Is bankruptcy the way to go?

When you file Bankruptcy you create a financial estate. That estate is “administered” by a Trustee. There are very different paths to the same outcome if you file a Chapter “7” or a Chapter “13” Bankruptcy, but the result is the same: you get rid of “unsecured” and maybe other kinds of debt.
Bankruptcy is filed by creating and filing a Petition. In the Petition you list all of your assets and income for the household; and all of the debts and obligations for that property or person who is filing.
After everything is listed your attorney applies “exemptions” to the property. Exemptions are creatures of State law in New York. Quite simply, they are the “things you get to keep” as defined by specific statues and laws.
EXEMPTIONS
There are many exemptions, but we would like to list a few. It does not matter if a person files a Chapter 7 or a Chapter 13 Bankruptcy. These exemptions apply to all cases:
? Homestead exemption: This is where the homeowner who is on the Deed and living in the property gets to protect $50,000.00 (in New York…other States Vary!!!)each (up to two) of equity in the property. So, if one person is on the Deed and they live in the house and the home is worth $50,000.00 and is paid off, they get to keep the home and no one can try and take it if they file Bankruptcy. If two people are on the Deed and reside in the home the house can be paid off and worth $100,000.00 and nothing will happen to it if they file a Bankruptcy. Similarly the house can be worth $200,000.00 and if two people are on the Deed and they both reside in the house and there is a mortgage for $100,000.00 the house is not affected by a Bankruptcy. The exemption protects equity, not the value of the home.
? Personal property: The vast majority of people do not have to worry about losing property when they file Bankruptcy. However, it is your obligation to report all property. Most people’s furniture, bedroom sets, dining room sets, clothes, etc. are normal consumer items that we list, but since the PERSONAL PROPERTY EXEMPTION IN NEW YORK IS $10,000.00 DOLLARS (In New York…check your State) we have found that it is not worth the trouble by the Trustee appointed to oversee your Bankruptcy to take and sell the property. The truth is that if we look around the normal home there is rarely property that would justify the appointment of an attorney; auctioneer; a sale by the Court and storage fee’s, etc., that would be required if the Trustee wanted your stuff. I always ask people “do you have Rolex watches; Antique Stickley furniture; Steinway Pianos that are paid off etc.?” and other inquiries. The truth is that by the time you meet with me it is apparent that people have exhausted their finances and often made some mistakes that they should not have regarding increasing their debt.
DON’T:
Take out a second mortgage to pay credit cards;
Transfer property to family members or friends to “protect it”;
Take money out of your retirement account to pay credit cards.
Disclaimer: This answer does not constitute legal advice. I am admitted in the States of New York, New Jersey and Massachusetts only and make no attempt to opine on matters of law that are not relevant to those three States. This advice is based on general principles of law that may or may not relate to your specific situation. Facts and laws change and these possible changes will affect the advice provided here. Consult an attorney in your locale before you act on any of this advice. You should not rely on this advice alone and nothing in these communications creates an attorney client relationship. The opinions expressed herein are those of the author only and the fact that he has worked as an Assistant District Attorney; State Supreme Court Clerk; Special Assistant United States Attorney (Hawaii); Assistant Cornell University Counsel or Judge Advocate, United States Marine Corps should not be relied upon to assume that these statements reflect the policy of these organizations.