L.I. based Vitamin World to file for Bankruptcy

Long Island, N.Y.-based seller of vitamins and nutritional supplements, Vitamin World plans to file Chapter 11 bankruptcy this month with the hope of getting out of what they say are expensive leases for their stores.

The vitamin and nutrition supplement seller has 345 stores around the country. Madden told Newsday  the company is filing bankruptcy, to renegotiate “problematic lease agreements.”

In his statement Madden said

“While a handful of landlords cooperated, the vast majority have not,” he said in the statement. “At this time we have no other option than to restructure the company’s real estate portfolio by filing for Chapter 11 protection.”

Now the question is, if you as an individual, file for bankruptcy can you get out of paying back rent or prevent eviction?

Chapter 11 is designed for businesses. Individuals can also use chapter 11 bankruptcies but it is far more complex and expensive to pursue. There would also be administrative burdens. The ultimate purpose is to allow you to reorganize yourself, giving you an opportunity to restructure debt and get out from under certain burdensome leases and contracts.

Residential renters filing personal bankruptcy most often file under either Chapter 13 or Chapter 7 of the U.S. Bankruptcy Code. Chapter 7 is a liquidation bankruptcy in which the bankruptcy trustee sells the debtor’s assets, with a few exceptions, and uses the money to pay off creditors. Chapter 7 bankruptcy is only available to individuals with low income and few assets.

Chapter 13 is also known as the wage owner plan. This helps qualified individuals who have a regular income and who are willing to repay their creditors but are in financial difficulty. The advantage of chapter 13 is that it protects you from the collection efforts of your creditors and permits you to keep your property while giving you time to catch up. In Chapter 13, you will have to work out a periodic payment plan that all your creditors can agree on to pay off their debts.

Chapter 7 is the most common and easiest type of bankruptcy usually for individual consumer debtor. Under this type of Bankruptcy, you can get relieved of your debts while keeping certain assets. This can be done only if you have an income lower than a certain limit.

Back rent is treated like any other debt like credit cards, medical bills, etc. and can and must be included in bankruptcy. It is unsecured debt. If you have back rent payments and are facing eviction, bankruptcy will delay the eviction proceeding, but only for a for a short period of time. An automatic stay goes into effect the minute you file for bankruptcy.

Unfortunately, when the bankruptcy is over, the landlord can move forward with eviction. On the other hand, if you can’t afford the rent, you can break the lease under bankruptcy, but be careful of doing that  It could hinder your ability to sign new leases in the future.

This post is just a thumbnail overview and shouldn’t be taken a legal advice. If you plan to file for bankruptcy to help with eviction, contact an attorney

 

 

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DEBTOR’S DILEMMA

Do You Qualify to File Chapter 7 Bankruptcy?

Not everybody can, do you?

In 2005, the Republican Congress and President Bush passed sweeping new changes in the US. Bankruptcy Laws. Under the old rules, just about anyone who wanted to file Chapter 7 Bankruptcy in New York could do so no matter what their income was.

The new law set income caps on those who qualify. The debtor’s income must be at or below the mean income. The US Bureau of Labor Statistics issues annual schedules of mean income by region, city, and family size.

The mean income for an individual, living alone in New York City is approximately $46,000, whereas the mean income for a family of four (4) living in Long Island is approximately $82,000.

If your income is above the mean income, you could still pass the “Means Test”, and could qualify under Chapter 7 bankruptcy.

The “Means Test” is a 12-page form. You list both your monthly income and “necessary and deductible” monthly expenses over a six (6) months period. If your “qualifying” overall “expenses” exceed the mean “expenses”, then you could and will “pass” the Means Test with an elevated income.

Not all “expenses” are acceptable in the means test calculation. For example, you may not include income support payments for an elderly parent, not living in your household, or non-court order child support, or expenses that are deemed non- essential or luxury items.

However, “high” rent or mortgage payments, student loan payments, child education expense and any medical expenses for members of the household are acceptable.

An experienced bankruptcy lawyer or paralegal will know how to include all acceptable “expense” to ensure that a debtor who “legally” qualifies under the new rules will pass the “Means Test”, even if that individual has a “high” income. Do not be discouraged, you may qualify for Chapter 7 Bankruptcy in New York even with your present income. After all, most people who are considering bankruptcy have expenses that exceed their income.

For any assistance in this regard, please contact Jeffrey Weinstein Bankruptcy Attorney, on 212-693-3737

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Bankruptcy Update

NY State Doubles Homestead Exemption

Filing a Chapter 7 Bankruptcy in New York has just gotten easier for hundreds of thousands of homeowners in New York. In December 2010, the state increased the homestead exemption from $50,000 to as much as $150,000, per individual, $300,000 per married couple in some New York jurisdictions.

This means that if an individual owns a home or apartment – and the home is his primary residence – he can file Chapter 7 bankruptcy, and he can shelter up to $150,000 ($300,000 for a couple) in homestead equity from creditors. The New York legislature is finally catching up with inflation, although still far behind many other states.

New York has long been deemed a “creditor-bias” state because the exemptions are among the lowest in the Country. Whereas, other states, like Florida in particular is a debtor-friendly state. Florida has an unlimited homestead exemption. A Floridian filing a Chapter 7 bankruptcy may be able to discharge all his unsecured debt, and creditors cannot touch his home, even if it is worth millions of dollars.

In addition the increase in homestead exemption, other increases include raising the vehicle exemption from $2,500 to $4,000.

Thus, contrary to popular belief, you don’t have to be totally broke to file Chapter 7 bankruptcy. You are legally able to claim certain “exemptions”, which allow the debtor, to shelter certain assets from your creditors. The most favorable clause allows a debtor to keep 100% of all retirement accounts, 401K, IRA’s , etc.

Let me illustrate how the NY homestead exemption works. Say you live in New York City, you have a Condo with a FMV (Fair Market Value) of $900,000. You currently have an outstanding principle balance of $600,000 on your mortgage. Together you and your spouse have a combined $300,000 homestead exemption. The exemption covers 100% of your equity in the condo.

Thus, if you file a joint Chapter 7, your Condo is 100% protected from your creditors.

Under the old law, only $100,000 of your equity was protected and $200,000 would be vulnerable if you filed a Chapter 7 Bankruptcy, your creditors could force the sale of your condo to collect up to $200,000 of debts.

For more information on New York exemption or on filing Chapter 7 or 13 Bankruptcy, email your questions at j.weinstein@jlwlawoffices.com or call me at 212-693-3737 for free consultation.

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