06 Feb Important Bankruptcy Facts Every Brooklyn Resident Should Know
Money troubles can happen to anyone—unexpected job loss, medical bills, or even changes in household income can make it tough to keep up with debts. Many people in Brooklyn face financial stress and wonder if bankruptcy might be the solution.
At Poltielov & Habib, LLP, our Brooklyn bankruptcy attorneys understand how overwhelming this can feel. We are here to give you clear answers to some of the most common bankruptcy questions.
What Is Bankruptcy?
Bankruptcy is a process meant to help people who can’t repay their debts. When you file for bankruptcy, the court and your creditors must follow specific rules meant to give you relief from overwhelming bills.
Filing for bankruptcy triggers something called the “automatic stay,” which stops most debt collections, lawsuits, and even foreclosure actions. Bankruptcy does not make you a bad person or a failure—it is a tool that can provide a fresh start for hardworking individuals who simply ran into financial problems.
Here at Poltielov & Habib, LLP, we focus on helping Brooklyn clients use bankruptcy laws effectively. We are Brooklyn bankruptcy lawyers who want you to understand your options and rights. There is no shame in needing a second chance, and bankruptcy can provide a path to rebuilding your life.
Why Do People in Brooklyn File for Bankruptcy?
There are many reasons why Brooklyn residents decide to file for bankruptcy. Some lose their jobs or have their income cut. Others face large medical bills that insurance does not fully cover. Some have small businesses that struggle due to economic downturns. High-interest credit card balances can also spiral out of control, making it hard to see a way forward.
If you are dealing with persistent debt, constant phone calls from collectors, or threats of lawsuits, bankruptcy can pause these actions while you figure out a plan. Filing for bankruptcy might also protect your home if you are behind on mortgage payments. At Poltielov & Habib, LLP, we have seen firsthand how filing for bankruptcy can bring peace of mind and help people stay in their homes.
Which Types of Bankruptcy Are Available?
There are two main types of personal bankruptcy for individuals:
Chapter 7 Bankruptcy (Liquidation)
Chapter 7 is often the fastest and most direct way to get rid of unsecured debts, like credit card bills and medical expenses. In many cases, people who file Chapter 7 can keep most of their possessions because New York has exemptions to protect certain property. After your case finishes, your qualifying debts are discharged, meaning you do not have to pay them back.
Chapter 13 Bankruptcy (Reorganization)
Chapter 13 is best for people who have enough regular income to pay back some or all of their debts over time. By submitting a repayment plan to the court, you can make affordable monthly payments for three to five years. Once you finish the plan, the remaining qualifying debts are discharged. Chapter 13 can be a good choice if you want to catch up on mortgage or car loan payments and keep the property you care about most.
Which chapter you pick often depends on your income, assets, and specific goals. Our Brooklyn bankruptcy lawyers at Poltielov & Habib, LLP will look at your entire situation to figure out if Chapter 7 or Chapter 13 is the better fit for you.
How Does the Automatic Stay Help You?
Many people feel relieved when they learn about the automatic stay. This is a powerful court order that goes into effect as soon as you file your bankruptcy petition. Once the automatic stay is in place, most creditors must stop calling you, sending letters, or suing you for unpaid debts. If your home is in foreclosure, the sale is put on hold until the court decides what happens next.
For Brooklyn homeowners, this can mean extra time to work out a repayment plan or consider other ways to handle debts. For those facing wage garnishment, it means you can keep more of your paycheck. The automatic stay alone is sometimes enough reason for people to file for bankruptcy because it finally gives them a break from constant collections and stress.
Are There Any Requirements to File for Bankruptcy?
Yes, there are a few steps everyone must complete before filing:
- Complete a Credit Counseling Course: You must take this course with an approved agency within 180 days before filing. It helps ensure you fully understand your financial situation and have considered other options.
- Meet Residency Rules: To file in Brooklyn (or anywhere in New York), you need to have lived in the state for at least 91 of the last 180 days.
- Pass the Means Test (Chapter 7 Only): If you want to file Chapter 7, you must check your income against New York’s median income. If your income is higher, you might have to complete a more detailed form to show you still cannot afford your debts. If it turns out you can make some payments, you may have to file Chapter 13 instead.
At Poltielov & Habib, LLP, our attorneys will guide you through these steps to ensure everything is done correctly and on time.
Can You Lose All Your Property If You File?
One of the biggest myths about bankruptcy is that you will lose everything you own. That is rarely the case. New York has special rules, called exemptions, that let you protect certain assets. For instance, there is a homestead exemption if you own a home, as well as exemptions for your car (up to a certain value), household goods, tools of your trade, and more.
If you file Chapter 7, it is possible that non-exempt property might be sold to pay creditors, but many people find that most of their items fall under state or federal exemptions. In Chapter 13, you typically keep your property while you follow your repayment plan.
Our attorneys will go through these exemptions with you so you know exactly what to expect. We are here to help Brooklyn clients hold onto what matters most.
How Does Bankruptcy Affect Your Credit Score?
There is no avoiding the fact that bankruptcy will show up on your credit report. A Chapter 7 filing remains for ten years, and a Chapter 13 for seven years. This does not mean you can never borrow money again. Many people start rebuilding their credit soon after their bankruptcy case is over.
You might receive new credit card offers within a year of filing, although these could have higher interest rates and smaller limits at first. By using credit wisely and paying bills on time, you can improve your score over time. Bankruptcy may lower your credit score initially, but it also wipes out debts that could be dragging it down already.
Which Debts Cannot Be Wiped Out?
Most unsecured debts, like medical bills or credit card balances, are dischargeable. However, certain debts often survive bankruptcy.
Here is a list of common non-dischargeable debts:
- Student loans (unless you can show extreme hardship)
- Recent income taxes or certain other tax debts
- Child support and alimony
- Court fines and criminal restitution
- Debts from fraud or embezzlement
If these debts are a big part of your financial challenge, we will walk you through possible solutions. Even if student loans cannot be cleared, getting rid of other debts might free up money to handle remaining obligations.
Can Bankruptcy Stop Foreclosure in Brooklyn?
Yes, filing for bankruptcy can pause foreclosure through the automatic stay. In Chapter 7, this pause might be temporary unless you can quickly get current on your mortgage or work something out with the lender. In Chapter 13, however, you can include past-due mortgage payments in your repayment plan, giving you three to five years to catch up. This can help you keep your home if you stick to the plan.
Poltielov & Habib, LLP often helps Brooklyn clients who are behind on mortgage payments. We look at your budget, your equity, and whether your lender might be open to a loan modification. If these options fail, a Chapter 13 repayment plan might be your best choice to avoid losing your house.
Are There Alternatives to Bankruptcy?
Bankruptcy can be a valuable tool, but it is not the only option. Some people try debt consolidation, credit counseling, or a loan modification first. Others reach out to creditors to see if they can settle their debts for less than the total amount owed.
We always explore these paths with our clients. However, if you have exhausted other solutions, a formal bankruptcy might be the surest way to a fresh start.
Ready to Talk to a New York Bankruptcy Lawyer?
If you are struggling to pay your bills and feel like you have run out of options, do not wait until collectors become more aggressive or until your home faces foreclosure. Our Brooklyn bankruptcy lawyers at Poltielov & Habib, LLP are ready to help you find a path out of debt. We will answer your questions, review your situation, and guide you toward a solution that fits your needs and goals.
Call us today at (718) 520-0085 or contact us online to schedule a confidential consultation. Let us walk you through the bankruptcy process and show you that there is hope for a brighter financial future. We believe that with the right plan and the right legal guidance, you can take control of your debts and start on the road to a fresh start.