CHAPTER 7 BANKRUPTCY in NEW JERSEY

(A Debtors Guide)
Although Most People Hesitate to Consider Bankruptcy, the Reality Is that Bankruptcy Is Often the Best Long-Term Solution When Financial Struggles Continue Month After Month

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If you are one of the millions of Americans who was hit hard by the recent recession the country experienced you may be considering bankruptcy as a solution to your financial troubles. Although most people hesitate to consider bankruptcy, the reality is that bankruptcy is often the best long-term solution when financial struggles continue month after month. If you do decide to pursue bankruptcy you will need to decide which bankruptcy chapter to use. Most New Jersey debtors who qualify to file a chapter 7 bankruptcy choose to do so because it completely eliminates most debt within a relatively short period of time. Only an experienced New Jersey bankruptcy attorney can advise you regarding the specifics of your situation; however, understanding some basics about chapter 7 bankruptcy may be helpful.

BANKRUPTCY CHAPTERS
We use the word chapter to differentiate the types of bankruptcy proceedings available because the U.S. Bankruptcy Code is divided into chapters which include the various types of bankruptcy proceedings. An individual debtor (or a married couple) has the option of filing using the following chapters: Chapter 11 although available to the average debtor, chapter 11 is usually used by a business or by an individual who has an interest in a small business. Chapter 11 requires the debtor to reorganize and pay off most debts. Chapter 12 only those who qualify as a family farmer or family fisherman may use chapter 12. Like a chapter 13, chapter 12 requires the debtor to develop a repayment plan to pay back most debts. Chapter 13 chapter 13 is commonly used by moderate to high income debtors or those who have valuable non-exempt assets they wish to protect. Chapter 13 calls for the debtor to create a repayment plan that pays back most debts over an extended period of time. Chapter 7 chapter 7 is also known as a liquidation because the debtors nonexempt assets can be sold and the proceeds used to repay creditors. Unlike the other

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chapters, a chapter 7 does not require repayment of debts .At the end of a chapter 7 bankruptcy most the debtors debts are discharged, or eliminated.

THE CHAPTER 7 MEANS TEST

Chapter 7 was created with low income debtors in mind. The purpose of chapter 7 was to allow debtors who truly do not have the means to repay debts to wipe the slate clean

without having to repay debts. Unfortunately, chapter 7 was highly abused prior to the Bankruptcy Reform Act of 2005, resulting in many high income debtors discharging debts that could have been repaid. Therefore, debtors are now required to pass the means test before being eligible to file a chapter 7 bankruptcy. The means test compares your income with that of other similar households in your geographic area. If you are at, or below, the median you are allowed to file a chapter 7 bankruptcy.

THE CHAPTER 7 PROCESS

Although no two bankruptcies are exactly the same, most chapter 7 bankruptcies follow the same basic path which includes: 1. Pre-filing credit counseling class.Required of all debtors. Can be completed online for a small fee. Must be completed before the bankruptcy petition can be filed.

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2. Filing the petition.A completed petition, along with all required schedules must be filed in the appropriate bankruptcy court. All creditors must be included on the schedule of creditors for debts to be discharged. 3. Automatic stay.The court will enter an automatic stay which prohibits creditors from any further action to collect on a debt. 4. Meeting of creditors.This is usually more of a formality in a chapter 7 bankruptcy. The meeting of creditors, also known as a 341 hearing is presided over by the bankruptcy Trustee and usually occurs at the trustees office or in a hea ring room at the court but is not a formal court appearance. The Trustee will ask some basic questions to verify your identity and to ensure that all information in the petition is correct. Creditors have the right to attend and question you as well but often choose not to in a chapter 7 bankruptcy. 5. Post-filing debtor education class.Also required of all debtors and also available online. Must be completed before the bankruptcy can be discharged. 6. Discharge.All dischargeable debts of the debtor are discharged, or eliminated and the case is closed.

NEW JERSEY EXEMPTIONS

One of the biggest misconceptions about filing a chapter 7 bankruptcy is that a debtor will lose all of his or her assets to creditors. The reality is that most chapter 7 debtors are able to keep most, if not all, of their assets by making use of the bankruptcy exemptions. Exemptions protect an asset from seizure by the Trustee. Although bankruptcy proceedings are governed by federal law in the United States, the individual states are allowed to determine what

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exemptions a debtor is entitled to when filing bankruptcy. In New Jersey, a debtor may use the federal exemptions or the New Jersey exemptions, but may not combine them. Some of the more common exemptions include: Homestead New Jersey is one of the rare states that do not have a homestead exemption; however, the survivorship interest of a spouse in property held as tenancy by the entirety is exempt from creditors of the other spouse. Under the federal exemptions you may exempt up to $22,975 in equity in your home. Motor vehicle New Jersey does not have a specific motor vehicle exemptions but a debtor may exempt up to $1,000 of value in a vehicle using the general personal property exemption. The federal exemptions allow a debtor to exempt up to $3,675 of value in a vehicle. Personal property New Jersey exempts 100 percent of clothing and another $1,000 for household goods and furnishings plus an additional $1,000 in general personal property. The federal exemptions allow you to exempt $12,250 in aggregate value for household goods and personal items plus additional amounts for jewelry, health aids, and tools of the trade. Retirement and pensions New Jersey completely exempts public employee retirement pensions. Federal exemptions exempt most tax-exempt retirement accounts.

LIFE AFTER BANKRUPTCY

Most debtors find that life after bankruptcy is much better than they anticipated. One of the biggest fears that a debtor faces is that he or she will not be able to obtain credit post-bankruptcy. In most cases, however, a debtor

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who files chapter 7 will see his or her credit score begin to improve within a few months after discharge. This occurs for several reasons. First, your debt to income ratio improves significantly when debts are discharged. Second, most debtors are able to pay any remaining debts on time after bankruptcy. Third, potential lenders know that a debtor cannot file bankruptcy again for at least seven years, making the debtor a better credit risk. For all of these reasons, chapter 7 debtors are often able to finance a vehicle within the first year after discharge and qualify for a mortgage within about two to three years after discharge. If you are considering bankruptcy, consult with an experienced New Jersey bankruptcy attorney to determine what your options are and what chapter is best for you and your situation. United States Courts, Liquidation under the Bankruptcy Code NOLO, New Jersey Bankruptcy Exemptions NOLO, The Federal Bankruptcy Exemptions

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About The Cassidy Law Firm, Attorneys at Law

Few attorneys can match the unique success that Harold Cassidy the founder of our law firm has achieved. Well-earned statewide awards from his peers and national recognition from mainstream media outlets have resulted from Mr. Cassidy establishing legal precedents and handling high-profile cases. For his blazing of new legal trails, our founder has received national recognition as an ABC News Person of the Week, as well as recognition from the state as a Top Lawyer in New Jersey Monthly and inclusion in New Jersey Super Lawyers Magazine. While a high level of acclaim has come our way, we do not forget where our roots are. The attorneys at The Cassidy Law Firm are dedicated to helping New Jersey residents charged with crimes, injured in an accident or needing help with a Chapter 7 or Chapter 13 bankruptcy filing. Attorney Harold Cassidy brings more than 35 years of experience providing representation that some clients have referred to as exquisite. He appreciates the unique problems his clients face, and he provides empathetic and attentive advocacy to the legal matters impacting their lives that include: Car accidents Birth injuries Surrogate mother and gestation carrier cases Medical malpractice Abortion malpractice Informed consent malpractice Trips, slips and falls Juvenile crimes Criminal appeals Municipal court cases DWI and drunk driving The Cassidy Law Firm 750 Broad Street, Suite 3 Shrewsbury NJ 07702 Telephone: (732) 747-3999 Fax: (732) 747-3944 Website: www.thecassidylawfirm.com

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