How to Prepare for filing a Chapter 7 Bankruptcy Petition in New Jersey
Imagine a single mother whose unexpected job loss plunged her into despair as mounting bills and overdue notices flooded her mailbox. Despite trying to find another job, the weight of her financial obligations left her feeling hopeless and overwhelmed. It wasn't until she discovered Chapter 7 bankruptcy that she found a potential lifeline to work toward a fresh financial start.
If you find yourself in a similar position, solutions do exist and you don’t have to face this journey alone. Chapter 7 bankruptcy allows you to eliminate most of your unsecured debts, including credit cards and medical bills, in as little as a few months.
However, the bankruptcy process can be complex and varies based on individual circumstances, such as your income and asset eligibility. It’s crucial to seek professional guidance on how to file for bankruptcy and ensure you understand the potential consequences and benefits.
At The Law Offices of Marc G. Alster, we pride ourselves on offering compassionate and knowledgeable assistance to those overwhelmed with debt. Attorney Alster is dedicated to empowering his clients with the information they need to make informed decisions about their financial futures. With extensive experience in bankruptcy law, our firm provides tailored advice to help you understand if Chapter 7 is the right path for you.
If you’re ready to take the first step towards financial freedom, don’t hesitate to reach out for a consultation and explore how filing for Chapter 7 bankruptcy could pave the way for your bright financial future.
Understanding Chapter 7 Bankruptcy
Chapter 7 bankruptcy, often referred to as "liquidation bankruptcy," is one of the most common forms of bankruptcy for individuals seeking a fresh financial start.
Chapter 7 bankruptcy allows you to discharge most of your unsecured debts, including medical bills, credit card debts, and personal loans. The main advantage to this form of bankruptcy is that it provides a chance for a fresh start, allowing you to eliminate debt in a relatively short time frame—usually between three to four months.
However, it's crucial to understand that some debts, such as student loans, child support, and certain taxes, usually cannot be discharged and may still need to be paid.
Under Chapter 7, a bankruptcy Trustee will be appointed to your case; the Trustee will only liquidate your non-exempt assets and use the proceeds to pay back your creditors if, and only if, your assets cannot be fully protected under the various Bankruptcy Code Exemptions. The vast majority of attorney Alster's clients, naturally choose not to file a Chapter 7 case in which an important asset like a home might be involuntarily sold by a potentially aggressive Chapter 7 Trustee, unless it is clear that our clients' most important assets are protected under the Code's numerous Exemptions.
Eligibility for Chapter 7 Bankruptcy
Before proceeding with a Chapter 7 bankruptcy filing, you'll need to determine whether you meet the eligibility requirements. The first step in the determination of eligibility in New Jersey is through the means test, which compares your average monthly income to the median income for a household of your size in New Jersey.
Means test. This is the calculation of your average monthly, household income over the past six months. This includes all sources of income, such as your wages, rental income, and any bonuses. If your income is below the state median, you are typically eligible to file for Chapter 7. Your Spouse's income is also included in this calculation unless you are separated/not living together. If your income exceeds the median, you may still qualify depending on if you're eligible for certain allowable deductions.
Historical good faith, disposable income test. Debtors will not qualify for Chapter 7 Bankruptcy protection if they have more than $100 net disposable household income; this is determined by deducting the debtors' projected monthly household expenses from the debtors' projected monthly household income. If debtors fail this historical good faith test and they still want to file for Bankruptcy protection they would have to file for Chapter 13 protection, where most or all of their disposable household income would have to be paid to a Chapter 13 Trustee over a 3 to 5 year Chapter 13 plan.
Previous bankruptcy filings: Consideration of any previous bankruptcy filings. If you filed for Chapter 7 bankruptcy before, you must wait eight years before you can file again. Similarly, if you filed for Chapter 13 and did not complete your repayment plan, you may face restrictions on filing for Chapter 7.
Steps to Follow in Preparation for Filing a Chapter 7 Bankruptcy Petition in New Jersey
You should follow the steps indicated below to properly prepare to file for Chapter 7 bankruptcy protection:
1. Gather Necessary Documentation
Gathering the necessary documents is a critical first step in the bankruptcy process. You'll need the following:
Income verification: Pay stubs, tax returns, and any other reasonable documentation that can prove proof of income for the past six months before filing for bankruptcy protection.
Expenses: A list of your monthly expenses, including housing costs, utilities, food, transportation, and medical expenses.
Debts: Documentation of all outstanding debts, including credit card statements, loan documents, and medical bills. Note that attorney Alster will order a summary of your information on file with the 3 national credit reporting agencies, i.e., (Experian, Trans Union, and Equifax) upon being retained for no additional fee.
Assets: Knowledge of your assets, including real estate, vehicles, and personal property.
2. Completion of your Bankruptcy Forms/Petition
In New Jersey, as throughout the United States, debtors need to be diligent in ensuring all information is accurate, as mistakes could slow down the process, lead to your case being dismissed, or worse; e.g., your asset could potentially be forcibly sold by the Chapter 7 Trustee if it cannot be protected by one or more of the Bankruptcy Code's exemptions.
3. File the Bankruptcy Petition
Once your petition is completed, you are eligible to file your bankruptcy petition in the United States Bankruptcy Court for the district of New Jersey as long as you resided in the District of New Jersey for the majority of the last 180 days before the filing date of your petition.
Filing fee. Be prepared to pay the filing fee, which currently is $338.
Filing the petition and Credit counseling requirement. Bankruptcy attorneys will file your petition electronically. Before your petition can be filed, almost all debtors must complete a credit counseling session from an approved agency. Once completed you'll receive a certificate of completion that must be submitted/filed with your bankruptcy petition.
4. Attend the Meeting of Creditors
After your petition is filed, you will be notified of a meeting of creditors, also known as a 341a meeting. This meeting occurs approximately 30 days after your filing date, where you will meet with a bankruptcy trustee and any creditors who choose to attend.
Prepare for the meeting: Your bankruptcy trustee will ask you questions about your financial situation, debts, and assets. Be prepared, honest, and respectful during this meeting.
5. Complete the Required Financial Management Course
After your bankruptcy petition is filed, you must complete a debtor education course/session from an approved provider. This course will cover essential financial management skills and can help you develop a budget for your post-bankruptcy finances. The provider or your attorney will receive the certificate of completion that must be filed with the Bankruptcy Court.
6. Wait for Discharge
Once you complete the required steps, including the meeting of creditors and financial management course, you need to wait for your bankruptcy case to be discharged. This process can often take several months. If your creditors don't object and there are no complications, your general unsecured debts included in your Chapter 7 Schedules will be discharged.
Potential Challenges and Considerations
Filing for Chapter 7 bankruptcy can offer relief, but there are also potential challenges that can arise. It's essential to be aware of the following:
Asset liquidation: While many of your assets may be exempt, your non-exempt assets could be sold to the Trustee pay off creditors if they cannot be fully protected under applicable exemptions. Understanding your Federal and State's exemption laws is crucial to plan ahead.
Credit impact: Chapter 7 bankruptcy will impact your credit score and will typically remain on your credit report for ten years. This can affect your ability to secure loans and credit in the future. However, you can work to improve your credit score over time; most of attorney Alster's clients have a much higher credit score one to two years after receiving their Chapter 7 Discharge.
Seek Professional Help
Consulting with an experienced bankruptcy attorney can provide invaluable guidance tailored to your financial situation. An attorney will help ensure that you meet all eligibility requirements, complete the forms accurately, and answer any questions you may have throughout the process.
Chapter 7 bankruptcy can provide a pathway toward financial recovery for individuals struggling with significant debt. Understanding the process, knowing your rights, and seeking professional assistance can significantly ease the journey toward a fresh financial start. Take the time to explore your options and make informed decisions that pave the way for a brighter financial future.. Potentially aggressive Chapter 7 Trustee if they're not given assurances that clients debtors would still would still be able to file for