New Jersey Bankruptcy Attorneys
By filing for bankruptcy, debtors in New Jersey can reorganize their finances in a way that allows them to repay and discharge debts.
Filing for bankruptcy is an option for any New Jersey resident dealing with financial issues. Before filing, debtors should compile information about their finances so that our lawyers can more easily prepare a bankruptcy petition. Debtors typically file either Chapter 7 or Chapter 13, depending on their income and expenses. There are benefits to both chapters, as well as many differences between the two. When you declare bankruptcy in New Jersey, eligible debts will be discharged, including credit card and medical debt.
For a free legal consultation with our New Jersey bankruptcy attorneys, contact Young, Marr, Mallis & Associates at (609) 755-3115 to get started.
Should You File for Bankruptcy in New Jersey?
Filing for bankruptcy can seem like a complex and daunting process when you are first learning about the subject. However, with the proper assistance and preparation, obtaining a successful discharge is within your reach.
Entering into bankruptcy is often seen as a last resort to those dealing with financial issues. In reality, the sooner you understand the scope of your debt and the likelihood of you escaping it alone, the sooner you should declare bankruptcy in New Jersey. There is no deadline to declare bankruptcy if you are considering it.
Although bankruptcy can affect your credit rating, outstanding credit card payments, medical bills, and mortgage payments might affect your financial health even more adversely and immediately. Furthermore, most debts come with interest, meaning the longer you delay entering bankruptcy or fail to repay your debts, the more overwhelming your situation might be come. And, perhaps most importantly to some debtors, worsening financial predicaments could lead to homes being foreclosed upon and property being repossessed in New Jersey. Filing for bankruptcy can help you to avoid negative such outcomes.
What to Do Before Filing for Bankruptcy in New Jersey
Filing for bankruptcy is not a decision that happens overnight. Instead, it is a process that takes time and preparation in New Jersey. Prior to you filing, you will have to complete certain steps.
Before you file for bankruptcy in New Jersey, you will be required to complete credit counseling, which can only be administered by a government-approved agency. Once you have submitted proof that you have completed credit counseling successfully, you may file for bankruptcy, provided you meet the residency requirements necessary to file in New Jersey. If this is your second time filing bankruptcy, you may be subject to specific waiting periods before you can obtain another discharge from the bankruptcy court.
While you might be able to file a bankruptcy petition after completing credit counseling in New Jersey, there is more preparation that must be done. Our bankruptcy attorneys will use this time to gather information about your income, expenses, assets, dependents, creditors, and debts, so that they can prepare your bankruptcy petition properly. There are countless forms that must be completed during bankruptcy. Getting the majority of them submitted alongside the bankruptcy petition is ideal.
How to File for Bankruptcy in New Jersey
The bankruptcy process happens in court, meaning debtors must file with the court. This is a complicated process that requires many forms and documentation, as well as court appearances and conversations with creditors.
A bankruptcy filing consists of several documents, or schedules, that must be completed and submitted to the court. The first document is the bankruptcy petition. This form contains all of the basic information about the individual filing bankruptcy, including the chapter of bankruptcy. Following the bankruptcy petition will be several schedules that list all of a debtor’s assets, income, and expenses, as well as other financial information. To complete these documents, our experienced attorneys will need a number of financial statements, including copies of bank statements, income tax returns, and pay stubs. If you are married, your spouse will need to provide information about their income, whether or not you are filing for bankruptcy jointly.
After you declare bankruptcy in New Jersey, the judge assigned to your case might require that you and your creditors engage in mediation, to see if there is a way to consolidate debts or otherwise resolve the matter without further involvement from the court. Depending on the type of debt you have and the creditors involved, our bankruptcy attorneys might be able to devise a plan to repay creditors during mediation.
Common Types of Bankruptcy in New Jersey
The two most common types of consumer bankruptcy are called Chapter 7, or liquidation, and Chapter 13, or reorganization.
The type of bankruptcy that you will file is, to some extent, determined by a mandatory financial evaluation called the means test, which looks at your financial resources over a six-month period. Depending on the outcome of the means test, you may be required to pay back some or all of your creditors through Chapter 13, or if you qualify, you may be able to obtain a faster discharge with Chapter 7.
If the means test reveals that your income is too high – or too low – you may need to file for a specific chapter of bankruptcy. However, even if you earn a high level of income, you may pass the means test and qualify for Chapter 7 if your living expenses are also high.
Comparing Chapter 7 and Chapter 13 in New Jersey
There are many differences between Chapter 7 and Chapter 13, though both can help a debtor improve their financial health. For example, while Chapter 7 works through liquidation, Chapter 13 works through repayment plans. Another major difference between these bankruptcy chapters are how long they take to complete in New Jersey.
The significant difference between Chapter 7 and Chapter 13 is that in Chapter 13, a bankruptcy plan is filed with the court proposing a payment plan lasting three to five years. Your creditors will submit proof of the debt owed, including documents showing the amount due. We will evaluate all of the claims filed by your creditors to ensure they are valid, and we will propose a plan that both addresses their claims and adheres to all necessary provisions of the Bankruptcy Code. The court will then enter an order confirming your plan once it complies with all applicable requirements. The particulars of your specific repayment plan, and the amount of your structured payments, will depend largely on your income, expenses, and debt.
Length of Bankruptcy
The Chapter 7 bankruptcy process typically lasts from four to six months, though the timeline of each case varies. Chapter 13 bankruptcy is a longer process that may take three to five years, depending on your debts and disposable income. When you file Chapter 13, you must file a bankruptcy plan within 14 days of submitting your bankruptcy petition. As long as you make consistent payments and comply with the terms of your plan, you should be able to keep all of your property.
Retention of Assets
When you file for Chapter 7, the court will appoint a trustee to assess the “bankruptcy estate,” or all of a debtor’s assets at the time of filing. Depending on how much you owe and the value of your assets, the trustee may sell certain belongings to help repay your debts. However, the Bankruptcy Code provides several protections, called exemptions, that our attorneys will use to allow you to keep most, if not all, of your property. If there is non-exempt property available, it may be advisable to file Chapter 13.
One of the great benefits of Chapter 13 is the opportunity for homeowners to catch up on missed mortgage payments, or “arrearages,” preventing foreclosure or a scheduled sheriff’s sale. If you are worried about losing your home and want to stop foreclosure, Chapter 13 bankruptcy may be one of your strongest options, depending on your financial circumstances and how far the proceedings have advanced. With Chapter 7, on the other hand, debtors might not be able to retain all of their assets, as liquidating assets is necessary to repay creditors through Chapter 7 bankruptcy if not all of a debtor’s assets are dischargeable.
Benefits of Filing Chapter 7 Bankruptcy in New Jersey
Chapter 7, often called “liquidation” or “no-asset” bankruptcy, is the most common type filed by individuals in New Jersey. Generally, debtors who have limited income and who do not own much property or many assets file under Chapter 7.
If you meet the income qualifications for Chapter 7, our attorneys will explain how Chapter 7 eliminates unsecured debt, such as credit card bills, personal loans, payday loans, lines of credit, medical bills, old utility bills, loan deficiencies after a vehicle repossession, and personal judgments.
There are debts, such as criminal restitution, fines, child support, alimony, and certain taxes that are “non-dischargeable” and will still remain after the bankruptcy process is completed. Student loans are generally non-dischargeable, though a lawsuit could be filed in your bankruptcy proceeding to petition the court to discharge the debt. The standard to allow discharge of student loan debt is challenging to meet, so student loan debt is rarely eliminated.
Despite being known as “liquidation bankruptcy,” you will usually be able to keep all or most of your property. The Bankruptcy Code provides several exemptions that our attorneys utilize to protect your assets. You might also be able to maintain possession of assets that have secured liens attached to them, such as cars, furniture that you are currently paying off, or your home, but you will have to continue making your monthly payments on these items. Generally, using federal exemptions instead of state exemptions is best for debtors in New Jersey.
Benefits of Filing Chapter 13 Bankruptcy in New Jersey
Often, people who do not qualify for Chapter 7 believe that filing for bankruptcy will not offer them any substantial relief. While stopping a foreclosure or sheriff’s sale is a significant benefit of Chapter 13, this type of bankruptcy offers additional advantages over dealing directly with your creditors as well as some other benefits that are not readily apparent.
Lowering Payments for Unsecured Debts
First of all, it is likely that if you do not qualify for Chapter 7, you will be required to pay your unsecured debts. However, in many cases, the amount that a debtor must pay is substantially less than the total amount owed and significantly less than the amount that would satisfy a creditor outside bankruptcy.
For example, a person might have $75,000 in credit card debt. Outside of bankruptcy, creditors could file a collection lawsuit and be awarded a judgment and subsequent wage garnishment. Under these circumstances, money would be deducted directly from a person’s paycheck – often leaving them with less income than they need to meet their average monthly expenses. Furthermore, any settlement agreement would probably require paying a significant amount of the total due over a short period. Additionally, if an agreement is made, a person would owe federal income tax on any debt that is forgiven through the agreement.
In Chapter 13, unsecured creditors do not have that much power. A debtor must complete a complex financial evaluation known as the means test to determine the amount they will have to pay towards unsecured debt. In many cases, that amount is less than what a creditor would settle for outside the bankruptcy process. In the example above, a debtor might have to pay $25,000 through a five-year bankruptcy plan. The remaining balance would be discharged. Another important benefit of eliminating debt through bankruptcy is that there is no additional tax obligation. Unlike forgiven debt, discharged debt in a bankruptcy is not taxed. This benefit also exists when you have debt discharged through Chapter 7.
Lowering Car Payments
If you are paying a monthly car payment and owe more on your vehicle than the car is worth, you might be able to lower your payment through a Chapter 13 bankruptcy. For example, if the remaining balance on your car loan is $15,000 and your car is only worth $10,000, you might only be required to pay the fair market value of your car. However, this benefit is not available to all debtors. For one thing, you must have owned the car for at least 933 days.
Lowering Mortgage Payments
Before 2008, many homeowners used the excess equity in their property to take a second or third mortgage. After the real estate collapse of 2008, many New Jersey residents found that they owed more of their home than what the property was worth. Under certain circumstances, a homeowner in a Chapter 13 bankruptcy with a second mortgage that, when combined with their first mortgage, is higher than the fair market value of the property, could strip the mortgage from the house and have it categorized as an unsecured debt. This benefit could dramatically lower a debtor’s monthly expenses.
Should You Consult a Debt Consolidation Company for Chapter 13?
With Chapter 13, debtors might think that a debt consolidation company will be capable of providing the same level of expertise and assistance that an attorney would. Unfortunately, this is a mistake that could be costly for debtors in New Jersey.
Some people opt to hire a debt consolidation company to negotiate with creditors on their behalf, especially during Chapter 13. Often, the fees associated with this course of action are more expensive than the typical bankruptcy costs. Also, the total amount a person would be required to pay is usually close to what they could have negotiated on their own. Debt consolidation companies also offer no protection from ongoing or pending lawsuits.
The Automatic Stay and Bankruptcy in New Jersey
No matter which type of bankruptcy you file for, whether Chapter 7 or Chapter 13, an automatic stay will go into effect as soon as the case commences. This will protect you from any debt collection efforts from creditors in New Jersey.
An automatic stay is a legal wall that protects you from your creditors. This powerful legal construct stops creditors from calling you, sending you bills, garnishing your wages, or continuing any legal actions against you. This means bank accounts are unfrozen, lawsuits cease, and sheriff’s sales are canceled.
If you have filed for bankruptcy several times in the recent past, an automatic stay might not last for the duration of your current case. In some instances, debtors are ineligible for an immediate stay, based on their bankruptcy history. You may be able to petition to get a stay imposed or extended if your history presents an issue during your current bankruptcy proceedings in New Jersey.
What Types of Debt Does Bankruptcy Eliminate in New Jersey?
There are two categories of debt in a bankruptcy case: “dischargeable” debts, which are debts that can be wiped out by bankruptcy, and “non-dischargeable” debts, or debts that cannot be eliminated by bankruptcy. Fortunately for debtors who file bankruptcy in New Jersey, most debts are considered dischargeable, regardless of whether the debtor files for Chapter 7 or Chapter 13. In fact, Chapter 13 allows debtors to discharge several extra debts that are usually non-dischargeable in Chapter 7.
Some types of debt are almost always dischargeable, while others can only be discharged under rare and specific circumstances. Examples of debts that can usually be wiped out by bankruptcy include, but are not limited to, business debts, credit card debts, medical debts, and personal debts (such as loans from friends and family).
Other types of debt can only be discharged if certain conditions are met. For example, tax debt is usually non-dischargeable, but under certain circumstances, older unpaid income tax can be discharged. Our bankruptcy attorneys can review your outstanding tax obligations and help determine if your situation meets the required criteria. Additionally, sometimes penalties and interest may be dischargeable even if the principal tax debt is not. To use another example, student loan debt is usually non-dischargeable, but may qualify for a discharge if the debtor can meet specific criteria, which is decided by the court.
After you file for bankruptcy, but before your debts can be discharged, you will be required to take a debtor financial education course. Debtor education is a federal bankruptcy requirement, and, like credit counseling, providers must come from a pre-approved government list. The purpose of the bankruptcy debtor education requirement is to provide participants with the knowledge and information they need to help budget and manage their finances in the future, to avoid the need for another bankruptcy.
While liability for most debts can be discharged, the government has decided that some debts are too pressing to be eliminated by bankruptcy. Examples of non-dischargeable debts in bankruptcy include alimony and spousal support debt, child support debt, and debt from certain court-ordered fines, such as criminal fines or victim restitution.
Do I Need an Attorney to File for Bankruptcy in New Jersey?
If a debtor wishes to file on their own, it is perfectly legal to do so. The technical term for doing so is “pro se.” However, while it is possible to file for bankruptcy without legal assistance, it is not in your best interest to do so.
The state and federal bankruptcy laws are complicated, dense, and ever-changing. Even a seemingly trivial error or omission in your paperwork can lead to delays, needless financial losses, or even the complete dismissal of your case, depending on the severity of the issue. Additionally, your creditors will likely have attorneys aggressively working to represent their interests.
Another important consideration is that any bankruptcy case that is dismissed could adversely impact your ability to file another bankruptcy. Often, a pro se debtor will have their case dismissed quickly due to unfiled paperwork or failure to comply with a provision of the Bankruptcy Code. This could jeopardize the very reason they were filing. For instance, if a homeowner filed for bankruptcy to stop a sheriff sale, the initial petition could stay a scheduled auction. However, if the case is quickly dismissed, then their home could sell the following month while they still believe that the property is protected. Furthermore, if the case is dismissed, any attempts to file again will encounter additional difficulties. In fact, if a pro se debtor filed multiple bankruptcies, they could be prohibited from filing again in New Jersey.
Often, a pro se filer will contact an attorney to get help with mistakes they made, such as failing to list all of their assets or income, filing under the wrong chapter, neglecting asset exemptions, or proposing an unfeasible plan, among other potentially costly errors. In many instances, correcting mistakes is more expensive than filing for bankruptcy with the help of an attorney from the beginning.
Our New Jersey Bankruptcy Lawyers Can Help
To set up a free, completely confidential legal consultation about Chapter 13 or Chapter 7 bankruptcy in New Jersey, contact the bankruptcy attorneys of Young, Marr, Mallis & Associates at (609) 755-3115 today.