Bankruptcy Relief for Individuals in New York

Under the U.S. Bankruptcy Code, individuals in New York may seek relief through liquidation (Chapter 7) or reorganization (Chapter 11). Once approved, most debts are discharged, giving the filer a fresh financial start. However, not all debts are dischargeable.

When an individual files for bankruptcy in New York, a discharge is typically granted at the end of the process unless a creditor successfully objects. The discharge order releases the debtor from personal liability for most debts incurred before filing.

Individuals must pass a means test to qualify for Chapter 7. This test compares the debtor’s income to the state median. If the income is below the threshold, the filer may proceed. Otherwise, Subchapter V of Chapter 11 may be an alternative.

In Chapter 7, debtors must show that their total debt outweighs their assets. Subchapter V filers must not exceed $7.5 million in total debts, with at least 50% being business-related if self-employed.

A debtor may be denied relief if they:

• Engaged in fraud or concealed assets.
• Destroyed records to hinder transparency.
• Incurred debts through reckless spending or gambling.
• Failed to complete a required credit counseling course.

Once discharged, the individual is no longer personally liable for most pre-filing debts. This includes credit card debt, personal loans, utility bills, and medical expenses.

Certain debts are non-dischargeable in New York, including:

• Child support and alimony.
• Student loans (unless undue hardship is proven).
• Criminal fines or restitution.
• Debts resulting from fraud or malicious conduct.

A bankruptcy discharge in New York helps restore the debtor's legal capacity to engage in business or financial contracts. It removes most of the financial limitations imposed due to bankruptcy but does not automatically restore all civil or licensing privileges.

Applicants must prepare the following:

• Voluntary bankruptcy petition.
• List of all creditors and claim amounts.
• List of all property and assets.
• Proof of income and recent tax returns.
• Certificate of credit counseling completion.

The bankruptcy petition must be filed in the U.S. Bankruptcy Court for the district where the debtor resides. In New York, this may be in the Southern, Eastern, Northern, or Western Districts depending on the debtor’s address.

Filing triggers an automatic stay under 11 U.S.C. § 362, which halts creditor actions such as lawsuits, garnishments, and foreclosure proceedings. This stay remains in effect until discharge or dismissal.

A trustee is appointed to evaluate the debtor's estate, conduct a creditor meeting (341 hearing), and recommend discharge. In Chapter 7, the trustee may liquidate non-exempt assets.

If no objections are raised and all steps are completed, the court issues a discharge order. This typically happens within 60–90 days of the 341 meeting in Chapter 7 cases.

• Stops most collection actions immediately.
• Wipes out eligible unsecured debts.
• Allows for a fresh financial start.
• Protects exempt property (e.g., clothing, pensions, some equity in home or car).

• Negative impact on credit history (remains for up to 10 years).
• Public court record of filing.
• May affect ability to obtain loans or housing.
• Certain professional licenses may be affected.