Jeffrey M. Rosenblum, P.C.
A Fresh Start

Long Island Bankruptcy Law Blog

Chapter 7 bankruptcy, exploring the consequences

For most people, the thought of filing a Chapter 7 bankruptcy is frightening. The process is shrouded in a great amount of negativity, and although some of the negativity is true, some of it is false. We have found that once people weigh the negative consequences against the positives, most of them feel better about the prospect of a Chapter 7 filing.

If you are like most Long Island residents with overwhelming debt, you have probably heard about the cons of a Chapter 7 bankruptcy. These potentially negative consequences usually include:

  • The possible loss of some of your personal property
  • Your bankruptcy will be a matter of public record for other people to see
  • You may take a hit to your credit score
  • You may experience feelings of shame about your financial situation

Debunking common bankruptcy myths for New York residents

Some of the things that truly matter in life often come with a slew of myths and misconceptions. Chapter 7 and Chapter 13 bankruptcies are no exception to this concept. Many of the ideas about bankruptcy that frighten Long Island residents are not true. To make the best financial decisions and find the right way to clear your debt, it is crucial to investigate all of your options before choosing a path. This includes any of the myths surrounding Chapter 7 and Chapter 13 bankruptcy.

One of the best ways to address the negative ideas you may have heard about filing bankruptcy is to take your case to an attorney. He or she will know exactly how bankruptcy works in the state of New York and can give you accurate, personalized advice. Your lawyer will also dispel any incorrect notions you may have about bankruptcy. In the meantime, this blog post will debunk three of the common misconceptions about bankruptcy.

Bankruptcy: What is the difference between Chapters 7 and 13?

While it may be possible to logically assume that your financial stability is going to be strong or weak according to various circumstances in your life, you can never predict with 100 percent certainty what lies in store for your financial future. Life takes twists and turns, sometimes quite suddenly and unexpectedly. If a situation arises that throws you for a loop regarding expenses, your budget and ability to pay back debt, it might be more challenging than you think to get things back on track.  

Filing for bankruptcy is often a viable option when financial situations get out of hand and you have no foreseeable means for satisfying the debts you owe. In fact, certain types of bankruptcy can stop the foreclosure process, which means you might be able to save your home by tapping into debt relief resources that are available in New York. You, of course, must first determine if you are eligible. To do that, you have to have a good understanding of Chapter 7 and Chapter 13 bankruptcies.

Determining if bankruptcy is right for you as a senior citizen

Living as a senior citizen in New York can be enjoyable for so many reasons. It can also be quite scary if your financial situation is in ruins. Just because you've worked your entire life doesn't mean that your finances will be in good shape. It all depends on how you handle your finances and credit. Let's take a look at bankruptcy as a senior citizen so you can determine if it's right for you.

Here are a few reasons why you should consider filing for bankruptcy as a senior citizen:

  • Consolidate debt on credit cards
  • Negotiate new terms on secured loans
  • Defer debt
  • Reduce the interest on your debt
  • Negotiate debt terms professionally

What are your tools of the trade?

If you declare bankruptcy, one of the things you may naturally worry about is how that filing is going to impact your ability to earn a living. You know that Chapter 7 means liquidating assets. However, are you going to have to sell the tools you use to make a living right now?

You should not have to. The tools of the trade are protected as a common bankruptcy exception. Now, this may only apply up to a specific value, so be careful about claiming too many items as tools of the trade. At the same time, though, you can expect the most critical items to usually be exempt from the liquidation process.

Report: Bankruptcy is becoming more common among seniors

Bankruptcy is becoming more common among senior citizens. In fact, according to a new report from the Consumer Bankruptcy Project (CBP), the rate of new bankruptcy filings among people who are at least 65 years old has doubled since 2013. The average amount of debt that seniors who file for bankruptcy have is over $17,000.

The trend goes back farther than five years, however. In 1991, just over 2 percent of senior citizens were in some phase of bankruptcy. Now it's over 12 percent. CBP researchers expect that number to continue to rise.

How can I get out from under a mountain of medical debt?

If you're a Long Island resident who is contemplating filing for bankruptcy, your debts may have accrued from many sources. Credit card debt, personal loans and student aid obligations can all take a huge chunk out of your disposable income.

But what also might be eroding your cash flow is medical debt — an expense that is totally unavoidable.

Can you file for bankruptcy and then start a business?

You have a great business idea, but you have too much debt to get it started right away. You decide that you're going to file for bankruptcy, eliminate your debt and then start the company. How soon can you do it?

Technically, you can start that company immediately. Nothing about your bankruptcy filing bars you from business ventures.

Does the IRS know about your foreign assets?

You may have numerous reasons to hold assets overseas. Perhaps your company does business with foreign entities, and you have an interest in those entities. Maybe you have immigrated to the U.S. and still own personal property in your homeland. Or, you may simply want to diversify with some high-risk investments that may yield higher returns.

Whatever your reason for having assets outside the United States, you may have believed that those assets enjoyed protection from the IRS. However, in recent years, the government has been working with financial institutions around the world to share information about assets Americans own overseas. Far from avoiding the taxes on your profits, you may now face steep penalties for failing to report your assets.

What are the top financial errors people make?

Financial mistakes are pretty common. As much as everyone wants to be in control of their finances, life has a way of getting out of control. Sometimes, it just takes one small mistake. Other times, a series of chronic mistakes cause the problems. What are some of the most common errors people make? A few are listed below:

  • Frivolous and excessive spending: People simply spend more than they can afford. They make too many impulsive decisions. They buy things that they want, but do not need, even if they can't afford them.