Chapter 7 Bankruptcy in New York

Chapter 7 is the fastest and cleanest form of personal bankruptcy. For most filers, it eliminates credit card balances, medical bills, personal loans, deficiency judgments, and almost all other unsecured debt in about four to six months. When you call us at 212-233-1233, we will run through the eligibility analysis with you and tell you whether Chapter 7 is the right tool for your situation.

What Chapter 7 Does

Filing a Chapter 7 petition does three things almost immediately:

• It triggers the automatic stay. Federal law instantly halts collection calls, lawsuits, wage garnishments, bank levies, repossessions, and foreclosure sales. Creditors who keep collecting after the stay attaches can be sanctioned.
• It creates the bankruptcy estate. A federal trustee is appointed to administer your non-exempt assets. New York's exemption scheme is generous — most of our Chapter 7 clients are "no-asset" cases, meaning the trustee has nothing to liquidate.
• It puts the discharge on track. Roughly sixty to ninety days after the meeting of creditors, the court issues a discharge order wiping out the dischargeable debts in your case.

What Chapter 7 Discharges

Chapter 7 typically wipes out:

• Credit card debt.
• Medical bills.
• Personal loans, signature loans, and lines of credit.
• Old utility balances and broken-lease deficiencies.
• Most civil judgments.
• Mortgage and auto deficiencies after foreclosure or repossession.
• Older income taxes, in narrow circumstances.

What Chapter 7 Does Not Discharge

Some debts survive a Chapter 7 discharge. The big ones:

• Domestic support obligations (child support and most spousal support).
• Most student loans, absent an undue-hardship adversary proceeding.
• Recent income taxes and trust-fund taxes.
• Debts for fraud, embezzlement, or willful and malicious injury.
• Criminal restitution, DUI judgments for personal injury, and most government fines.

Who Qualifies for Chapter 7

To file Chapter 7 as an individual, you must pass the means test. The means test compares your household's six-month average income to the New York median for a household of your size. If you are under the median, you pass automatically. If you are over the median, you complete a more detailed expense calculation, and only filers whose monthly disposable income is below a statutory threshold qualify.

Most of our individual clients pass the means test on the income side. We work through the calculation in the first consultation so there are no surprises later.

Protecting Your Property

New York debtors can choose between the New York state exemption scheme and the federal exemption scheme. The choice matters — the right scheme depends on whether you own a home, how much equity you have, the value of your vehicle, and what else you own. See our page on New York bankruptcy exemptions for the full breakdown.

Typical Chapter 7 outcomes for our clients:

• House: kept, provided equity fits within the homestead exemption.
• Car: kept, with the lien reaffirmed if the car is financed.
• Retirement accounts: 401(k), 403(b), IRA, and pension assets are fully protected.
• Wages and bank accounts: 90% of wages and a baseline cash exemption are protected.
• Household goods, clothing, and tools of the trade: fully protected up to the statutory limits.

The Chapter 7 Timeline

1. Week 0 — Consultation and engagement. Eligibility analysis, budget review, document checklist.
2. Weeks 1-4 — Document collection and pre-filing credit counseling. Tax returns, pay stubs, bank statements, secured-loan paperwork, and a one-hour briefing from an approved credit counselor.
3. Week 4-6 — Petition preparation and filing. We draft the schedules and the statement of financial affairs, review them with you, and file electronically.
4. Week 5-10 — Meeting of creditors (341 meeting). A brief hearing with the Chapter 7 trustee. Albert attends with you. Most meetings last under ten minutes.
5. Week 12 — Financial management course. A second required course, taken online.
6. Week 16-20 — Discharge. The court issues the discharge order. Dischargeable debts are gone forever.

Common Chapter 7 Pitfalls We Help You Avoid

• Filing too soon after a large transfer to a relative or insider (look-back periods range from 90 days to four years).
• Filing without disclosing a personal injury claim, inheritance, or tax refund that has accrued but not yet been received.
• Reaffirming a car loan that has a balance well above the vehicle's value.
• Paying preferential payments to a relative within the year before filing.
• Forgetting to claim every available exemption.

Call us at 212-233-1233 for a free Chapter 7 eligibility consultation. We can usually tell you in fifteen minutes whether Chapter 7 is the right move.