,000 (total) worth of household goods, wearing apparel, and other personal property. Most pensions are exempt.

Chapter 13 generally permits you to keep your property: for instance, you may be able to save your home even if it’s already in foreclosure. This is because you repay creditors out of your future income (although sometimes at pennies on the dollar). Under Chapter 13, you will submit a plan which must be approved by the bankruptcy court. You must then pay the chapter 13 trustee the amounts promised in your plan. If you complete your repayment plan, you will receive a discharge. Chapter 13 is only available to individuals with regular income whose debts do not exceed $339,900 in unsecured debts and $1,010,650 in secured debts.

For more information on bankruptcy and other ways to lighten your debt burden, visit our debt-relief website.

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