What Is Bankruptcy in New Jersey?
When financial burdens become too heavy, filing for bankruptcy may be your best option. Bankruptcy protects you from liability for unpaid debts and provides a supervised way to a fresh start.
Understanding these laws can help you make the right decisions and avoid falling for the myths surrounding bankruptcy. If you need further help or advice, efficient New Jersey bankruptcy attorneys at the Law Offices of Scott J. Goldstein, LLC are available to answer your questions.
Types of Bankruptcy in New Jersey
In New Jersey, individuals can file for Chapter 7, Chapter 11, Chapter 12, or Chapter 13 bankruptcy, whereas businesses can file for Chapter 7 or 11 only. However, Chapters 7 and 13 are the most common.
Navigating the process and requirements can be overwhelming, especially for those already struggling financially. Here’s a quick guide to Chapter 7 and Chapter 13.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy is for individuals or businesses who struggle to repay their debts. It involves selling their nonexempt assets to pay creditors. This type of bankruptcy can rarely help with secured debts, but you will be discharged from paying unsecured debts, such as credit card debt, personal loans, or medical bills. Utility bills can be discharged too.
New Jersey offers several exemptions to protect certain assets from liquidation during bankruptcy proceedings. However, the exemption amounts are usually low by modern standards.
The New Jersey Senate recognized this shortfall in bill S-2423, which would increase the property exemption amount.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy allows individuals to restructure their debts. It is ideal for those with a reliable source of income but unable to pay their debts in full. With Chapter 13 bankruptcy protection, you can create a repayment plan over a period of three to five years that allows you to save your property and pay off debts.
Eligibility Requirements for Bankruptcy in New Jersey
You must meet specific requirements to be eligible for bankruptcy relief.
For Chapter 7 bankruptcy, you must pass the “means test”, which compares your income to the state median income for your household size. If your income falls below the median, you qualify for Chapter 7. Otherwise, you may be required to file for Chapter 13.
For Chapter 13, you must show that your disposable income, which is the difference between your income and the allowed expenses, is enough to cover your repayment obligations.
What Are Bankruptcy Exemptions
Bankruptcy exemptions protect certain property assets, such as houses and retirement accounts, from liquidation for debt payment purposes.
New Jersey residents are eligible for the exemption packages provided by the federal bankruptcy code and state statutes. When filing for bankruptcy, you can choose either state or federal exemptions, whatever serves you best. However, you can’t choose or mix both exemptions.
Under New Jersey bankruptcy laws, you may exempt only $1,000 in personal property. Personal assets can include any type of property other than real estate, such as cars, electronics, or jewelry.
However, Bill S-2423 would increase this exempt property amount to $10,000 if passed as law. More importantly, it would establish a $340,000 homestead exemption. In other words, it would allow you to exempt up to $340,000 of home equity from bankruptcy protection.
These changes could also decrease the monthly payments under a bankruptcy payment plan. They could also prevent debtors from having to sell certain assets to pay creditors.
Exemptions are not automatic, so you will have to list your exempt assets in your bankruptcy petition. Understanding the exemptions available under federal and state laws can help you protect as many assets as possible. Our bankruptcy attorney in New Jersey will be happy to help you.
Bankruptcy Filing Process in New Jersey
The process for filing bankruptcy starts with completing credit counseling before filing. After obtaining the counseling certificate, you can then file the required petition, statements, and schedules with the appropriate bankruptcy court where you live. You may want to seek legal counsel to avoid common mistakes made before filing for bankruptcy.
After filing your bankruptcy petition, the court will appoint a bankruptcy trustee to your case. They will divide your property into exempt and nonexempt property, then sell what’s deemed nonexempt to settle priority debts.
Part of the process is to complete a mandatory debtor education course. It has to be completed in order to receive a discharge.
The trustee will schedule and hold a creditors meeting where you’ll answer their questions under oath. The outcome of this meeting can have a huge impact on your case based.
If you are a creditor who will be part of a bankruptcy meeting, you may need to consult a creditor-bankruptcy lawyer from the Law Offices of Scott J. Goldstein, LLC.
Required Forms and Supporting Documents
To file for bankruptcy in New Jersey, you must complete several forms and statements of financial affairs along with the credit counseling certificate. You also have to provide supporting documents, including tax returns and bank statements.
It’s crucial to ensure that all forms are completed accurately.
Bankruptcy Fees in NJ
The cost to file for New Jersey bankruptcy Chapter 7 is $338. If your income is below 150% of New Jersey poverty guidelines, you may be eligible for a bankruptcy filing fee waiver.
The filing fee for a Chapter 13 petition is $313. If you can’t pay the fee when the petition is filed, you may apply for an installment schedule.
Other expenses you must consider include credit counseling and debtor education course costs and attorney fees.
Debtors are not required to hire New Jersey bankruptcy lawyers. However, their knowledge and experience may be instrumental in your case. They can guide you through the process and give you proper legal advice.
How Can a Bankruptcy Attorney Help?
The bankruptcy process can be challenging, but understanding the bankruptcy laws in New Jersey can make it easier.
If you’re considering bankruptcy, it’s vital to consult with an experienced bankruptcy lawyer to discuss the process and its impact on your life. They can guide you through the process and increase your chances of a favorable outcome.
Remember, filing for bankruptcy is not the end of the road. It’s an opportunity to take control of your life and future.
Ready for a fresh start? Reach out to the Law Offices of Scott J. Goldstein, LLC to schedule a free consultation.
Chapter 7 bankruptcy, or liquidation bankruptcy, is a court-supervised procedure that allows individuals and businesses to discharge most of their unsecured debts, including medical and utility bills, credit card debt, and personal loans.
However, the bankruptcy filer must give up nonexempt assets to a bankruptcy estate managed by a court-appointed trustee. The trustee will sell these assets to pay creditors. The nonexempt property includes cash, bank accounts, securities, luxurious items, and a second car or household.
Every bankruptcy filer must undergo a “means test” to calculate their monthly income. A five-year monthly income, excluding expenses and secured debt payments, that is higher than 25% of their unsecured debts or $15,150, whichever is lesser, can disqualify them on the basis of abuse. The goal is to prevent those with enough income from paying off their debts through bankruptcy and avoiding repayment.
NJ Chapter 7 bankruptcy can be filed by individuals, partnerships, or corporations. However, they must meet certain requirements.
If you’re considering a Chapter 7 New Jersey bankruptcy filing, our bankruptcy attorney at the Law Offices of Scott J. Goldstein, LLC can help you.
How to File Bankruptcy in New Jersey
Before filing for New Jersey Chapter 7 bankruptcy, you must make sure to comply with the local and federal bankruptcy laws as well as the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA).
- Credit counseling
If you are an individual, you must obtain court-approved credit counseling within 180 days before filing the bankruptcy petition. Credit counseling may include discussing your financial situation and, optionally, developing a debt management plan.
The counseling typically takes around an hour and may be done over the phone, online, or in person. When completed, the debtor receives a credit counseling certificate, which must be filed with the bankruptcy petition.
- Filing the bankruptcy petition
To file for Chapter 7 bankruptcy, you must complete and file a bankruptcy petition and the required financial documents and form, including schedules of:
- Assets and liabilities
- Current income and expenses
- Executory contracts and unexpired leases
- Exempt property
The petition and these documents must include a list of creditors, the amount of debt, property, and monthly expenses.
If you are an individual, you will have to file additional documents. It’s crucial to consult an experienced bankruptcy lawyer to make sure you have all the required documents.
You can file your petition with the New Jersey bankruptcy court in Camden, Newark, or Trenton, depending on where you live or operate as a business.
Once you file for bankruptcy, an automatic stay goes into effect, which stops all debt collection actions and legal proceedings against you.
- Debtor Education Course
Besides credit counseling, you must take the Personal Financial Management Course and file form 423 after the completion. You must complete this course to receive a discharge.
- The trustee meeting
Within 21 to 40 days after the filing, the bankruptcy trustee will schedule a meeting, called the 341 meeting, with you and the creditors. You will be under oath and will have to answer questions from the trustee and the creditors.
This meeting is vital because its outcome will determine whether your bankruptcy case is valid or abusive. Moreover, your creditors will be able to object to the discharge, dischargeability of debts, or exempt property.
- The Discharge
Bankruptcy discharge relieves you from some debts and protects you from lawsuits or debt collection actions by creditors. While Chapter 7 bankruptcy can wipe out your unsecured debts, you may have to return any collateral property to discharge secured debts.
The bankruptcy process is complex, involving many steps and forms. Hiring a New Jersey bankruptcy lawyer will give you the legal counsel and advice you need. They can help avoid common mistakes made before filing for bankruptcy and determine whether you meet the qualification requirements of Chapter 7 bankruptcy protection.
How Do I Qualify for Chapter 7 Bankruptcy in NJ?
Generally, most individuals in New Jersey are eligible for bankruptcy Chapter 7 if they meet the income requirements.
Filing for Chapter 7 bankruptcy protection requires having a lower income than the New Jersey median income for a household of equal size.
As of April 1, 2023, the debtor’s income on an annual basis can’t be higher than $99,056 in New Jersey for a family of two. The amount is higher if there are more members of a household. If your income exceeds the state’s median, it doesn’t necessarily mean you won’t qualify for Chapter 7 bankruptcy.
You can still file for Chapter 7 if your disposable income, which is the difference between your income and expenses, is lower than a certain amount.
What Property Can You Keep?
Your property will be divided into exempt and nonexempt property. You will be able to keep all assets deemed exempt, whereas the trustee will liquidate the nonexempt assets.
Both federal and state laws have property exemption rules, and you will be able to choose between the two at the time of filing.
For example, under federal exemptions, you may exempt one motor vehicle valued at $4,000, whereas New Jersey exemption rules don’t include cars. However, you may use the $1,000 personal property exemption to cover your car.
Other factors can influence what property you’ll be able to keep. For example, whether you’ll be able to keep your home can depend on how current you are with your mortgage payments.
Will Filing Bankruptcy in New Jersey Erase My Debts?
The main goal of Chapter 7 discharges is to completely eliminate most of your unsecured debts. However, certain debts cannot be discharged, such as:
- Child support
- Student loans
- Most taxes
- Debts arising from fraud, embezzlement, or intentional harm
Moreover, filing for bankruptcy can negatively affect your credit score for several years. A low credit score can make it harder for you to get a loan, rent an apartment, or secure a job. However, you can recover if you handle your finances responsibly after the bankruptcy. You can also achieve financial stability in the long term.
Bankruptcy Attorneys at Law Offices of Scott J. Goldstein Can Help
Filing for New Jersey Chapter 7 bankruptcy can be a life-changing decision. But it can also be the first step towards debt relief and a fresh start.
If you are an individual filing for personal bankruptcy, you will find the process particularly complicated. Our bankruptcy attorney in New Jersey is available to help you understand the process, requirements, and consequences of Chapter 7 bankruptcy. We can also attend the creditors meeting with you and make sure you are well-prepared.
Are you planning to file for bankruptcy? Contact New Jersey bankruptcy lawyers at the Law Offices of Scott J. Goldstein for a free consultation today.