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.

The 341 Meeting of Creditors

The 341 meeting — named for section 341 of the Bankruptcy Code — is the one in-person (or by video) appearance that every Chapter 7 debtor makes. It is conducted by the trustee, not a judge, and almost always takes less than ten minutes in a consumer case. We attend with you, and we prepare you before the date so there are no surprises.

The trustee will place you under oath and verify your identification and Social Security number. The standard line of questioning then covers:

• Whether you reviewed the petition, schedules, and statement of financial affairs before signing.
• Whether everything in the schedules is accurate and complete to the best of your knowledge.
• Transfers of property within the look-back periods (one year for insiders, two years for general fraudulent-conveyance review, four years under the New York Debtor and Creditor Law).
• Anticipated inheritances, lawsuit recoveries, and tax refunds.
• Recent payments to family members, business partners, or other insiders.
• Ownership of any business interests, intellectual property, or digital assets such as cryptocurrency.

Creditors are entitled to attend and ask questions, but in a routine consumer case they almost never appear. The trustee may ask follow-up questions on specific assets or transfers, and we address those in advance whenever possible.

Reaffirmation Agreements

A reaffirmation agreement is a voluntary post-petition contract under section 524(c) by which a debtor agrees to remain personally liable on a secured debt that would otherwise be discharged. The most common candidates are auto loans, mortgage notes, and the occasional furniture or jewelry purchase money loan.

Reaffirmation has trade-offs. It preserves the contract relationship, allows on-time payment history to be reported post-discharge (which helps rebuild credit), and avoids creditor invocation of "ipso facto" default clauses. It also removes the debt from the discharge order — if you later default, the creditor can sue on the personal obligation just as if you had never filed.

We review every proposed reaffirmation carefully. A reaffirmation on a deeply underwater vehicle loan, for example, is almost never the right call — in many cases the borrower is better served by surrendering the car, discharging the deficiency, and buying replacement transportation post-discharge. The court is required to make an independent finding that the reaffirmation is in your best interest if you are not represented, and we make the same finding before recommending you sign.

What Happens to Tax Refunds, Bonuses, and Inheritances

The bankruptcy estate captures all of your legal and equitable interests in property as of the petition date, including assets you have a right to but have not yet received. That has practical implications:

• Tax refunds. The portion of your refund attributable to income earned before the petition date is generally property of the estate. We time filings to minimize that exposure when refunds are large — or claim them as exempt where the exemption scheme allows.
• Year-end bonuses. Earned but unpaid bonuses are estate property to the extent they are vested as of the filing date.
• Inheritances. Under section 541(a)(5), inheritances become estate property if the death occurs within 180 days after filing. This is one of the few categories that "looks forward" rather than backward, and clients with elderly or terminally ill relatives should disclose the situation at the consultation.
• Personal injury and employment claims. Any cause of action that accrued before the petition date is an asset of the estate and must be scheduled, even if you have not yet hired a lawyer.

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 for ordinary preference review to four years under NY DCL).
• 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.
• Running up credit card balances or taking cash advances in the months before filing, which can lead to a section 523(a)(2) non-dischargeability challenge.
• Choosing the wrong exemption scheme — federal versus New York — when one would protect substantially more value than the other.
• Failing to list every creditor, including medical billers, judgment creditors, and assignees; an unlisted debt in some circumstances is not discharged.

Frequently Asked Questions About Chapter 7

How much does a Chapter 7 case cost?

The court filing fee is $338. Pre-filing credit counseling and the post-filing financial management course typically cost between $25 and $50 each. Attorney fees for routine consumer Chapter 7 cases in New York generally range from $1,500 to $3,500, with the precise figure depending on case complexity. We quote a flat all-in fee at engagement so there are no surprises.

Will my employer find out?

Probably not. Bankruptcy filings are public, but private employers do not routinely monitor the docket. Section 525 prohibits an employer from firing you solely because of a filing. Government employers and certain security-sensitive private positions are more likely to discover the filing through background checks.

Can I file Chapter 7 if I have filed before?

You can receive a Chapter 7 discharge once every eight years measured from the prior Chapter 7 filing date. A prior Chapter 13 discharge requires a six-year gap before a Chapter 7 discharge, with limited exceptions.

Will I have to go to court?

Beyond the 341 meeting — which is typically held remotely — routine Chapter 7 cases require no court appearances at all. Contested matters (objections to exemptions, motions to dismiss, adversary proceedings) are the exception rather than the rule for the cases we file.

What if my income changes during the case?

Chapter 7 is a snapshot proceeding. Income changes after the petition date do not affect eligibility or the discharge. The 6-month look-back for the means test is fixed as of the filing date.

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.