July 2010 – Rochester Bankruptcy and Debt Relief – Rochester, NY Bankruptcy Attorney

Upcoming Changes to New York’s Bankruptcy Exemptions

As readers of this blog know, if a debtor is filing for either Chapter 7 Bankruptcy or Chapter 13 Bankruptcy in New York, New York’s bankruptcy exemptions will apply. Unfortunately, those exemptions have not been updated in quite some time and are very limited as far as the values of protected assets is concerned.

There is a bill pending in New York State’s legislature that would substantially change the value of assets that could be protected in bankruptcy by changing the figures included in the Debtor and Creditor Law and CPLR which are the basis of those exemptions.

Specifically, this bill would increase the level of certain exemptions from the satisfaction of a money judgment. In addition to the increases, it would add one computer, one cell phone and one motor vehicle worth up to $4,000 to the list. If such vehicle was equipped for use by a disabled person, the limit would be $10,000. The money judgment exemption for the motor vehicle would not apply if the debt enforced is for child support, spousal support, maintenance or alimony.

It would increase the homestead exemption value of a home under Section 5206 of the CPLR from $50,000 to: $150,000 for the counties of Kings, New York, Queens, Bronx, Richmond, Nassau, Suffolk, Rockland, Westchester, and Putnam; $125,000 for the counties of Dutchess, Albany, Columbia, Orange, Saratoga, and Ulster; $75,000 for the remaining counties in the state.

It would also amend Subdivision I of Section 282 of the Debtor and Creditor Law to increase from $2,400 to $4,000 the exemption for one motor vehicle in bankruptcy. If such vehicle was equipped for use by a disabled person, the limit would be $10,000 in bankruptcy. The bill would amend section 283 of the debtor and creditor law to increase the amount of the aggregate individual bankruptcy exemption from $5,000 to $10,000.

The bill would add a new section 285 to the Debtor and Creditor Law to permit debtors to choose either the current federal exemptions or the exemptions in New York Law. The New York State exemptions are listed in Debtor Creditor Law Art 10-A, Sections 282 and 283. Federal exemptions are enumerated in 11 U.S.C. 522(d). It will apply a Cost of Living Adjustment to be published by the New York Banking Department for the applicable exemptions in sections 5205 and 5206 of the CPLR and Section 282 and 283 of the Debtor and Creditor Law.

If those proposed amendments pass into law, the debtors living in Rochester, and Western New York, would be able to protect an additional $25,000 in home equity per filer and also benefit from an increase in the value of vehicle exemption.

More significantly, the debtors will be able to chose between the New York exemptions or the Federal exemption limits. At this time, New York does not allow debtors to make this choice. The ability to utilize federal exemptions will help those debtors who do not own a home more than anything else, because there is a wildcard exemption under Federal Rules. The wildcard exemption, 11 U.S.C. 522(d)(5), typically allows the debtor to exempt a substantial amount of cash, which is presently limited under New York’s exemptions to $2,500.

If you are contemplating filing Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, or are dealing with debt problems in Western New York, including Rochester, New York, Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation with a Rochester, NY, bankruptcy lawyer.

Chapter 7 Bankruptcy, Chapter 13 Bankruptcy and Immigration Status

Can my bankruptcy filing affect my immigration status? This is a question periodically asked by my clients. The answer to that question is actually depends on the particular circumstances of each case, but here are some of the issues that may be relevant.

There is no immigration law, statute, or regulation that specifically forbids individuals who have filed for bankruptcy from applying for naturalization. Additionally, there is no specific question on Form N-400, Application for Naturalization, related to bankruptcy. However, the debtor’s immigration status can be affected if he has not filed required tax returns or if he owes money to the IRS.

While reviewing immigration-related applications, the INS is usually checking to see if an individual seeking naturalization has evidence of “poor moral character” which could be grounds to deny an application. The filing of a bankruptcy petition as a consequence of financial hardship clearly does not rise to the level of “poor moral character.”

However, if you are facing any type of immigration issue and are about to file for either Chapter 7 or Chapter 13 Bankruptcy, you should disclose that fact to your bankruptcy lawyer at your initial consultation as well as discuss your potential bankruptcy filing with your immigration attorney.

If you contemplating filing Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, or are dealing with debt problems in Western New York, including Rochester, New York, Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation with a Rochester, NY, bankruptcy lawyer.

Do Both Spouses Have to File for Bankruptcy Together?

While most married people think that if they file for Chapter 7 bankruptcy or Chapter 13 Bankruptcy, they must do so with their spouse. That is not true.

Whether one spouse or both file a bankruptcy petition, it’s their choice. It is not uncommon for one spouse to have most of the debt in his or her name only, in which case an individual filing would more appropriate. However, if both spouses are have a significant amount of debt, they should file together.

Sometimes I meet with only one spouse because the other spouse is is not willing to file for bankruptcy. In these situations, one spouse to file the bankruptcy petition and obtain necessary relief from the bankruptcy court.

There are also some additional issues that need to be considered. Initially, if only one spouse is filing and the couple is residing together, the other spouse’s income may be relevant for the purpose of household income as reflected on Schedule I, resulting disposable income reflected on Schedule J, and that spouse’s income may also be relevant for the means test.

As far as the means test, it is necessary to determine whether there is a presumption that there is enough disposable income available to give unsecured creditors sufficient payment under a Chapter 13 bankruptcy plan, such that permitting a Chapter 7 could be considered an abuse of discretion. But even if the means test is passed, and no presumption of abuse arises, or, alternatively, if this is a non-consumer bankruptcy and the means test is not even required, abuse can still be found given the totality of the circumstances. The income and assets of the non-filing spouse are important in both those considerations. If the debtor has legal rights to share in the income and assets of a non-filing spouse or even if the practice has been between spouses to share income and assets regardless of legal rights, the bankruptcy law tells us that the debtor’s access to the non-filing spouse’s income and assets has to be considered in deciding whether the bankruptcy court would permitting a Chapter 7 bankruptcy filing.

An experienced bankruptcy attorney can analyze each consumer’s financial situation and suggest whether a married couple should file an individual or a joint petition.

Do Divorce Settlements Survive Bankruptcy?

I have previously written about interplay between divorce, family court proceedings and bankruptcy, as well as other issues involving interplay between bankruptcy and family law. One issue that is highly significant in situations where one of the former spouses is about to file a Chapter 7 Bankruptcy or Chapter 13 Bankruptcy is whether the bankruptcy trusee will seek to undo a divorce settlement agreement.

With bankruptcy filings being so common, and divorce being a major reason for seeking bankruptcy relief, divorce lawyers are frequently concerned as to whether a divorce settlement will be upheld in a bankruptcy proceeding.

There are valid reasons to be cautious since if a debtor transfers a valuable asset to a spouse (or soon-to-be ex-spouse) prior to filing for bankruptcy, and the debtor-spouse does not receive reasonable value in return, then the transfer may be deemed to be a “fraudulent transfer.” In such a case, the bankruptcy trustee can sue the person who received the asset to recover it for the bankruptcy estate, so that all creditors can share in its value. As with any other situations involving fraudulent transfers, the debtor must have been insolvent at the time of transfer.

In order to demonstrate that a transfer was not a fraudulent transfer, the party who received the transfer would have to show that there was “reasonably equivalent value.” It is common for a divorcing spouse to settle the divorce case by giving the other spouse valuable assets such as an interest in real estate, bank accounts, investments, or other personal property. In those situations, both parties do not want a bankruptcy trustee to try to set such transfers aside.

There was a time when some of the bankruptcy courts have held that innocent spouses who received such a transfer were no different from any other party who received a large transfer without sufficient consideration. However, a case decided by the United States Circuit Court of Appeals in June of 2009 will give many divorcing spouses a greater degree of certainty that a trustee will not be able to set aside a divorce settlement.

The decision in Bledsoe v. Bledsoe, 569 F.3d 1106 (9th Cir. 2009) this issue by addressing when a bankruptcy court may avoid a transfer made pursuant to a state-court divorce decree. The Circuit Court affirmed that decision and held that a trustee can only set aside a matrimonial settlement if he alleges and proves “extrinsic fraud.” The Court also held that a divorce decree that follows from a regularly conducted, contested divorce proceeding conclusively establishes “reasonably equivalent value” in the absence of fraud or collusion. Since the Second Circuit has not addressed this issue, Bledsoe is valid law in the bankruptcy courts in New York. At the same time, the bankruptcy court, here in Rochester, New York, and elsewhere, will always review the totality of the facts.

In order for a divorce settlement to be upheld by the bankruptcy court, it must be ratified by the matrimonial court. That means that any transfer should be accurately described in a stipulation of settlement. In addition, the stipulation must be specifically referred to and incorporated in the judgment of divorce. It is not enough that the parties merely stipulate to a settlement; the court must specifically approve the settlement. In a typical judgment of divorce, this is accomplished by stating that the stipulation survives the judgment of divorce and is not merged into it.

Can You Be Fired For Filing Bankruptcy?

Many people who file for bankruptcy in New York have fears about their relatives, friends, neighbors and employers discovering that they have filed for bankruptcy. They try to hide this fact from everyone. Many people who would greatly benefit from filing for bankruptcy under either Chapter 7 or Chapter 13 are reluctant to do so is because the perception among some people is that it is shameful to file for bankruptcy. I spend a considerable amount of time explaining to my clients that there is nothing shameful about filing for bankruptcy.

A lot of people are scared that their employers would find out that they filed for bankruptcy. They are afraid that their employers might fire them from their jobs if employers find out about their bankruptcy filing. They try as much as possible to hide their filing for bankruptcy because of this sense of insecurity.

The debtors should not be concerned since federal law prohibits employers from discriminating against them or from terminating their employment solely because of the debtor’s bankruptcy filing. Specifically, the bankruptcy code’s non-discrimination provision, 11 U.S.C. section 525(b), states as follows:

No private employer may terminate the employment of, or discriminate with respect to employment against, an individual who is or has been a debtor under this title … solely because such debtor … is or has been a debtor under this title…. 11 U.S.C. sec. 525(b).

One caveat to the above provision is that the Bankruptcy Code prohibits discrimination solely on the basis of the bankruptcy filing. It will not protect an employee who is having other employment-related problems.

The reality now is that a great number of people in Rochester, New York, or elsewhere in Western New York, have filed or are filing for bankruptcy. For a business having employees who file for bankruptcy is simply a fact of life. In many respects, it is better for the employer to have an employee file for bankruptcy, so that the employee is not spending time answering phone calls from the debt collectors, or that employer does not have to waste time garnishing employer’s wages. In today’s economy, bankruptcy is a reality that everyone is facing, and so companies would rather not do anything that would appear to be a form of discrimination against their employees.