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What Does Filing Bankruptcy in New Jersey Mean for You?

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Filing for Bankruptcy in New Jersey

The cost of living in New Jersey, or the US in general, is high. New Jersey housing costs can be extremely high due to its proximity to New York City. Renting or owning a car or paying for a student loan can also be quite expensive.

Bills can quickly pile up to the point where paying for everything seems impossible. Those who can’t cope with their financial difficulties can consider filing for bankruptcy. Filing bankruptcy doesn’t mean all your debts will be forgiven. However, bankruptcy can provide specific debt relief.

Once you file your bankruptcy petition, an automatic stay goes into effect. It stops most creditors from collecting and even stalls foreclosure proceedings. Some debts can be eliminated depending on the type of bankruptcy you file. While for others, you may have more time time to repay.

Even successful people aren’t immune to financial challenges and difficulties. Moreover, many New Jersey residents file for bankruptcy because of circumstances beyond their control. 

If you’re struggling with debt, bankruptcy may give you a fresh start. The first step to a bankruptcy filing is knowing your options. Hiring a skilled attorney can help you avoid common mistakes made before filing for bankruptcy

Qualifying for Bankruptcy in New Jersey

The most common bankruptcy filings are Chapter 7 and Chapter 13. Chapter 7 bankruptcy works well for those whose property consists of essential items. On the other hand, individuals who own luxury items may lose them.

Chapter 7

To be eligible for Chapter 7 bankruptcy, the person must pass a means test. This test compares household income to the median income. Your monthly income has to be less than the median for a similarly sized household in New Jersey. If it exceeds the state median, the process will get more complicated.

Chapter 13

If you do not qualify for Chapter 7, Chapter 13 of the bankruptcy code might be an option. It allows debtors to reorganize their debt and create a monthly repayment plan. A feasible payment plan will allow them to repay some or all of their remaining debt in the next three to five years. 

Chapter 13 bankruptcy can be the best option for people who have a regular income as well as those who wish to keep their homes after completing the bankruptcy process.

However, Chapter 13 can be expensive. Many people can’t meet their plan payments. To qualify, you may have to pay the more significant part of the following:

  • Priority nondischargeable debt
  • Nonexempt property value
  • Disposable income.

What Is the Process of Filing for Bankruptcy in New Jersey?

New Jersey bankruptcy filing can be overwhelming. A qualified creditor-bankruptcy lawyer can help. They can make sure your New Jersey bankruptcy process goes smoothly.

In every bankruptcy case, there are certain steps you have to take. These steps include:

  • Collect necessary documents
  • Take a credit counseling course
  • Complete and file a bankruptcy petition to the bankruptcy court
  • Attend a 341 Meeting
  • Take a debtor education course

In addition, Chapter 13 filers may also have to attend a repayment plan confirmation hearing. All these steps must be finished before debts get discharged.

Secured vs Unsecured Debts

However, understanding the difference between secured and unsecured debts is also essential. Under Bankruptcy law, debts are divided into secured and unsecured debts. Whether a debt is secured or not makes a big difference when discharging debts.

Secured Debts

A secured debt is one where a piece of property is attached to it in return for a loan. If the debtor doesn’t pay what is owed, the creditor may be able to repossess that piece of property. Most common secured debts include mortgages and car loans.

When it comes to secured debts, they can’t be discharged without losing the property attached to them. If the debtor signs a reaffirmation agreement, they may keep the property. But, they also have to be on time with all finance payments.

Unsecured Debts

On the other hand, with unsecured debt, the property is not attached to it. That means the creditor doesn’t have the right to take possession of the debtor’s property if they fail to pay. Credit card debt or medical bills are common examples of unsecured debts.

Typically, unsecured debts can be completely discharged through bankruptcy or paid in part through monthly payments. 

Will Filing Bankruptcy in New Jersey Erase All of My Debts?

You could erase many of your debts with Chapter 7 discharges in bankruptcy. That is especially the case with unsecured debts and maybe even home mortgages. Yet, not all obligations go away. The debtor will be allowed to keep exempt assets.

New Jersey filers can choose between two sets of bankruptcy exemptions. They include state or federal exemptions. Bear in mind that New Jersey exemption laws protect only essential assets.

In Chapter 13 bankruptcy, only qualifying debts are erased. Secured debts are paid. Unsecured debts are treated according to their importance. Many Chapter 13 debtors pay only a small portion of their unsecured debts.

After filing, the New Jersey bankruptcy court will assign a bankruptcy trustee. They will oversee the case and determine how to pay creditors. When that is finished, they will discharge the remaining debt.

Usually, credit card debts, medical expenses, and older tax obligations can be discharged. The same applies to personal loans not secured by an asset. Certain debts can also get discharged in Chapter 13, but not in Chapter 7 bankruptcy. They include some of the debts arising from a divorce or wilful property damage.

However, some debts can’t be discharged with any bankruptcy petition. They include the following:

  • Student loans
  • Child support payments
  • Recent tax obligations
  • Court-ordered damages you have to pay in drunk driving or personal injury case

You may still be determining which bankruptcy petition would suit you best. If that is the case, a New Jersey bankruptcy lawyer may be able to help.

How Can a New Jersey Bankruptcy Attorney Help

Several specific steps have to be completed before filing for personal bankruptcy. Failing to do any of these steps can result in a case dismissal. So, having experienced bankruptcy attorneys by your side can be crucial for a successful case. Your attorney can help you file for bankruptcy, which typically requires the following: 

  • Correctly filling out several bankruptcy forms 
  • Listing sources of income, property, and debts

They can provide guidance throughout the bankruptcy process. If you have more questions on filing for bankruptcy relief, contact a bankruptcy attorney at the Law Offices of Scott J. Goldstein.