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Chapter 7 Bankruptcy

A woman who needs help filing for chapter 7 bankruptcy in New Jersey"

Chapter 7 Bankruptcy in New Jersey

Are you avoiding the telephone at home because creditors are constantly calling? Is your mailbox full of past due notices and demands for payment? Chapter 7 bankruptcy may be the answer for you.

Chapter 7 bankruptcy allows you to make a fresh financial start, digging you out of the mountain of credit card, medical or other bills that have you stressed and worried about how you are going to get them paid.

What is Chapter 7 Bankruptcy?

A common question asked by others like you who are facing financial difficulty is “What is Chapter 7 bankruptcy?” Under Chapter 7, debts are eliminated through what is known as “discharge,” making you no longer legally obligated to pay them.

The official Chapter 7 bankruptcy definition is a “legal liquidation proceeding.” What this means is that any assets determined to be nonexempt may be sold in order to pay your creditors. However, Chapter 7 also offers you significant protections.

What Debts Can Be Discharged?

Under Chapter 7, any unsecured debt may be eliminated under federal law. Unsecured debt is anything debt you did not use collateral to guarantee payment on the account.

Credit cards, medical bills and payday loans are considered unsecured debt. In addition, you may also be able to discharge past-due rent or utility bills as well as some types of tax debt.

Bankruptcy Protection

One of the most important protections provided under the Chapter 7 bankruptcy definition is what is known as an automatic stay. Under the automatic stay, creditors are no longer permitted to call, send debt collection letters, file lawsuits or garnish your wages as soon as you file for bankruptcy.

This can immediately reduce your anxiety and stress as harassing creditors are no longer permitted to contact you.

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How It Works

Once it has been determined that you are eligible to file Chapter 7, your attorney will prepare court documents that outline our income, debts, and assets. A trustee is appointed by the court to oversee your case and it is their job to be sure that any assets available are distributed to your creditors.

You will not lose everything you own in a bankruptcy, however, as some items are exempt from seizure by the court. Your clothing, furnishings, and tools you use as part of your employment are exempt as is a vehicle valued up to a certain amount and some of the equity in your home. Some states offer what is known as a wild card exemption that allows you to protect some of our nonexempt property as well.

Creditors have up to 60 days to object to the discharge. Any creditor who violates the automatic stay could suffer court sanctions, including paying you for the violation.

Determining Your Eligibility for a Chapter 7 Bankruptcy

If you are interested in restoring your financial stability and getting a fresh start with a Chapter 7 bankruptcy, one of the first questions you need to answer is, “Are you eligible?” Due to the significant benefits and protections that Chapter 7 affords, eligibility to file under Chapter 7 is limited.

There are two main ways you can qualify to file under Chapter 7: (i) your income is below New Jersey’s median income level, or, (ii) you satisfy the Chapter 7 “means test.”

1. Your Income Is Below New Jersey’s Median Income Level

If your income is below New Jersey’s median income level, you are automatically eligible to file under Chapter 7. This is determined based on figures published by the U.S. Census Bureau. As of 2022, New Jersey’s median income levels are:

  • Single-Earner Household – $71,941
  • TwoPerson Household – $88,511
  • ThreePerson Household – $112,416
  • FourPerson Household – $134,345

If you have more than four people in your household, you can simply add $9,000 for each additional person. New Jersey’s median income levels are among the highest in the country, and, as a result, many individuals and couples in the state qualify to file under Chapter 7 automatically.

2. You Satisfy the Chapter 7 “Means Test”

If your household income is above New Jersey’s median level for your family size, you can still file for bankruptcy under Chapter 7 if you satisfy the “means test.” This test looks at your household income level and compares it to your outstanding debts. If the difference between your household income (minus expenses) and your outstanding debt falls below the means test’s threshold, then you can file for bankruptcy under Chapter 7.

While you can find Chapter 7 means test calculators online, you do not want to trust your financial future to an online calculator. Many of these calculators are not accurate, as they fail to take relevant expenses and debts into account. To find out if you pass the means test, you should discuss your financial situation with an experienced New Jersey Chapter 7 bankruptcy lawyer one-on-one.

What To Expect During the Chapter 7 Bankruptcy Process

Filing for bankruptcy under Chapter 7 is a process—and it is a process that you need to take seriously. Once you commit to moving forward, you should be prepared to work with your New Jersey Chapter 7 bankruptcy lawyer every step of the way. The more effort you put into the Chapter 7 bankruptcy process, the more you will get out of it.

What should you expect if you decide to pursue a Chapter 7 bankruptcy? Here is a brief overview of the five major steps in the process:

  • Meet with Your New Jersey Chapter 7 Bankruptcy Lawyer – The first step is to meet with a New Jersey Chapter 7 bankruptcy lawyer. Your lawyer will sit down with you to discuss your options, assess your eligibility, and help you make informed decisions about how to move forward.
  • Prepare Your Chapter 7 Bankruptcy Petition – If you decide to move forward with filing under Chapter 7, your lawyer will prepare your bankruptcy petition. This is a formal legal document (or “pleading”) that gets filed with the bankruptcy court in New Jersey. It is important to work with your lawyer during this part of the process to ensure that he or she has all relevant information, as omitting information from your pleading can potentially create problems down the line.
  • Attend Credit Counseling – Once you file for bankruptcy under Chapter 7, you will be required to attend credit counseling. You must successfully complete your credit counseling before the court will approve your Chapter 7 bankruptcy.
  • Attend the “Meeting of Creditors” – When you file for bankruptcy under Chapter 7, you will also be required to attend a “meeting of creditors.” At this meeting, you will be placed under oath, and you will be required to answer questions about your assets and income. You can—and should—have your lawyer represent you during the meeting.
  • Finalize Your Chapter 7 Bankruptcy – Assuming you don’t encounter any major issues along the way (which you shouldn’t if you have an experienced New Jersey Chapter 7 bankruptcy lawyer representing you), the final step will simply be to finalize the process. The bankruptcy court will issue an order discharging your eligible debts, and then your fresh start will begin.

Which Debts Aren’t Eligible for Discharge Under Chapter 7?

As we mentioned above, most types of unsecured debts are eligible for discharge under Chapter 7. But, some unsecured debts are not, and it is important to determine whether enough of your debts are eligible to make filing for bankruptcy under Chapter 7 worthwhile.

So, what types of debts aren’t eligible for discharge under Chapter 7? Generally speaking, ineligible unsecured debts include:

  • Certain tax debts
  • Child support debt
  • Debts that were fraudulently obtained (i.e., by misrepresenting your income on a loan application)
  • Debts that you fail to list in your Chapter 7 bankruptcy petition
  • Judgment debts (i.e., debts owed for damages awarded in a drunk driving or assault case)
  • Student loan debt
  • Debts recently incurred for luxury purchases

What about your secured debts—your mortgage, car loans, and any other debts that have assets attached to them? Depending on your financial circumstances, you may have a few different options for handling these debts in your Chapter 7 bankruptcy case. For example, if you can keep making your payments after eliminating your eligible unsecured debts, then you can keep your secured debts and the assets they secure (i.e., your home or car). Alternatively, you may be able to surrender these assets and walk away from your secured debts free and clear—if this makes sense for your individual circumstances.

But, since there are exemptions for your primary residence and vehicle, there are factors to consider beyond whether you want to continue living in your home or if you are ready to get rid of your car. Our bankruptcy attorneys can help you carefully weigh all of your options and choose the best path forward.

5 Key Reasons To Hire a New Jersey Chapter 7 Bankruptcy Lawyer

While most people know that filing for bankruptcy under Chapter 7 can provide relief from debts they can’t afford to pay, in our experience, most people are unfamiliar with the other benefits that a Chapter 7 bankruptcy filing affords. If you are struggling with debt, here are five key reasons to hire a New Jersey Chapter 7 bankruptcy lawyer:

1. Keep Your Home and Your Car

Contrary to popular belief, filing for bankruptcy under Chapter 7 doesn’t mean (or doesn’t have to mean) losing your home and your car. Even if you have a mortgage and a car loan, a Chapter 7 bankruptcy lawyer will be able to help you keep your home and your car as long as you can pay these bills once you have your eligible unsecured debts discharged.

2. Keep Your Utilities On

Under the automatic stay that comes into play when you file for bankruptcy, once you file, your utility companies won’t be able to turn off or disconnect your services. Your lawyer can help ensure that you receive the protections of the automatic stay by preparing and filing your Chapter 7 bankruptcy petition correctly. Additionally, in the event that any of your utility companies turn off or disconnect your service improperly, your Chapter 7 bankruptcy lawyer can assist with holding them accountable.

3. Stop Your Creditors From Calling

Properly filing a complete and accurate Chapter 7 bankruptcy petition will also stop your creditors from calling. With an experienced lawyer on your side, you can put an end to the harassment for good. Your creditors won’t be able to call during the bankruptcy process, and when the bankruptcy process is over, you will be free from the debts that you are currently unable to pay. While the Chapter 7 bankruptcy process typically takes around four to six months, your lawyer can help you get protection from creditor harassment immediately.

4. Protect Your Wages from Garnishment

With certain types of debts, creditors can seek to force payment by garnishing debtors’ wages. If a creditor garnishes your wages, the amount you owe will be deducted from your paycheck before you receive it. The Chapter 7 automatic stay prevents this as well—but, once again, you need to rely on your lawyer to ensure that you initiate the process properly.

5. Eliminate the Maximum Unsecured Debts

While there are many risks involved in trying to file under Chapter 7 on your own, one of the biggest risks is that you won’t eliminate all of your eligible debts. When you hire Dilworth Paxson LLP., we will thoroughly review your finances, and we will be sure to include all eligible debts in your Chapter 7 petition. This will ensure that you receive the maximum protection available—and that you will have the minimum possible debt load once your Chapter 7 bankruptcy is over.

Contact A New Jersey Chapter 7 Bankruptcy Lawyer Today

If you or a loved one is dealing with constant collection calls, Chapter 7 may be the answer for you. There are requirements to file Chapter 7, so it is critical that you contact a qualified attorney who can review your circumstances and advise you on the best path to take. Learn more by contacting us today.

This chapter of the Bankruptcy Code provides for ``liquidation`` - the sale of a debtor's nonexempt property and the distribution of the proceeds to creditors.

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