Of all of the states in the United States, New York has been affected the hardest by COVID-19. New York has more than 343,000 diagnosed cases of COVID-19 in the state and at least 27,641 deaths Nationally, 30 million Americans are out of work resulting in mortgage payments not being paid, car payments not being paid, and credit card bills overdue. In NYC alone, hundreds of thousands of businessmen are facing possible failure of their businesses, and many have questions about:
Considering the drastic effect COVID-19 has had on New York’s economy, many homeowners and business owners have been left with no choice but to consider filing for personal bankruptcy.
Essentially, bankruptcy is the legal status of a person or other entity that cannot repay the debts it owes to creditors. Bankruptcy is a very drastic legal maneuver and is not to be taken lightly. It should be reserved only for the most extreme situations. Some of these include:
Filng personal bankruptcy when you own a business or filing for personal bankruptcy in NY is an extreme remedy. You need to consult with an experienced personal bankruptcy lawyer to discuss your personal matter and whether you qualify for personal bankruptcy help.
What happens when you’re filing for personal bankruptcy in NY? How does personal bankruptcy work? When you file for personal bankruptcy in NY, you are asking the Court to give you debt relief because you cannot pay your creditors. There is no statutory limit as to how many times you can file for bankruptcy. According to the bankruptcy code, there are two main types of personal bankruptcy for individuals: Personal Bankruptcy Chapter 7 and Chapter 13. A Chapter 7 bankruptcy filing involves a liquidation of assets, which means all of your assets are sold and then distributed to the creditors. In a Chapter 7 bankruptcy, all of your debt is discharged and you have a clean slate. This generally is accomplished within three to four months of filing.
In contrast, a Chapter 13 bankruptcy filing resolves a portion of your debt, in which your debt is reorganized and a payment plan is introduced, generally over a period of five years, in which your interest rates are reduced, and your creditors are paid each and every month over the course of that period. Chapter 13 is generally for people with credit card debt who can pay off their debts after a renegotiation with creditors and the reorganization of assets to debt.
In a bankruptcy, almost all assets become part of the debtor’s estates, but for certain exemptions that allow the person bankruptcy filer to keep some of their assets and belongings. Generally, only certain items you can keep. This includes personal items and clothing, household furniture, food and equipment in your permanent home, tools necessary to your work, a motor vehicle with a value up to a certain limit, usually an older vehicle qualifies, certain farm property, and possibly your home if you own it.
If only one spouse has debt, that spouse can file for bankruptcy individually to discharge his or her own obligations. Accordingly, an individual bankruptcy allows one spouse to wipe out his or her debts without negatively affecting the other spouse’s credit.
In New York, it costs $306 to file for bankruptcy under chapter 7 and $281 to file for bankruptcy under chapter 13, whether for one person or a married couple. However, the court may allow you to pay this filing fee in installments if you cannot pay all at once. Personal bankruptcy attorneys generally charge from $1,500-$5,000.
Bankruptcies will remain on a credit report for 7 to 10 years, depending on if Chapter 7 or Chapter 13 was filed (as opposed to the date the debts were actually discharged). Chapter 13 bankruptcy is deleted from your credit report seven years from the filing date. Chapter 7 bankruptcy is deleted 10 years from the filing date.
Accordingly, bankruptcy impacts your credit less as time passes and as you add positive information to your credit report. It’s possible to get to an excellent credit status after bankruptcy, but you have to get through the process first.
What happens when you’re filing for personal bankruptcy and you own a business? If you decide to file for personal bankruptcy, your involvement within your business, whether it is a business partnership or LLC, will only affect your equity with that business.
A LLC will be interpreted by bankruptcy courts as an asset within your estate. With that in mind, the trustee in charge of your bankruptcy may opt to sell your LLC ownership to help settle your debts.
Similarly, when it comes to a business partnership, a personal bankruptcy filing of one business partner does not need to affect the ongoing operations of the business. It typically only affects the individual and his “stock” or “interest value” in the entity. In most scenarios, his bankruptcy won’t reach the company assets.
Since hundreds of thousands of businesses in New York have also been affected by the coronavirus, many creditors will work with you to try to work out some sort of payment plan, meaning that eventual road leading to bankruptcy can in fact be delayed or even possibly ruled out completely.
There are many programs provided by both the federal and New York state government that can offer some sort of financial relief. Businesses with fewer than 500 employees can apply for a loan through the Paycheck Protection Program, which was instituted in the Coronavirus Aid, Relief and Economic Security Act (Also known as the CARES Act). In fact, the Payback Protection Program has approved 860,000 applications for $210 billion of loans. Borrowers can apply for forgiveness for any funds used for payroll costs, mortgage, interest, rent and utilities over an eight-week period.
In negotiating with creditors, a few key strategies are important to keep in mind. One, you can mention to the creditors that unless they work with you, you’ll have no choice but to file for bankruptcy. Unsecured creditors, such as credit card companies, know this, and most would rather settle the debt for pennies on the dollar than wind up with nothing if the debtor files for bankruptcy protection.
Second, unsecured creditors may settle for around 50% of the debt. Therefore, you should start with a lower offer, around 15%, and negotiate from there.
Third, whatever the agreed payment plan ends up being, creditors are more likely to settle if funds can be transferred right away. Accordingly, creditors are much more likely to be agreeable if the funds are paid immediately.
Although there are many personal bankruptcy attorneys and personal bankruptcy lawyers who provide personal bankruptcy help, you need an experienced personal bankruptcy lawyer who can explain how personal bankruptcy works, explain personal bankruptcy chapter 7 and chapter 13, listen to your personal bankruptcy story, and will explain in detail your options for personal bankruptcy alternatives.
Law Office of Yuriy Moshes represents all types of individuals and businesses affected by Covid-19 in the greater New York City area including all its boroughs, including Manhattan, Brooklyn, Queens, the Bronx, and Staten Island) as well as Northern New Jersey, Long Island, and Upstate New York.
If you’re struggling with debt and are considering bankruptcy or wish to avoid bankruptcy all together, do not worry. We are offering a free consultation with an attorney.