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Chapter 7 Bankruptcy

If you are considering filing Chapter 7 bankruptcy, our legal team of New Jersey bankruptcy attorneys may be able to help. Please take a few moments to look over the information on this page to learn more.

 

What is Chapter 7 bankruptcy?

In the US, there are two options for filing bankruptcy that are typically employed by individuals: Chapter 7 and Chapter 13. In Chapter 7 bankruptcy, you can sell your assets and use the cash from the sale to pay off your debts. When you file Chapter 7 with the bankruptcy court, you will be appointed a trustee who will determine what assets are exempt – meaning what you can keep – and what assets you must sell.

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Who can file a Chapter 7 bankruptcy?

The requirements for Chapter 7 bankruptcy are as follows:

  • You must reside or do business in the United States or a municipality
  • You can’t have filed for Chapter 7 bankruptcy in the last 8 years.
  • You can’t have tried to file bankruptcy in the last 180 days and been denied.
  • You must demonstrate that you don’t have enough money to pay your monthly expenses for necessities and your monthly debts.
  • You must demonstrate that it would not be unfair to your creditors to grant you relief under Chapter 7.

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What are the steps to declaring bankruptcy?

  1. Choose to file bankruptcy. You should only file bankruptcy if you have no other options. If you decide to go ahead, you must choose between filing either Chapter 7, which involved liquidating your assets, or Chapter 13, which requires setting up a repayment plan.
  2. Hire an attorney. In most cases, you’ll want to speak with an attorney before you file for bankruptcy. An attorney will explain the bankruptcy process and help you deal with creditors. New Jersey law prohibits creditors from harassing you, calling you at unreasonable hours or at work, or telling your friends, relatives and employers about your debt. Once you retain a lawyer, creditors may only speak to your lawyer.
  3. Start bankruptcy filings. To file for bankruptcy, you must go to the courthouse and fill out bankruptcy forms detailing your financial history.
  4. Appear at the creditors’ meeting. About 1 month after you file for bankruptcy, you must meet with your creditors to discuss your debt and payment options.
  5. Work with a trustee. The court will appoint a trustee to manage the sale of your assets and distribute the funds to your creditors.

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Can bankruptcy get rid of all my bills and debt?

Bankruptcy laws are in place to give those who are in debt beyond their ability to repay the debt to start fresh. That said, not all debts will be eliminated. You’ll still have to pay taxes, spousal and child support, any prior criminal fines and penalties, and in most cases, student loans. Also, in many cases, your creditors will try to recover something – whether that is the product you haven’t paid for or cash from the sale of your assets through your trustee.

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Do I need to hire a bankruptcy lawyer?

Under most circumstances, if you file bankruptcy, you will benefit from consulting with a bankruptcy attorney. Your lawyer will help you calculate the value of your assets, evaluate options to keep your home, car, and other personal assets, and keep creditors from calling you directly. Once you hire an attorney, creditors are required by law to only contact your attorney.

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What is the new bankruptcy law and when did it take effect?

In April 2005, Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. Most of the changes from this law went into effect on October 17, 2005, or 180 days from the time the bill was signed into law.

Under the new law, bankruptcy applicants must meet certain eligibility requirements. If your current monthly income is less than the median income in your state, you are eligible for Chapter 7. However, if your current monthly income is greater than the median income of your state and you can afford to pay 25% of your debt, you are not eligible for Chapter 7 bankruptcy and must file Chapter 13 proceedings.

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If I file for bankruptcy, will I need to go through credit counseling?

Yes. The new bankruptcy law requires that applicants must undergo credit counseling in a government-approved program before they file for bankruptcy. Once applicants file for bankruptcy, they must also participate in a government-approved financial management program to learn the basics of personal finance.

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What happens to my home, personal property, and other assets?

Once you file for bankruptcy, all the property you own at the time of filing and certain other types of property you may receive in the future becomes the property of the bankruptcy estate. Your trustee will then manage the sale of these assets and divide the cash from sales between your creditors.

However, there are certain types of property that you may be able to keep. Those assets are determined based on your financial situation and the laws in your state. If you are a New Jersey resident, you can choose between New Jersey state law exemptions and federal law exemptions.

Homes are not considered exemptions under New Jersey law. However, under federal bankruptcy law, there is an exemption that provides for up to $18,450.00 for your principal residence. You should calculate your equity based on a fair market valuation. Once you determine that value, subtract the amount you owe plus the selling and transfer costs to calculate your equity.

New Jersey law allows you to keep $1000.00 in assets. Federal law allows you to keep as much as $2750.00. This can include your car, furniture, jewelry, retirement plans, animals, unmatured life insurance, tools for your trade, and other miscellaneous property.

To calculate the value of your car, check the value in the Kelly Blue Book and then subtract the amount you owe from the value listed to calculate your equity.

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What happens to my credit rating when I file for bankruptcy?

Chapter 7 bankruptcy filings will stay on your credit report for up to 7 years. Once you file for bankruptcy, it can take up to 2 years to rebuild your credit. If you still have monthly debts like your mortgage or car payments, consistently paying them on time every month will help build your credit.

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What are the attorney’s fees?

Your initial consultation is free. Once you have spoken with one of our lawyers, we will estimate a fee based on the nature and complexity of your case. We offer flexible payment plans and can accommodate the needs of most people.

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How do I get started?

Please fill out the Free Case Evaluation form on the top right side of this page and we will respond within 24 hours.

If you wish to speak with someone immediately, call our client-intake specialist, Ken Cooper, Senior Paralegal at (856) 308-5426.