Bankruptcy is a legal process that allows individuals or businesses to declare and resolve their inability to repay their debts. The bankruptcy process can be complex and is governed by both federal and state laws. In New Jersey, bankruptcy is meant to be an option to provide a fresh start for those who are facing overwhelming financial problems. Whether you’re considering bankruptcy to deal with medical debt or other consumer debts such as home or vehicle payments, consulting with an experienced attorney is important.
Our team of knowledgeable and compassionate New Jersey bankruptcy lawyers understands the importance of safeguarding your financial interests. Straffi & Straffi Attorneys at Law has been concentrating on bankruptcy cases for Central and Southern New Jersey for the past eight years. If you are struggling with debt, we are here to provide you with sound legal advice and representation. We can conduct a comprehensive evaluation of your case and provide you with your available options. Contact us at (732) 341-3800 to schedule a consultation.
Types of Bankruptcies: Chapters 7, 11, and 13
There are three main types of bankruptcies in the United States: Chapter 7, Chapter 11, and Chapter 13. Each type of bankruptcy is designed for different situations and may have distinct rules and procedures.
Chapter 7 Bankruptcy
This is the most common type of personal bankruptcy filing. It’s also called “liquidation” bankruptcy, as certain non-exempt assets may be sold to repay creditors. To qualify for Chapter 7 bankruptcy in New Jersey, you must pass the means test, which compares your income to the state median. If your income is below the median, you can file for Chapter 7; otherwise, you may need to consider Chapter 13. Most unsecured debts, such as credit card debts and medical bills, can be eliminated through Chapter 7 bankruptcy.
Chapter 11 Bankruptcy
This type of bankruptcy is primarily for businesses, but some individuals with significant debt may also qualify. Chapter 11 allows a business to restructure its debts and develop a plan to repay them while continuing operations. The debtor will need the court’s approval for major decisions and will have to follow certain guidelines and limitations.
Chapter 13 Bankruptcy
This is a reorganization bankruptcy for individuals who have a regular income but still struggle to pay off their debt. A court-approved repayment plan is created, typically lasting three to five years. In exchange for following the plan, the debtor can keep their property, and the remaining unsecured debts may be discharged at the end of the repayment period.
Understanding the different types of bankruptcies and their unique features can help individuals and businesses make informed decisions about their financial future. It’s important to seek the advice of a knowledgeable bankruptcy lawyer if you are considering filing for bankruptcy. A lawyer can guide you through the bankruptcy process and help you understand the rules and procedures for each type of bankruptcy.
Reasons to Consider Filing for Bankruptcy
Filing for bankruptcy is not a decision to be taken lightly, as it has long-term financial and legal consequences. It’s essential to weigh the potential benefits and drawbacks before making your decision. Some common reasons individuals and businesses consider filing for bankruptcy in New Jersey are:
- Discharge of debts – In some cases, bankruptcy allows you to eliminate or reduce your debts, providing a fresh start.
- Stop creditor harassment – Once you file for bankruptcy, creditors and debt collectors must halt their collection efforts.
- Protection from foreclosure or repossession – Bankruptcy can help prevent your property from being seized by creditors, allowing you to keep your home or car.
- Opportunity to restructure debt – Bankruptcy can provide you with a more manageable repayment plan that may lower monthly payments or change the terms of loans.
- A chance to rebuild credit – While bankruptcy will hurt your credit initially, it can provide a foundation to rebuild your credit once your debts are resolved.
Before deciding to file for bankruptcy in New Jersey, it is important to seek professional guidance from an experienced bankruptcy attorney who can help you understand the repercussions and equip you with the confidence to make informed decisions.
New Jersey Bankruptcy Laws and Exemptions
Each state has its own unique bankruptcy laws and exemptions, which are legal guidelines that protect your property during bankruptcy. New Jersey bankruptcy filers have access to Federal Bankruptcy exemptions, however, they must opt for either the federal or state bankruptcy exemptions and cannot combine elements from both systems. When you file for bankruptcy in New Jersey, the following exemptions may apply:
- Homestead exemption – Although New Jersey does not provide a homestead exemption, you can still take advantage of the federal homestead exemption wherein you can protect up to $27,900 of home equity when filing for bankruptcy. Married couples can double this exemption.
- Personal property exemption – You may protect certain personal property items, such as clothing and household goods, up to specified value limits.
- Motor vehicle exemption – There is no dedicated motor vehicle exemption available in New Jersey but you can utilize the motor vehicle exemption offered by the federal exemptions, up to $4,450.
- Retirement accounts – Most tax-exempt retirement accounts, including 401(k)s, 403(b)s, and IRAs, are protected in New Jersey bankruptcy cases.
- Wildcard exemption – New Jersey allows a wildcard exemption of up to $1,000, which can be applied to any property you choose, except real estate.
It’s important to consult with an experienced bankruptcy attorney in New Jersey to ensure you understand the specific laws, exemptions, and how they may affect your case. They can also guide you through the filing process and help you make informed decisions to protect your financial future.
Preparing to File for Bankruptcy in New Jersey
Filing for bankruptcy in New Jersey is a complex process, and it is essential to follow the correct steps and procedures to ensure a successful result. This article will discuss the process of preparing to file for bankruptcy in New Jersey, including the steps to take before filing, gathering documentation and financial information, completing the mandatory credit counseling, choosing between Chapter 7 and Chapter 13 bankruptcy, and working with a bankruptcy attorney.
Steps to Take Before Filing
Before filing for bankruptcy in New Jersey, it is crucial to take the time to evaluate your financial situation and ensure that bankruptcy is the best option for you. Consider alternative solutions, such as debt negotiation or consolidation, to evaluate whether bankruptcy is the right path for you.
It is also a good idea to have a clear understanding of your assets, debts, and expenses; this will help you determine which type of bankruptcy to file for and arrange your finances for the best possible outcome in your case. Lastly, research the bankruptcy process, including the types of bankruptcy available, the requirements for each, and the impact it will have on your credit and financial future.
Gathering Documentation and Financial Information
When preparing to file for bankruptcy, it is vital to gather accurate and thorough financial information that accurately represents your financial situation. This documentation will be used to complete official bankruptcy forms and communicate with the court and trustee about your case. Some types of documents you will need to gather and organize include:
- Tax returns for the past two years
- Pay stubs or proof of income for the last six months
- Bank statements for the past six months
- Documentation for any retirement accounts, pension plans, or other investments
- Mortgage loan documents, if applicable
- Any recent appraisals or valuation of your home
- Property tax bills
- Documentation for any vehicles, including loans, leases, and registrations
- A list of your creditors, including balances and account numbers
- Any court judgments, lawsuits, or garnishments
These documents will help you complete the required forms and schedules and provide a clear picture of your financial situation for the court.
Credit Counseling Requirement
Before filing for bankruptcy in New Jersey, you are required to complete a credit counseling course from an approved counselor. This course is designed to help you evaluate whether bankruptcy is the best option for your financial situation and provide you with education and resources for managing your finances in the future. After the course, you will receive a certificate of completion that must be included with your bankruptcy filing.
Choosing Between Chapter 7 and Chapter 13 Bankruptcy
Choosing the right type of bankruptcy for your situation is crucial for a successful outcome. In New Jersey, the two main types of bankruptcy available to individuals are Chapter 7 and Chapter 13.
- Chapter 7 bankruptcy, often called “liquidation” bankruptcy, allows you to discharge many of your unsecured debts, such as credit cards and medical bills. However, this may require the liquidation of some non-exempt assets to satisfy your creditors. To qualify for Chapter 7, you must pass the means test, which evaluates your income and expenses to determine if you have the ability to repay a portion of your debts.
- Chapter 13 bankruptcy, also known as “reorganization” bankruptcy, involves creating a repayment plan to pay back a portion of your debts over a specified period (typically three to five years). Chapter 13 bankruptcy allows you to keep your assets while working to repay your debt.
Consult an experienced New Jersey bankruptcy attorney to determine the right type of bankruptcy in your specific case.
Filing the Bankruptcy Petition
Throughout the filing process, it is essential to understand your rights and obligations, as well as the potential consequences of filing for bankruptcy.
Completing the Bankruptcy Forms
Before filing your bankruptcy petition, you must complete the necessary forms. These forms include schedules and statements that detail your financial situation, such as your debts, assets, income, and monthly expenses. You may obtain the forms directly from the U.S. Courts website or consult with a bankruptcy attorney or bankruptcy petition preparer.
To fill out the forms correctly, you must gather relevant financial information, such as recent pay stubs, bank statements, credit card bills, and mortgage documents. It is essential to provide accurate information in these forms, as incomplete or false information can lead to a case dismissal or even potential criminal charges for bankruptcy fraud. Be prepared to provide a complete list of your creditors, their contact information, and the total amount owed to each one.
In addition to the standard bankruptcy forms, you may also need to complete additional local forms specific to the New Jersey district in which you are filing. These forms may include a statement of social security number, debtor’s certification of completion of post-petition instruction, and others. New Jersey bankruptcy courts are divided into three divisions, based on the debtor’s geographic location.
Filing Fees and Fee Waivers
When you file for bankruptcy, you must pay a filing fee, which varies depending on the type of bankruptcy. For Chapter 7 bankruptcy, the filing fee is $338, and for Chapter 13 bankruptcy, the filing fee is $313. These fees can be paid in cash, money order, or cashier’s check, payable to “Clerk, U.S. Bankruptcy Court.”
In certain circumstances, debtors may qualify for a fee waiver or installment plan. To request a fee waiver, you must complete and submit the “Application to Have the Chapter 7 Filing Fee Waived.” The court will consider your income, assets, expenses, and other financial circumstances to determine whether you are eligible for a fee waiver.
If you are not eligible for a fee waiver, you can request to pay the filing fee in installments by submitting the “Application for Individuals to Pay the Filing Fee in Installments.”
Submitting the Petition to the New Jersey Bankruptcy Court
Once your bankruptcy forms are completed, and you have paid the filing fee or obtained a waiver, you must file your petition with the appropriate New Jersey bankruptcy court division – Camden, Trenton, or Newark. You can submit the forms in person or by mail. Keep in mind that filing by mail may result in delays.
After submitting your bankruptcy petition, the court will assign a trustee to your case. The trustee’s role is to review your financial situation, represent your creditor’s interests, and oversee your bankruptcy case’s administration, including holding the required 341 meeting of creditors.
Automatic Stay and Creditor Notifications
Upon filing your bankruptcy petition, an automatic stay is put into effect, which provides temporary protection against most creditor actions, such as lawsuits, wage garnishments, and collection calls. This relief allows you to focus on resolving your financial situation, working with the trustee, and participating in credit counseling and debtor education courses.
The bankruptcy court will notify your creditors of your bankruptcy filing, and they must cease collection efforts against you, as long as the automatic stay remains in effect. It is essential to understand that certain debts, such as child support and taxes, may not be discharged in bankruptcy, and collection actions for these debts may continue despite the automatic stay.
The Bankruptcy Process in New Jersey
The process of bankruptcy in New Jersey is divided into two types: Chapter 7 and Chapter 13 bankruptcy. Each type has its own timeline and procedure that must be followed by the debtor seeking relief from debts.
Chapter 7 Bankruptcy Timeline
Chapter 7 bankruptcy, commonly known as a “liquidation” bankruptcy, allows the debtor to discharge their unsecured debts, such as credit card debts and medical bills. The following is the timeline of events in a Chapter 7 bankruptcy case:
- 341 Meeting of Creditors: Approximately 30 to 45 days after filing for bankruptcy, the debtor is required to attend a meeting with their bankruptcy trustee and any creditors that choose to attend. The meeting, known as the 341 Meeting of Creditors, allows the trustee and creditors to verify the debtor’s assets and financial situation. The debtor is expected to answer questions under oath regarding their assets and financial affairs.
- Debtor Education Course: Within 60 days of the 341 Meeting of Creditors, the debtor must complete a mandatory debtor education course. This course provides the debtor with information about responsible financial management, and a certificate of completion must be filed with the court. Failure to complete this course can result in a case dismissal.
- Trustee’s Liquidation of Assets: In a Chapter 7 bankruptcy, the trustee is responsible for identifying and liquidating the debtor’s non-exempt assets. Non-exempt assets are those not protected by bankruptcy exemptions, such as luxury items and investment properties. The proceeds from the liquidation are then used to pay off creditors according to the priority of their claims.
- Discharge of Debts and Case Closure: Once the trustee has liquidated the debtor’s non-exempt assets and distributed the proceeds to creditors, the debtor is granted a discharge of their eligible debts. A discharge order is issued by the court, which legally releases the debtor from any further obligation to repay the discharged debts. The case is then closed, typically within four to six months from the date the debtor filed the bankruptcy petition.
A Chapter 7 bankruptcy can provide relief for those struggling with unsecured debts, but it is important to understand the timeline and requirements of the process to increase the chances of a successful outcome.
Chapter 13 Bankruptcy Timeline
Chapter 13 bankruptcy, also known as a “reorganization” bankruptcy, allows the debtor to restructure their debts into a manageable repayment plan lasting three to five years. The following is the timeline of events in a Chapter 13 bankruptcy case:
- 341 Meeting of Creditors: Similar to the Chapter 7 process, the debtor must attend a 341 Meeting of Creditors within 30 to 45 days after filing their bankruptcy petition. However, in a Chapter 13 case, the primary purpose of this meeting is to resolve any objections by the trustee or creditors to the debtor’s proposed repayment plan.
- Debtor Education Course: Like Chapter 7, the debtor must complete a mandatory debtor education course and file the certificate of completion with the court within 60 days of the 341 Meeting of Creditors.
- Confirmation of the Chapter 13 Repayment Plan: Within 45 days of the 341 Meeting of Creditors, a confirmation hearing is held in court to determine whether the debtor’s proposed repayment plan is feasible and meets the requirements of the bankruptcy law. If the plan is confirmed, the debtor begins making payments to the trustee, who then distributes the funds to the various creditors in accordance with the plan.
- Repayment Period and Discharge of Remaining Debts: Under the confirmed repayment plan, the debtor may take up to five years to repay their debts, depending on their income and other factors. Upon successful completion of the repayment plan, the debtor is granted a discharge of any remaining eligible debts. The case is then closed, and the debtor is released from their previous financial obligations.
In summary, the bankruptcy process in New Jersey involves a series of important steps, including meetings, courses, and court hearings to ensure the debtor understands their obligations and the consequences of bankruptcy. The entire process can last between four months for a Chapter 7 case to several years for a Chapter 13 case, depending on the debtor’s financial situation and compliance with court requirements.
After Filing for Bankruptcy in New Jersey
Filing for bankruptcy in New Jersey can be a challenging and emotional decision. However, it is essential to remember that bankruptcy is designed to give individuals and businesses a fresh start by eliminating or reorganizing debt under the protection of the federal bankruptcy court. In this article, we will discuss life after bankruptcy, including rebuilding credit and overall financial health, understanding and avoiding bankruptcy fraud, and alternatives to bankruptcy in New Jersey.
Life After Bankruptcy: Rebuilding Credit and Financial Health
Rebuilding your credit and financial stability after filing for bankruptcy is a critical step toward rebuilding your life. It is essential to understand that rebuilding your credit will take time, patience, and discipline. However, following these simple steps will help you get back on your feet and move towards a more stable financial future.
- Obtain a copy of your credit report: Review your credit report and ensure that your discharged debts are accurately reflected. Make sure there are no errors, and if found, dispute them immediately with the credit bureaus.
- Establish new credit: Start with a secured credit card or a small, manageable loan. Make sure to pay on time every month and do not overextend your credit limit. This will help build positive credit history over time.
- Build an emergency fund: Saving money for emergencies is crucial after bankruptcy. Having a safety net can help prevent future financial hardships, allowing you to avoid relying on credit or falling into debt.
- Create a budget and stick to it: Develop a realistic budget that considers your income, expenses, and financial goals. Follow your budget consistently, track your spending, and adjust as needed to stay on track.
- Develop healthy financial habits: Focus on living within your means, avoiding excessive debt, and making consistent, on-time payments. These habits will help rebuild your credit and demonstrate responsible financial behavior.
It is important to understand that your bankruptcy will remain on your credit report for a period of seven to ten years, depending on the type of bankruptcy filed. However, by following the steps outlined above, you can start rebuilding your credit immediately and progressively improve your credit score over time.
Understanding and Avoiding Bankruptcy Fraud
Bankruptcy fraud is a federal crime that involves intentional deceit or abuse of the bankruptcy system. Fraud can include hiding assets, submitting false information or documents, and any other attempts to defraud the bankruptcy court or creditors. To avoid bankruptcy fraud, it is important to understand the different types of fraudulent activities and how to prevent them.
- Be honest and accurate in all filings and communications with the bankruptcy court and trustee. Ensure that you disclose all assets, debts, and financial information as required.
- Do not transfer, hide, or undervalue assets in an attempt to protect them from being liquidated or seized during bankruptcy proceedings.
- Avoid taking on new debt or making excessive purchases immediately before filing for bankruptcy.
- Consult with an experienced bankruptcy attorney who can guide you through the process and help prevent any potential issues.
By understanding and avoiding bankruptcy fraud, you can protect yourself from potential criminal charges, fines, or other negative consequences in your bankruptcy case.
Alternatives to Bankruptcy in New Jersey
While bankruptcy can provide relief from overwhelming debt, it may not always be the best solution for every individual or business. There are several alternatives to bankruptcy that may help you avoid the long-term consequences of filing while still addressing your financial hardships.
- Debt Management Plan: A debt management plan involves working with a credit counseling agency to consolidate and repay your debts within a specified period. This option allows you to make a single monthly payment to the agency, which will distribute it to your creditors on your behalf.
- Debt Settlement: Debt settlement involves negotiating with creditors to accept a reduced amount to satisfy outstanding debts. This process can help you avoid bankruptcy, but it may have a negative impact on your credit score and could result in tax consequences for the forgiven debt.
- Loan Modification: If your financial struggles primarily involve your mortgage, you may be able to work with your lender to modify your loan terms, such as reducing the interest rate or extending the loan term.
- Financial Counseling: A financial counselor can help you evaluate your financial situation, create a budget, and develop strategies to address your debts and overall financial health.
Before deciding on bankruptcy, it is essential to explore all available options and seek professional advice tailored to your unique situation. By doing so, you can make an informed decision and choose the best path toward financial stability.
|Step||Chapter 7 Bankruptcy||Chapter 13 Bankruptcy|
|Filing the Bankruptcy Petition||Debtor files a Chapter 7 bankruptcy petition||Debtor files a Chapter 13 bankruptcy petition|
|Automatic Stay||Automatic stay goes into effect, providing immediate protection from creditors’ collection actions||Automatic stay goes into effect, providing immediate protection from creditors’ collection actions|
|Appointment of a Trustee||A bankruptcy trustee is appointed to oversee the case and liquidate non-exempt assets||A bankruptcy trustee is appointed to oversee the case and manage the repayment plan|
|Creditors Meeting (341 Meeting)||Debtor attends the 341 Meeting of Creditors where trustee and creditors can ask questions||Debtor attends the 341 Meeting of Creditors where trustee and creditors can ask questions|
|Liquidation of Non-Exempt Assets||Trustee identifies and liquidates non-exempt assets to repay creditors||Debtor keeps assets but pays creditors through a repayment plan|
|Discharge of Debts and Case Closure||Eligible debts are discharged, providing relief from personal liability. Bankruptcy case is closed||Remaining eligible debts are discharged, providing relief from personal liability. Bankruptcy case is closed|
Working with an Experienced New Jersey Bankruptcy Attorney
Filing for bankruptcy in New Jersey can be a complicated and often overwhelming process, and it is essential to have the guidance and support of an experienced bankruptcy attorney to help you navigate the system. An attorney can help you understand the requirements and procedures, complete and file the necessary forms and schedules, represent you in court proceedings, and advocate for your best interests throughout the process.
Our team of experienced New Jersey bankruptcy attorneys, led by Daniel Straffi Jr., is highly knowledgeable in bankruptcy laws. For over eight years, we have been serving Central and Southern New Jersey as a dedicated bankruptcy law firm. Our primary focus is to assist individuals in achieving financial freedom and a fresh start in life. We understand that being unable to pay your debts can be overwhelming and can cause immense stress not only for you but also for your family.
If you are facing such a situation, we can offer you the legal advice and representation you need. Our firm, Straffi & Straffi Attorneys at Law, has helped numerous families and businesses in Ocean County, Monmouth County, and other areas in New Jersey start anew. To schedule a consultation, contact us today at (732) 341-3800.