Under Chapter 7 laws, debts are liquidated without payment. States similarly, debts are eliminated without any further obligation, as if they erased and had never existed. Chapter 13 however requires that debts are repaid, in fully or partially, depending upon the ability of the debtor based on disposable income. Because of these differences, the effect of selecting the Chapter 7 New York bankruptcy option creates an extraordinary opportunity to eliminate debts quickly. The term "straight bankruptcies" is old term which is still used occasionally today and may be used to describe liquidation cases filed under Chapter 7 of the US Code.
Most consumer debts are dischargeable. Routine discharges are available for mortgage deficiencies, car notes, credit cards, accounts payable, and many others. Certain debts are not dischargeable, and in general, include liabilities owed to government authorities (taxes, fines, penalties) and civil liability for debts imposed on others without permission (child support, judgments for damages, DWI, DUI, theft, fraud, etc.).
The primary purpose of Chapter 7 laws is to discharge debts and provide debtors a "fresh start." However, all people who file are not entitled to a discharge of all debts. Limitations are imposed on who may file, and the particular debts that may be discharged. New York bankruptcy courts are charged with an affirmative duty to review compliance with all applicable rules and statutes. Likewise, trustees and creditors may file objections and direct the courts attention to noncompliance. Depending upon the classification for each debtor who files and classification of debts included within the estate, the application of Chapter 7 laws is unique for each person who files.
In practice, most individuals who file New York bankruptcy under Chapter 7 do receive a discharge without surrendering significant assets. Most often, this favorable result for debtors occurs after careful review and planning. If significant assets are subject to seizure, or discharge of debts is questionable, debtors often choose reorganization or avoid filing altogether using one of the many alternatives available today.
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