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Frequently Asked Questions

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.

Q. I have seen advertisements for cheap flat rate bankruptcies, and/or my accountant has offered to do my bankruptcy, why should I hire a lawyer instead?
A. Financial debt is overwhelming. When you hire our firm to file your bankruptcy petition you will receive a competent and experienced legal assessment of your specific financial situation, that will help correctly determine your eligibility for a specific bankruptcy discharge in accordance with the United States Bankruptcy Code.

At Usar Law Group, you will be represented competently and professionally during every step of your bankruptcy petition. When you hire us, we will be your bankruptcy attorneys until you successfully obtain a bankruptcy discharge decree.

Q. What does Chapter 7 bankruptcy mean?
A. Chapter 7 of the United States Bankruptcy Code allows certain eligible debtors to ask a Bankruptcy Court to release (discharge) them from personal liability from specific debts (usually consumer debts) and to prohibit creditors from taking any further action against the debtor personally to collect those debts, based on the debtor’s financial inability to pay those debts. Chapter 7 provides for the sale of a debtor’s nonexempt and/or certain valuable property and the distribution of the proceeds from those assets to creditors (i.e., liquidation).

Q. What are some of the consequences of filing bankruptcy?
A. Bankruptcy is not always the best option and it carries many serious consequences. For instance, once a debtor is granted a Chapter 7 discharge a debtor cannot file again for such relief for 8 years. A bankruptcy filing also remains on a debtor’s credit report for up to 10 years affecting their ability to get future credit, making it very difficult to obtain a mortgage, lease a car, may sometimes affect employment, the renting or leasing of an apartment.

Certain property may be sold to pay off creditors. Under Chapter 7, a debtor will only be allowed to keep certain property that is valued at a certain amount, this is referred to as exempt property. The type of property and the value of the property is based on federal and state laws that specify what may or may not be claimed. Property not exempt will be sold or turned over to the debtor’s creditors to pay off debts.

Under Chapter 13 a debtor also has to wait at least two years before they may again file for relief under that chapter.

Some debts are not dischargeable. Child support, alimony, student loans, and income taxes owed, certain secured debts, among other debts are not erased and filing bankruptcy will not discharge these debts.  On the other hand, child support payments, alimony payments, and social security payments, pension, among others, that are paid to a debtor are exempt property that a debtor may keep.

Failure to be fully transparent when filing a bankruptcy petition, like not disclosing assets, or not accurately disclosing information can result in denial of a discharge, discharge of the bankruptcy case, and/or criminal prosecution.  A certain tristate area “Real Housewife” famously serves as an example.  As such, careful consideration before filing, in addition to effective legal representation when filing, are essential.

Q. Can I stop collection companies from calling me, prevent my utilities from being shut off, prevent garnishments, etc.?
A. Filing for Chapter 7 or Chapter 13 relief triggers an immediate automatic stay against collection activities related specifically to debts incurred during the pre-filing of your petition for bankruptcy, delaying and stopping foreclosures, repossessions, garnishments, and utility shut-offs.  This includes an end to harassing and intimidating calls and letters from collection companies and creditors.

Q. Will I lose my severance payments if I file Chapter 7 bankruptcy?
The financial crisis due to the Covid-19 pandemic has caused corporations or business entities to lay-off their employees and declare bankruptcy. As a measure of protection and in exchange for waiving certain rights to pursue legal action against them, some of these business entities offer severance packages to their former employees. Severance pay arises from agreement between an employer and an employee. Ordinarily it is granted to employees upon termination of employment under certain agreed-upon terms and conditions.  Usually the severance pay takes the form of additional periodic payments spanning over several weeks or months. It may also include stock options, retirement accounts, unused vacation time, holiday pay, sick leave, or other benefits.   The amount of pay usually depends on the length of employment for which an employee is eligible upon termination.

Severance payments raise the question of whether a laid-off employee is allowed to keep the severance payment if she or he files a Chapter 7 Bankruptcy. The answer to this question is fact sensitive.

First, initiating or opening a case with the Bankruptcy Court creates a bankruptcy estate.  Under the federal statute title 11 Section 541(a)(1), a bankruptcy estate is broadly defined. Subject to certain exclusions, the property of a bankruptcy estate includes all legal or equitable interests of the debtor in property as of the commencement of the case. It contains property of any source, present, and future. Contractual rights clearly fall within the reach of this section. Chartschlaa v. Nationwide Mut. Ins. Co., 538 F.3d 116, 122 (2d Cir. 2008).

The Court of Appeals for the Second Circuit which has jurisdiction over New York Bankruptcy Courts also analyzed this section, its legislative history, including congressional testimony, and other court’s analysis on the same issue, and concluded that all legal or equitable interests of the debtor in property has been given the broadest possible interpretation.  Every conceivable interest of the debtor, whether it is a future interest, nonpossessory, contingent, speculative, and derivative, is within the reach of Section 541. Chartschlaa, 538 F.3d at 122 (2008)[Citing In re Yonikus, 996 F.2d 866, 869 (7th Cir. 1993)].

A severance offer made prior to the filing of a bankruptcy petition is clearly a bankruptcy asset. In re Rock, No. 04-83722 (Bankr. C.D. Ill. April 25, 2005). Post-petition severance payments will become property of the estate only if they are “sufficiently rooted in the pre-bankruptcy past.” Segal v. Rochelle, 382 U.S. 375, 380 (1966)). This practically means virtually all post-petition severance payments are rooted in the pre-bankruptcy past, and are therefore property of the bankruptcy estate. Nevertheless, severance payments may fall under one of the exclusions enumerated in Section 541. For example, severance Agreements that contain an anti-alienation or non-transferability clause and language indicating that the severance pay obligation was intended to be in the nature of a trust may fall under the exclusion referenced in the statute. See, Patterson v. Shumate, 504 US 753 (1992)(Holding that the anti-alienation provision required for Employee Retirement Income Security Act of 1974 qualification constitutes an enforceable transfer restriction for purposes of 11 U.S.C. Section 541 (c)(2), which excludes from the bankruptcy estate the debtor’s interest in a trust that is enforceable under applicable non-bankruptcy law). Severance payments may be exempt property under 11 U.S.C. Section 522(d)(10)(C) which exempts the debtor’s right to receive unemployment benefits under subsection (b)(2) of the same section. Severance payments may also be exempt property under state law. See, Wornick v. Gaffney, 544 F.3d 486, 490 (2d Cir. 2008) (“Whether the debtor has a legal or equitable interest in property such that it becomes property of the estate under section 541 is determined by applicable state law.”)  In New York, this would be NY Debtor and Creditor Law Section 282(3)(iv) which grants a bankruptcy exemption for the right to receive a payment in compensation of loss of future earnings of the debtor or an individual of whom the debtor is or was a dependent, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor.  Similarly, Section 282(2)(c) of NY Debtor and Creditor Law grants a bankruptcy exemption for the right to receive unemployment benefits.