Consumer Bankruptcy

This bankruptcy is for individuals who find  themselves with debts they simply cannot pay. When an individual accumulates  insurmountable debt, there are often many options.  While  bankruptcy should generally be a last resort, more and more debtors are realizing that bankruptcy is the most or, in some cases, the only option.  If you are considering bankruptcy, the lawyers at de Moya & Associates, P.C. in Rockland County, New York can advise you on the most suitable course of action.

Bankruptcy Options for Consumers

Just as a business has various choices when it comes to the type of bankruptcy best suited to its situation, consumers may opt for either Chapter 7, Chapter 13, or less commonly Chapter 11.  Bankruptcy options are determined by federal  bankruptcy law and the Bankruptcy Code, and the type of bankruptcy filed is named according to the chapter number it falls under.

As of 2005, it is required that consumers considering bankruptcy seek credit counseling from an approved agency within 180 days before filing bankruptcy,  regardless of the type of bankruptcy they wish to file. 

In most instances, consumers voluntarily seek bankruptcy as a means of relieving extraordinary debt that they are unable to pay  due to unexpected events such as illness, disability, job loss, divorce or business failure.  In some cases  creditors can force debtors into what is known as involuntary bankruptcy.

Chapter 7

The most common bankruptcy for consumers is a Chapter 7 bankruptcy, also called a “liquidation bankruptcy.” When a debtor files a petition with a bankruptcy court for Chapter 7 it triggers an automatic stay, which  stops all collection activities by  creditors. The court appoints a trustee to manage the liquidation process of non-exempt  assets and to pay off  eligible debts as much  as  possible.

In Chapter 7 bankruptcy, not all assets are eligible for liquidation, and certain properties are retained  by the debtor. For most debtors, all their property is exempt or is subject to valid liens. Much of the remaining debt is discharged without loss of any property. This is called a no-asset case.

Once the trustee has gathered nonexempt assets and the creditors  have been paid with the proceeds from the sale of these assets, all remaining debts are forgiven, except f debts resulting from willful or malicious acts on the part of the debtor, fraud, domestic support,  taxes or student loans.

Chapter 13

If a debtor has less than $336,900 in unsecured debt, and less than $1,010,650 in secured debt,  has a stable income and believes the crisis is temporary, they may opt for Chapter 13 bankruptcy. Just as with Chapter 7, filing Chapter 13 stops creditors from attempting to collect on debts. The debtor proposes a repayment plan over a 3 to 5 year period. If the bankruptcy court approves the plan, creditors are barred from seeking to collect any debt  outside  the scope of the approved plan. After the plan is completed as approved, the debtor is discharged from all the debts within the scope of the plan.

Pros and Cons of Chapter 13 and Chapter 7 Bankruptcy

If the criteria are met, often Chapter 13 will be more advantageous. In Chapter 13 more assets may be exempt from liquidation, and more types of debts are dischargeable. Also, the debtor pays arrears owed to his secured creditors through a plan over a 3 to 5 year period. A debtor’s choice between filing a Chapter 13 or Chapter 7 may be changed after filing begins since a case may be converted to a different chapter  in certain situations.


Bankruptcy is often the best or, in some cases, the only solution for consumers with  insurmountable debt.  Hiring  an experienced attorney who understands bankruptcy law is essential. If you are considering bankruptcy for any reason, or have questions about your financial situation, contact the professionals  at de Moya & Associates, P.C. in Rockland County, New York.  We will help you decide whether bankruptcy is the right solution for you.

**DISCLAIMER: This site and any information contained herein are intended for informational purposes only and should not be construed as legal advice. Seek competent legal counsel for advice on any legal matter.

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