Jeffrey B.Peltz, P.C.

New York Bankruptcy

Chapter 7 Bankruptcy in New Jersey is used by individuals to eliminate debts. With several important exceptions, all debts are eliminated in a Chapter 7 Bankruptcy. The exceptions include child support payments and civil and criminal fines. Although taxes are not usually eliminated, under certain circumstances, they may be. Student loans are almost never eliminated in bankruptcy.

Upon the filing of a Chapter 7 Bankruptcy, the court issues an automatic stay that will prevent your creditors from harassing or suing you, taking money from your bank accounts and garnishing your wages.

In a Chapter 7 Bankruptcy, you are allowed to keep certain assets. What you are not allowed to keep is taken by the bankruptcy court and sold. The proceeds from the sale are applied to pay your creditors. This sounds harsher than it really is. In the typical Chapter 7 Bankruptcy, you are allowed to keep all or most of your assets.

Assets that you are allowed to keep are exempt from your creditors. Such exemptions vary from state to state. New Jersey gives you a choice of accepting either the New Jersey bankruptcy exemptions or the federal bankruptcy exemptions. Most people are allowed to keep more assets by using the federal bankruptcy exemptions. The New Jersey bankruptcy exemptions and the federal bankruptcy exemptions are summarized below:

New Jersey Bankruptcy Exemptions:

• Personal property up to $1,000, including: clothing, goods, and stock or interest in corporations
• Household goods and furniture up to $1,000

 

Federal Bankruptcy Exemptions

 

• Homestead Exemption: Up to $21,625 of the equity in your home
• "Wild Card" Exemption: unused portion of homestead, up to $10,825, may be used for other property
• Disability and unemployment benefits
• Life insurance policy with loan value up to $11,525
• Alimony and child support
• Most pensions and IRA accounts
• Personal possessions, such as clothing, appliances, books, furniture, household goods, musical instruments, each item up to $525 with a total up to $11,525
• Jewelry up to a total of $1,450
• Motor vehicles up to $3,450
• Personal injury recovery up to $21,625
• Payments in compensation for loss of future earnings
• Workers compensation benefits
• Wrongful death recovery for the death of an individual upon whom you depended
• Unemployment, social security, public assistance, veteran's benefits, and crime victim's compensation
• Tools of the trade up to a total of $2,175

If a married couple is filing a joint bankruptcy, the state and federal exemptions are doubled.

If your debts are mostly consumer debts, then in order t o qualify for Chapter 7 Bankruptcy, your income cannot be more than a certain amount. If your income is equal to or less than the median income for residents of New Jersey, you are eligible to file a Chapter 7 Bankruptcy.

As of May 1, 2012, the median incomes in New Jersey are as follows:

$62,226 for a household of 1

$69,634 for a household of 2

$87,576 for a household of 3

$105,175 for a household of 4

An additional $7,500 is allowed for every additional member of a household with more than 4.

Click here to check the median incomes of other states.

If your income is more than the median income, you may still be able to file Chapter 7 Bankruptcy. To find out, you must take the "means test." The means test takes your expenses into account to see whether you qualify for Chapter 7. This is not as straight forward as it sounds. Some of the expenses that are used are not your actual expenses but are instead the average expenses for someone living in New Jersey. It is best to use the services of an experienced attorney when taking the means test.

Click here for more information about the means test.

If you fail the means test, you still may be able to file a Chapter 13 Bankruptcy.

Another requirement for filing a Chapter 7 Bankruptcy is the completion of two educational classes. These classes must be taken from court approved companies. The classes may be taken either in person, by phone, or on the Internet. They are offered in many different languages. Each class usually takes a few hours to complete.

The first class, Credit Counseling, must be taken prior to the filing of the bankruptcy petition. When you complete the class, you will get a certificate. Be aware that the certificate expires after 180 days. So, it is best not to take the class until you are almost ready to file your bankruptcy.

The second class, Personal Financial Management, must be taken after the filing of the bankruptcy petition, but no later than 45 days after your bankruptcy hearing. If you miss this deadline, your bankruptcy will be dismissed.

The Chapter 7 Process

Once you have filed your bankruptcy petition, the bankruptcy court will assign a judge and trustee to your case. A hearing will also be scheduled to occur about a month later. Although your creditors are given notice of the hearing, they almost never appear. The bankruptcy trustee will question you at the hearing. Although the trustee will ask questions to determine whether you are ineligible for a discharge in bankruptcy on the basis of fraud, most of the questions will likely be asked to determine whether you have any non-exempt assets. If there are sufficient non-exempt assets, the trustee may liquidate them and use the proceeds to pay part or all of your debts.

After the trustee's questions have been asked and answered satisfactorily, the trustee will close the meeting. A typical hearing takes no more than 15 minutes. If the trustee does have further questions, a second meeting will be scheduled.

Your creditors have two months to file an objection after the hearing. Absent such objections, you should receive your discharge about three months after your hearing.

The key to a successful Chapter 7 Bankruptcy is having an experienced attorney evaluate your situation, prepare your petition, answer your questions and be at your side during your hearing.