Woman holding credit card and cell phone considering bankruptcy.

Bankruptcy: A Beginner’s Guide

Bankruptcy 101: A Beginner’s Guide

Trainor Law Firm PLLC


Declaring individual bankruptcy is a major financial decision. We’ve compiled some basics to consider while determining if declaring is the correct option for you.

What types of individual bankruptcy are there?

Chapter 7 – Bankruptcy where many, if not all, of your debts are discharged (cancelled) outright in a short three-to-six month process.
Chapter 13 – Bankruptcy where you use your income to make payments on your debts over three-to-five years.

Am I eligible for bankruptcy?

If your income is too high – you may not qualify for a Chapter 7. Therefore, a Chapter 13 may be your best option.
If your income is too low or your debt is too high – you may not qualify for a Chapter 13. In this situation, a Chapter 7 may be your best option.

What debts won’t be cancelled?

Debts like child support, student loans, tax liens, alimony or debts for wrongful death or willful injury are not cancelled when bankruptcy is declared.

What happens to my home?

If you want to keep your home, bankruptcy will not relieve you of your obligation to pay your mortgage, but can get you caught up on your payments.  If you can eliminate some of your other debt, paying your mortgage may be easier.

Will I lose my vehicle or other property?

Exemption laws available in the State of New York allow you to keep some or all of your personal property.  Depending on what equity you have, some personal property may not be protected.  Some companies offer reaffirmation agreements to allow you to keep your car or other property.

Will my credit cards be paid off?

Bankruptcy is a good way of cancelling or paying off most unsecured loans and credit card debt with the approval of the Bankruptcy Court.

Can I keep my pensions, IRA or 401(k)?

New York State allows you to keep your qualified pension, retirement account or IRA in bankruptcy under an exemption.

What happens if someone co-signed for me?

In a Chapter 13, the co-signor is usually protected.  Under a Chapter 7, the co-signor may get ‘stuck’ with the debt that you are discharged from.

How will bankruptcy affect my credit score?

Bankruptcy can be intrusive as you have to disclose all your finances and your creditors get a notice that you filed.  If you feel the pressure of not being able to pay your debts, you probably are doing your best to make minimum payments that are taking your entire paycheck on a weekly or monthly basis.  While your credit score may take a plunge at first, eventually (some say within 6 months) your credit score will begin to rise as you are able to either discharge debts under Chapter 7 or make payments to your creditors under Chapter 13.  Either way, bankruptcy may be the best decision in remedying your financial distress.

If you are in need of assistance in navigating the bankruptcy process, call our office at (518)-899-9200 or contact us to see how we can assist.


This article is intended to be educational and is not intended to be legal advice, which can only be given after an attorney-client relationship is established.

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