How Are Assets Divided in Bankruptcy?

businessman separates the wooden puzzle with a picture of money

When financial turmoil strikes, individuals and entities may consider bankruptcy as a viable solution to relieve their debt burden. Bankruptcy is a legal process where people or other entities who cannot repay debts to creditors seek relief from some or all of their obligations. At the core of this process is the division of assets, a critical step that determines how creditors are paid off. Ursulova Law Offices, P.C., based in Brooklyn, New York, provides guidance through these challenging times, ensuring that the asset division is handled efficiently.

Understanding the Types of Bankruptcy: Chapter 7 and Chapter 13

Bankruptcy provides two main pathways for individuals and entities seeking relief from overwhelming debt: Chapter 7 and Chapter 13. Each type offers distinct approaches and benefits, tailored to different financial situations.

  • Liquidation in Chapter 7
    In a Chapter 7 filing, a trustee appointed by the court oversees the liquidation of the debtor’s non-exempt assets to pay off creditors. However, the law protects certain essential assets from sale through exemptions, safeguarding necessities such as household items, a vehicle, and potentially the primary residence. For more information on what assets are exempt and non-exempt, we invite you to review the details listed in our practice areas.

  • Reorganization in Chapter 13
    Unlike Chapter 7, Chapter 13 bankruptcy allows debtors to retain their assets while reorganizing their financial obligations. Through a proposed repayment plan, lasting typically between three to five years, debtors can manage their debts while keeping crucial assets. This option is particularly suitable for those with consistent income who wish to avoid foreclosure or repossession. We encourage those interested to discuss this option with a Brooklyn NY bankruptcy lawyer at our firm.

The Impact of Exemptions on Asset Division

Our firm emphasizes the importance of understanding state-specific exemptions, which play a critical role in determining which assets you may keep through your bankruptcy proceedings. These exemptions are designed to ensure you do not lose fundamental property rights during the process. For an in-depth look at exemptions applicable in New York, please visit our practice areas page.

Secured vs. Unsecured Debts

In bankruptcy proceedings, the treatment of debts hinges significantly on whether they are secured or unsecured. Secured debts are linked to specific assets, such as a house or car, serving as collateral. If debtors wish to retain these assets, they must continue making regular payments and may need to reaffirm the debt to avoid repossession or foreclosure. Conversely, unsecured debts, which include credit card balances, medical bills, and other loans not backed by collateral, are addressed differently. These are typically resolved by either liquidating the debtor’s non-exempt assets in a Chapter 7 bankruptcy or by formulating a repayment plan in Chapter 13, where these debts can be restructured and potentially reduced to more manageable amounts.Our firm is also equipped to handle cases that intersect bankruptcy with no-fault arbitration, offering proficient guidance for those facing these dual challenges. More about our approach and services can be found on our About Us page.

Explore Your Bankruptcy Options

At Ursulova Law Offices, P.C., we view bankruptcy not as an end but as an opportunity for a fresh start and a clear path toward financial recovery. Our dedicated bankruptcy lawyers in Brooklyn are committed to guiding clients through these challenging times with dignity and respect. We understand that the decision to file for bankruptcy is significant, and we are here to ensure that this decision is made with the best possible advice and preparation. For those considering this route to financial recovery, we invite you to contact us today to learn more about your options and how we can help you regain your financial footing.

Ursulova Law offices, P.C.

Contact Ursulova Law Offices, P.C. to find out how our NY Bankruptcy Attorneys can help you today. Our offices are located in New York, Brighton Beach, Brooklyn and Garden City.

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