Posted: March 19, 2020
Saving Your Home and Getting a Fresh Start Through a Chapter 7 Bankruptcy Filing
You have worked your entire adult life. Things have been good. You are married and have two teenage children. Your spouse also works and, together with you, there is sufficient household income to afford the home in the suburbs, two late model cars, annual vacations, entertainment and recreation expenses, current technological devices for everyone in the family, activities for the kids, and even some surplus to put away for retirement. All of your credit card accounts are paid regularly and you have built up equity in your home. Then, suddenly, disaster hits. Based upon circumstances which you had not anticipated, such as illness, business closure by your employer, or the need to take care of a family member, you or both you and your spouse find yourselves without employment and without any other source of income. While you may have some savings, and you may be eligible to receive certain benefits, including unemployment insurance or disability benefits, it is simply not enough. First you see your savings depleted, you cannot pay the total amount due on your credit card any longer. You start using multiple credit cards and, although you are making minimum payments, the balances are rapidly rising each month. You are late making your car and mortgage payments. You are one month behind, then two months. Collection notices start coming to you from the utility companies, the car leasing or finance companies, the credit card companies and then the dreaded notice from the mortgagee who holds the lien against your residence. Finally, you and your spouse are once again employed, and there is income once again. You make efforts to work out terms of a modification agreement with the mortgagee. However, after two or three months of back and forth, you and the mortgagee cannot work out a viable agreement to become current, particularly in view of the additional debt load which has accrued during the last several months. Moreover, by the time you finish negotiating with the mortgagee, you are now another two or three months further into debt. A mortgage foreclosure lawsuit has been commenced against you and your spouse. Several credit card companies have also commenced collection lawsuits against you. You are told that if any of the credit card companies obtain a judgment against you or your spouse, and that judgment, or a transcript of that judgment, is filed in the County Clerk’s Office in the county where your home is located, that judgment will attach as a lien against your property. You are now at risk of losing the equity in your home, which you worked so hard to build over the last twenty years. Worse yet, you risk losing your home altogether. You need relief from your debts. You need to save your home.
Relief is available. Filing a Chapter 7 bankruptcy petition will automatically stay the continued prosecution of any and all lawsuits, including any mortgages foreclosure proceedings and collection lawsuits. In the absence of a court order, no lawsuit which was or could have been brought against you prior to the filing of the petition may be commenced or continued once your petition is filed. Additionally, in order to preserve at least a portion of your interest in certain assets, you have the option of claiming certain exemptions when filing the petition. One of the exemptions you may be eligible to claim is the homestead exemption. The purpose of claiming the homestead exemption is to protect the equity in your home. In New York, a debtor has the option of claiming his or her exemptions under either the federal or the state exemption system. Determining which system to use will depend upon the amount of equity you will need to protect and the extent to which you have to claim exemptions for any personal property. You are only permitted to use one system to claim all of your exemptions. You cannot use the federal system to claim an exemption for one asset and the state system to claim an exemption for another asset. Under the federal system, a debtor can claim a homestead exemption of up to $25,150.00. If a husband and wife file a joint petition, they may each claim a homestead exemption for a total of $50,300.00. If a debtor’s equity in his or her residence exceeds the allowed amount of the exemption under the federal system, the debtor may claim a homestead exemption under the federal system, the amount of which varies depending upon the county in which the debtor resides and the property is located. For debtors residing in the five New York City counties, Nassau, Suffolk, Rockland, Westchester or Putnam Counties, the current amount that can be claimed as exempt is $170,825.00 per debtor. Therefore, if a husband and wife file a joint petition, the aggregate amount which can be claimed as exempt is $341,650.00. If there are any non-consensual judgment liens encumbering the property which impair a debtor’s claimed homestead exemption, the Debtor can seek to avoid the judgment liens to the extent that they impair the claimed exemption(s).
In the United States Bankruptcy Court for the Eastern District of New York, the Board of Judges “has instituted a uniform, comprehensive, court-supervised loss mitigation program in order to facilitate consensual resolutions for individual debtors whose residential real property is at risk of loss to foreclosure.” General Order No. 676, Amending General Orders Nos. 543 and 582. While each judge in the Eastern District individually decides whether he or she wishes to participate in the Loss Mitigation Program, most judges do participate. Once Chapter 7 debtors receive a discharge of their general unsecured debts, and those debts are wiped out, secured lenders (such as mortgagees) recognize that the debtors will have additional funds from which to negotiate a consensual agreement and a greater chance of succeeding in loss mitigation, thereby providing the debtor with an increased opportunity to retain the equity they have built and the homes they worked so hard for.
For those individuals struggling to preserve their homes, or the equity in their homes, Chapter 7 is a viable option and one that should be seriously considered. Seeking the help of a seasoned bankruptcy attorney to review your particular circumstances, to explain your options, and to vigorously represent your legal interests should be at the top of your list. Kirschenbaum & Kirschenbaum, P.C. has an expert bankruptcy team with over 40 years of experience representing parties in the bankruptcy court. Not only do we have the knowledge, competence, ability and drive necessary to obtain the relief you need, but we also care, and will take those extra steps necessary to bring stability back to your life and to preserve your “American Dream.”
For assistance with all Bankruptcy matters, please contact us:
Ken Kirschenbaum, Esq. (516)-747-6700 Ext. 301 or firstname.lastname@example.org
Stacy Spector, Esq. (516)-747-6700 Ext. 304 or email@example.com