There are several chapters like chapter 7, 9,11,12,13 of bankruptcy code under the federal law which governs the bankruptcy laws of New York. The various chapters under the bankruptcy law cover various issues and therefore guides as to how to deal with, and decide cases falling under each chapter effectively. Chapter 7 is applicable for debtors who have no assets to repay the debts. Chapter 9 deals with cases of government municipalities. For the owners or shareholders of a company there is chapter 11. Chapter 12 deals with fishermen and farmers. For salaried individuals or families, self employed and wage earners there is Chapter 13.
As fixed under chapter 7 of the New York bankruptcy law, the income of an individual under such cases should be less than the average income. Under this chapter, the cases that are handled are almost made fully exempt from the debt, but some things like student loans, alimony, child support, fraudulently acquired debts have to be paid off. The rules are different under chapter 13 where recovery is made from the person filing for bankruptcy after reorganizing the legal responsibility of debt. This is usually done over a longer period of time and most possibly at a less rate of interest, and also by reducing the monthly payments. But if someone thinks that by filing for bankruptcy will make them immune from debt payment they are wrong, as under no provisions there is the option of getting rid of the liability without repaying the debts.
Strict federal laws have been implemented so that there can be some check on random filing for bankruptcy. Nowadays to file a case under New York Bankruptcy law, one has to totally convince the establishment that he or she is truly without any assets which can be used for paying back the outstanding debts. Therefore there is no other option but to file for bankruptcy, to stop paying interests on the debts. A documented proof which confirms the claims of an individual about being totally without any assets is required for filing a bankruptcy petition. The courts which handle the bankruptcy cases generally decide which are the genuine and really deserving cases, and accordingly allocates them under the various chapters. There are also the cases of business bankruptcy where a business fails due to a variety of reasons and hence have to file for bankruptcy, declaring that the company is in no position to pay off the debt as it has exhausted all its resources. At the same time the company can also declare that though bankrupt, they wish to carry on with their business activities. Chapter 11 deals with such cases where the petitioner is either the owner or the shareholder of the company.
New York bankruptcy law prefer that the cases be filed under chapter 13, and not under chapter 7, the reason being that under chapter 13 it is still possible to recover debts as much as possible. This is usually done by spreading the recovery period over a longer span of time, by realizing the minimum amount due after reorganizing the loan liability. But the really genuine cases where the individual are in no condition to pay their interests on debts, for example, people with some chronic illness, unemployed people, people with physical deformity or any other kind of sickness that involves heavy expenditures, are filed under chapter 7. This is a way to prevent scams as well as help the genuinely ruined people to get back on their feet, to establish themselves in the society again. This way both the state and its people are safe-guarded and are set on a path to economic revival.
The author of this article, Chiranjit Roy is a practicing lawyer who has experience in handling bankruptcy cases falling under different categories. With his ten years of experience in the field, he has extensive knowledge regarding the legal complexities of New York Bankruptcy law.