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 topics and are therefore guides on how to deal with and decide the cases that fall under each chapter effectively. Chapter 7 applies to debtors who do not have assets to pay their debts. Chapter 9 deals with the cases of government municipalities. For the owners or stockholders of a business there is Chapter 11. Chapter 12 deals with fishermen and farmers. For salaried individuals or families, self-employed workers and wage earners there is Chapter 13.
Under Chapter 7 of the New York bankruptcy law, a person’s income in such cases must be less than median 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 paid. The rules are different under chapter 13 where recovery is made from the person who files for bankruptcy after reorganizing legal responsibility for the debt. This is usually done over a longer period of time and quite possibly at a lower interest rate, and also by lowering the monthly payments. But if someone thinks that filing for bankruptcy will make them immune from paying the debt, they are mistaken, since 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 the random filing of bankruptcy. Today, to file a case under New York bankruptcy law, one has to totally convince the establishment that they really don’t have any assets that can be used to pay off outstanding debts. Therefore, there is no other option than to declare bankruptcy, to stop paying the interest on the debts. Documentary proof confirming an individual’s claims of being totally penniless is required to file a bankruptcy petition. The courts that handle bankruptcy cases usually decide which are the genuine and actually valid cases and assign them in the various chapters accordingly. There are also business bankruptcy cases 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 repay the debt because it has exhausted all its resources. At the same time, the company can also declare that, although it is bankrupt, it wishes 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, since under chapter 13 it is still possible to recover debts as much as possible. This is usually done by spreading the payback period over a longer period of time, realizing the minimum amount due after reorganizing the loan liability. But the really genuine cases in which the individual is not in a position to pay the interest on their debts, for example, people with a chronic illness, unemployed people, people with physical deformity or any other type of illness that implies high expenses, are filed. in chapter 7. This is a way to prevent scams and help genuinely broke people to get back on their feet, to settle back into society. In this way, both the state and its people are protected and are heading towards economic reactivation.