Free Consultation
The office is open as per the NYS Covid-19 guidelines. We are now doing both in-person and telephone consultations. Please call the office at 718-855-6840 to schedule a time to speak with one of our experienced bankruptcy attorneys.

What Happens When You Can’t File Bankruptcy?

There are times when filing New York bankruptcy isn’t a good idea, like when debtors only owe a couple thousand dollars, but it’s a much more difficult proposition advising debtors who can’t file. The Bankruptcy Code doesn’t offer relief for everyone in all circumstances, so it can help to discuss alternatives.

But first, here are a few examples of situations in which debtors are ineligible for personal bankruptcy:

  • Most commonly, debtors who owe money that can’t be easily discharged, e.g. student loans, support payments, or sometimes taxes.
  • Debtors whose incomes are above the state’s median for their family size for chapter 7 but owe more debt than the chapter 13 debt limits allow.
  • High income debtors who nevertheless can’t pay their priority claims under a chapter 13 plan.
  • Debtors who are barred from bankruptcy due to fraud or other illegal activities.

There are a few responses for these debtors (okay, the ones who commit fraud are on their own). One, discharge may be the greatest financial benefit of bankruptcy, but it’s not the only one. Some homeowners file solely to take advantage of the automatic stay to prevent a foreclosure. Consequently, filing might not be a bad idea. Homeowners who are behind on their mortgages can also file chapter 13 to repay their arrearages plus any interest on them, even if they don’t have much need for the discharge.

Two, a discharge of some debts can free up income for others that bankruptcy cannot address.

Three, insolvent debtors can always try to settle their debts with their creditors. Often they can get serious discounts from creditors that just want something. Although, beware zombie creditors and those that don’t legitimately own your debts. Payments to them won’t count.

Four, debtors who can’t settle with their creditors can try other debt-management strategies. For example, a popular one is reducing monthly payments to the minimum for each creditor but then dedicating all disposable income to the smallest balances first. As each debt is paid off, the newly freed income is dedicated to the next smallest creditors and then going up the line. Called the “debt-snowball method,” debtors see results quicker, and they supposedly stick to it because it alters their behavior. Debtors can modify this method to focus on priority claims and then file bankruptcy.

Debtors who cannot file bankruptcy will have to adopt alternative strategies to take control of their financial situations. Consulting with an experienced New York bankruptcy lawyer can help you develop those options.

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 lawyer Bruce Weiner for a free initial consultation.

Rosenberg, Musso & Weiner, L.L.P
26 Court St # 2211
Brooklyn, NY 11242, USA
718-855-6840
http://nybankruptcy.net/

Recent Posts

Social Security Number Not Necessary for Bankruptcy

A question that’s commonly asked about New York bankruptcy is whether a debtor needs a Social Security number to file. Debtors ask because they sometimes run across the bankruptcy form title, “Your Statement About Your Social Security Numbers” (B 121), which asks debtors to list their current and prior Social Security numbers. The new bankruptcy

Read More »

How Can a Debtor (or Creditor) Get a New Trustee?

The trustee in a New York bankruptcy case is usually not the debtor’s ally. His or her purpose is mainly to administer the bankruptcy estate or ensure the debtor’s repayment plan goes according to plan. Trustees pursue preference payments, fraudulent conveyances, and other malfeasance committed by debtors. They frequently initiate adversary proceedings against debtors. In

Read More »

What Is a ‘Pot Plan’ in Chapter 13 New York Bankruptcy?

The answer has to do with paying money into a pot, not other kinds of pots. There is surprising flexibility in how debtors can structure their repayment plans in chapter 13 New York bankruptcy, especially as they apply to unsecured creditors. The reason for this flexibility isn’t simply to give debtors more options; rather, it’s

Read More »

Good Math Skills Needed When Amending a Chapter 13 Plan

New York bankruptcy lawyers aren’t always known for their math skills. In fact, there are many jokes about lawyers as liberal arts majors who can’t do math or science. The issue of lawyers and math, however, is quite serious in consumer bankruptcy, which can be “numbers intensive.” Unfortunately, easy math mistakes can plague a chapter

Read More »

Bruce Weiner named a member of the 2021 New York Super Lawyers

Bruce L. Weiner, a partner at Rosenberg Musso & Weiner LLP, Brooklyn bankruptcy attorneys, has been named a 2021 New York Super Lawyer. This list recognizes only five percent of lawyers in the state. Super Lawyers, a part of Thomson Reuters, is a rating service, research-driven and peer-influenced, that lists outstanding lawyers who’ve attained a

Read More »

Options for Debtors Whose Co-Signers File Bankruptcy

It’s one thing to consider filing New York bankruptcy when you run into financial problems, but it’s another thing entirely when a co-signer of a debt files bankruptcy. The co-signer who is doing fine might suddenly find himself or herself in serious trouble. Here are some things for co-signers to consider should a co-debtor file

Read More »
Scroll to Top