Chapter 7
A chapter 7 can be filed by an individual, a partnership or a corporation. It involves the liquidation of debtor's non-exempt assets, with the proceeds being distributed to creditors. The gathering of assets, the sale of the assets, and the payment of creditor's claims, are the responsibility of a chapter 7 trustee. Although a chapter 7 Bankruptcy causes the dissolution of a partnership or corporation, obviously an individual continues to exist after bankruptcy. Therefore, the goal of the an individual chapter 7 is to obtain a "fresh start", even if it is at the risk of losing ones assets. This fresh start is possible because the bankruptcy code provides for the discharge of most pre-petition debts, whether or not they are paid in the liquidation.
Often a chapter 7 can be virtually painless in that no assets are actually lost. This may be due to the fact that the debtor had no assets to liquidate or the assets were exempt. In order to help facilitate the “fresh start", Congress allowed for certain exemptions so the debtor was not left totally destitute. The Code sets forth federal exemptions but also provides that the States can opt out of these exemptions and allow for the utilization of that particular States's exemptions. New York has opted out of the federal exemptions. Thus, a debtor filing bankruptcy in New York can utilize the New York exemptions available against creditors in non-bankruptcy situations. These exemptions include a $10,000 homestead exemption ($20,000 in a joint bankruptcy), a $2,400 exemption in a motor vehicle and an exemptions for a qualified ERISA plan or IRA.
Bluestein & Muhlbauer, P.C.
333 International Drive
Williamsville, NY 14221
716.633.3200
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