There are several chapters like Chapter 7, 9,11,12,13 of the bankruptcy code under the federal law that governs the bankruptcy laws of New York. The various chapters of bankruptcy law cover various issues and therefore provide guidance on how to deal with and decide the cases included in each chapter effectively. Chapter 7 applies to debtors who have no assets to pay off debts. Chapter 9 deals with the 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, self-employed and salaried people or families there is Chapter 13.
As stated in Chapter 7 of New York bankruptcy law, a person’s income in such cases must be less than the average income. Under this chapter, the cases that are handled are almost completely exempt from debt, but some things like student loans, alimony, child support, fraudulently acquired debts have to be canceled. The rules are different under Chapter 13, where recovery is made to the person who files for bankruptcy after reorganizing legal responsibility for the debt. Usually this is done over a longer period of time and possibly at a lower interest rate, and also by reducing the monthly payments. But if anyone thinks that filing for bankruptcy will make them immune from debt repayment, they are wrong, as under no provision is there an option to get rid of the liability without paying the debts.
Strict federal laws have been put in place so that there can be some control over random bankruptcy filings. Today, in order to file a case under New York bankruptcy law, one has to fully convince the establishment that they really do not have any assets that can be used to pay off outstanding debts. Therefore, there is no other option but to declare bankruptcy, to stop paying interest on the debts. Filing a bankruptcy petition requires documented proof that confirms an individual’s claims of total lack of assets. The courts that deal with bankruptcy cases generally decide which are the genuine and truly meritorious cases and, accordingly, assign them to the various chapters. There are also the cases of business bankruptcy where a business goes bankrupt due to a variety of reasons and therefore has to file for bankruptcy, declaring that the business is unable to pay the debt as it has exhausted all of its resources. . At the same time, the company can also declare that, although bankrupt, it wants to continue its business activities. Chapter 11 deals with cases where the petitioner is the owner or shareholder of the business.
New York bankruptcy law prefers that cases be filed under chapter 13, and not under chapter 7, the reason is that under chapter 13 it is still possible to recover debts as much as possible. Typically this is done by extending the payback period over a longer period of time, recognizing the minimum amount owed after rearranging the loan liability. But the really genuine cases in which the individual is not in a position to pay his interest on debts, for example, people with a chronic disease, unemployed people, people with physical deformity or any other type of disease that involves large expenses, are filed in Chapter 7. This is one way to prevent scams and to help really broke people get back on their feet, re-establish themselves in society. In this way, both the state and its people are safe and on their way to economic reactivation.