Bankruptcy / Debt Collection Laws in New York and New Jersey

The bankruptcy law is applied using both federal and New York State laws. In New Jersey, normally only the federal law applies:

● The U.S. Bankruptcy Code for Chapter 7 is 11 U.S.C. §§ 101(41), 109(b)
● New York State’s Civil Procedure Law: CPLR § 5205, 5206
● New York State’s Debtor and Creditor Law: § 282

Here are some relevant sections of the law and related links to government and non-profit organization websites explaining the law.

The U.S. Bankruptcy Code section explaining Chapter 7 bankruptcy is explained by the Office of U.S. Courts: (Here is the website link:

To qualify for relief under chapter 7 of the Bankruptcy Code, the debtor may be an individual, a partnership, or a corporation or other business entity. 11 U.S.C. §§ 101(41), 109(b). Subject to the means test described above for individual debtors, relief is available under chapter 7 irrespective of the amount of the debtor’s debts or whether the debtor is solvent or insolvent. An individual cannot file under chapter 7 or any other chapter, however, if during the preceding 180 days a prior bankruptcy petition was dismissed due to the debtor’s willful failure to appear before the court or comply with orders of the court, or the debtor voluntarily dismissed the previous case after creditors sought relief from the bankruptcy court to recover property upon which they hold liens. 11 U.S.C. §§ 109(g), 362(d) and (e). In addition, no individual may be a debtor under chapter 7 or any chapter of the Bankruptcy Code unless he or she has, within 180 days before filing, received credit counseling from an approved credit counseling agency either in an individual or group briefing. 11 U.S.C. §§ 109, 111. There are exceptions in emergency situations or where the U.S. trustee (or bankruptcy administrator) has determined that there are insufficient approved agencies to provide the required counseling. If a debt management plan is developed during required credit counseling, it must be filed with the court.

One of the primary purposes of bankruptcy is to discharge certain debts to give an honest individual debtor a “fresh start.” The debtor has no liability for discharged debts. In a chapter 7 case, however, a discharge is only available to individual debtors, not to partnerships or corporations. 11 U.S.C. § 727(a)(1). Although an individual chapter 7 case usually results in a discharge of debts, the right to a discharge is not absolute, and some types of debts are not discharged. Moreover, a bankruptcy discharge does not extinguish a lien on property.

New York State’s debtor law was explained the Empire Justice Fund as follows: (Their website is:

As one of his final acts in office, on December 22, 2010, Governor David Paterson signed a significant law regarding exemptions for personal and real property, Chapter 568 of the Laws of New York 2010. The law amends and adds certain exemptions relating to the satisfaction of money judgments under Civil Practice Law and Rules (CPLR) § 5205(a) for exemption of personal property, and under CPLR § 5206 for the exemption of real property. The law also amends N.Y. Debtor and Creditor Law (DCD.) §§ 282(1), 283, and adds § 285 specifically regarding exemptions for debtors in bankruptcy.

The amendments update and modernize several exemptions, some of which had not been altered for decades. New York’s exemptions have been updated sporadically through the years, but this is the most significant revision in some time. Some amendments increase dollar values and others amend or add items, bringing out of date exemptions into the 21st Century. CPLR §§ 5205 and 5206 give the judgment debtor the right to claim certain personal and real property exempt from collection. The public policy behind exemptions is to not to leave a judgment debtor destitute and without basic necessities.