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Non-Lawyers’ Explanations of Bankruptcy May Be Wrong

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Do you have financial problems? Do you tend to ask your friends for advice? Is one of your friends an experienced New York bankruptcy lawyer who will explain the process for you? Are your friends otherwise knowledgeable people? The answer to these questions may be, “Yes but you don’t know it.”

Although many bankruptcy lawyers stress that debtors may be too embarrassed to consider bankruptcy when it might help them, the opposite may also be true: They’re more than happy to confide in their friends, who promptly give them bad advice. This can be especially true when those friends have gone through bankruptcy themselves. They know quite a bit to be credible but not enough to know where the holes in their knowledge are. If you’re the type of person to ask your friends’ bankruptcy advice, here are a few tips to bear in mind when evaluating their nuggets of wisdom.

If they’ve gone through bankruptcy themselves they may not realize just how significantly their situation differs from yours, particularly if they filed in chapter 13 rather than chapter 7. It is true that debtors with no assets, low incomes, and unsecured debts will probably have similar bankruptcy outcomes in chapter 7. But it only gets more complicated from there.

One way debtors’ cases may differ is in their assets, and thus their available exemptions. New York State’s exemptions offer homeowners a substantial homestead exemption, but it differs by county. Debtors in some counties may be able to exempt more than in others, and of course they may owe more or less on their mortgages than others. Once there’s nonexempt equity, then debtors may end up losing their houses in chapter 7 when chapter 13 was a better fit.

Relatedly, as time goes on, asset values fluctuate. That friend who filed bankruptcy in 2010 may not have had any nonexempt equity to worry about in chapter 7, but in 2018, home values have appreciated. What could have been an easy chapter 7 filing years ago might be much more complicated today (which is a reason to not wait on considering bankruptcy but that’s a topic for another day).

On the other side, you may have more options than your friends had several years ago. If a friend of yours tells you that student loans are hopeless weight because they couldn’t discharge them a decade ago or more, perhaps you’re easily eligible for a federal income-driven repayment plan that slashes high monthly payments to something that better suits your earnings.

Ultimately, bankruptcy is all about the details. The system had to be designed with that in mind to accommodate the myriad financial situations debtors and creditors present. If your financial situation is precarious, then talking to an experienced New York bankruptcy lawyer can help you assess the best course of action better than your friends can.

For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Brooklyn bankruptcy attorney Bruce Weiner for a free initial consultation.

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