- Determine if you qualify for Chapter 7 bankruptcy and determine how much it'll cost.
- Explore alternatives to Chapter 7 bankruptcy.
- Be familiar with all the need-to-know information about filing a Chapter 7 bankruptcy in New Jersey.
This type of bankruptcy is standard, so you can utilize many resources to learn more about it.
You can use the New Jersey Chapter 7 Calculator below to estimate your qualifications and how much it might cost.
Now, let's jump into why Chapter 7 bankruptcy is widespread.
1) How Chapter 7 Bankruptcy Works
Generally, two main concerns come to mind when filing bankruptcy:
- How quickly will a Chapter 7 discharge the debt?
- How much will a Chapter 7 cost to file?
When comparing different ways to get out of debt, Chapter 7 bankruptcy is usually the cheapest and fastest option compared to Chapter 13 bankruptcy, debt negotiation, debt management, and debt payoff planning.
What is the Time Frame of Chapter 7?
In New Jersey, you can usually get a Chapter 7 bankruptcy discharge in as little as 120 days or four months.
When filing, you may hear the term "no-asset, " meaning you don't own any houses or other assets exceeding the New Jersey bankruptcy exemptions. This may be an excellent option if you have no assets and are looking for a fresh start.
How Much Does It Cost To File?
Across the nation, a Chapter 7 bankruptcy typically falls between $500 and $3000. However, the cost can vary depending on where you're filing. Even within New Jersey, the cost can differ depending on location. For example, if you file in Paterson, you may pay around $1,375 in attorney fees, whereas in Newark, you may pay about $1,170.
It's important to note that the bankruptcy filing cost can be reduced if you qualify for a filing fee waiver. Check out the New Jersey filing fee waiver for more details.
How Do I Qualify For Chapter 7 Bankruptcy?
Chapter 7 bankruptcy is designed for those who cannot repay some debts. However, before you can file, you must go through an income evaluation to see if you qualify for a Chapter 7 bankruptcy.
Unsecured debts are debts that don't have any collateral attached to them. So, if you file a Chapter 7 bankruptcy, you can discharge medical bills, personal loans, certain old income tax debts, ancient utility bills, credit card debts, and most personal judgments. A Chapter 7 bankruptcy is, essentially, a fresh start.
However, there are some downsides to a Chapter 7 bankruptcy because it can stay on your credit report for up to ten years, making it harder to get loans or credit in the future. Plus, not all debts can be wiped away. Child support, alimony, and student loans are usually not eligible for discharge.
Filing for bankruptcy is a complex process, so research and consult a professional to see if it's the best option for your situation.
What happens to secured debts in Chapter 7?
Secured debts are debts you owe that are backed by the collateral of an asset, for example, a car loan or mortgage. If you need relief for secured debts, Chapter 7 might be able to help. But here's the catch: you'll have to hand over the asset to the creditor, and they will have to accept the asset as payment in full for the amount you owe.
Now, look deeper into how you can qualify for Chapter 7 bankruptcy.
IMPORTANT: The New Jersey Means Test
The Bankruptcy Means Test calculates your average monthly and yearly income. The test compares your household income to the median income of other households in your state.
If your average or median income is lower than the New Jersey median income, you might qualify for a bankruptcy discharge, which would wipe out the debts. To determine if you're eligible for Chapter 7 bankruptcy, you can use this free New Jersey Chapter 7 Bankruptcy Means Test Calculator.
What if My Income Exceeds The Chapter 7 Means Test?
You can take a two-part test (called the Means Test) to see if your income is higher than the average income in your state. It's not a simple pass or fail test, so even if you don't meet the requirements in the first part, there's still a chance you can qualify for Chapter 7 bankruptcy by passing the second part.
Chapter 7 Bankruptcy Income Limits for New Jersey
The New Jersey median income figures for the Means Test are adjusted occasionally based on the IRS and Census Bureau data. If you're filing for bankruptcy in New Jersey on or after April 1, 2024, here are the latest New Jersey median income numbers for bankruptcy cases:
For any additional member, add $9,000 to the annual income. Stay up-to-date on these thresholds through the U.S. Trustees website or by taking the New Jersey Chapter 7 Bankruptcy Calculator.
Understand New Jersey Bankruptcy Exemptions
Bankruptcy exemptions protect a certain amount of equity so that you can keep your high-valued assets. However, if these exemptions don't cover your property, it may be sold in a Chapter 7 liquidation case. In a Chapter 13 case, any non-exempt equity in your property can increase the amount you have to pay in your bankruptcy plan.
The New Jersey bankruptcy homestead exemption will tell you how much equity is protected based on age and marital status.
- For single individuals and those under or over age 65, the exemption is $0.
- For those married under or over age 65, the exemption is $0.
However, the New Jersey homestead exemption also states, "Survivorship interest of a spouse in property held as tenancy by the entirety is exempt from creditors of a single spouse." This means that if you and your spouse own property together in a certain way, it's protected from the creditors of just one of you.
New Jersey may not have the most generous exemptions, but they allow you to use federal ones. The federal bankruptcy exemptions are laid out in the 11 U.S. Code §522 to determine what those are. The National Consumer Law Center also lists federal bankruptcy exemptions on its website.
Chapter 7 Bankruptcy New Jersey Pros and Cons
Chapter 7 can be a great option to get out of debt, but it is essential to understand all the pros and cons before you file.
Pros
- Affordable debt relief solution
- You can receive a discharge in about 120 days.
- Fresh start that allows you to discharge the debt.
- You may be able to keep your home and belongings due to exemptions.
- It can put a stop to debt collection lawsuits. No more constant phone calls, threatening letters, or fear of legal action.
- No more deficiency. This is when you owe more on a loan than what your collateral is worth, and the difference is called a deficiency, but a Chapter 7 can wipe it away.
- Provides relief for unaffordable, unsecured debts.
Cons
- You need to meet income requirements for qualifications.
- You may lose your home and other belongings if your assets exceed the exemption limit.
- It will hurt the credit report for ten years.
- It may hurt credit scores.
- If you have non-dischargeable debt, it may not be able to be wiped away. These are debts such as student loans and taxes that may not be able to be included.
- Difficult to prevent foreclosure
It's important to consider all the benefits and sides of Chapter 7 to make the best decision. With the proper guidance and support, you can file a Chapter 7 and feel financially free. Now that we've explored the pros and cons of Chapter 7 bankruptcy let's dive into the alternatives.
Alternatives to Chapter 7 Bankruptcy
Maybe you don't qualify for Chapter 7 bankruptcy, you've got a bunch of assets that could complicate things, or you feel like it's just not for you. Whatever the case may be, you have other options!
a) Chapter 13 Bankruptcy
Chapter 13 can restructure your debts into a manageable monthly plan. You can hold onto your home and vehicle, even facing financial difficulties. It can put a stop to foreclosures, repossessions, and wage garnishments.
A Chapter 13 bankruptcy may allow you to catch up on mortgage and past-due car payments over three to five years. It can even help you tackle tax debt in some cases. It might also offer some relief regarding unpaid child support and alimony. It's important to note that to stay in Chapter 13, you must continue making regular domestic support payments. Under certain conditions, some debtors filing for Chapter 13 bankruptcy can reduce their car loan payments and even eliminate second mortgages. It provides a way to restructure your debts, protect your assets, and regain control of your financial future.
Can you afford Chapter 13 bankruptcy?
A Chapter 13 repayment plan can be complex, so you may want to ask an attorney about it. There are the attorney fees and a repayment plan that looks at non-exempt equity and disposable income to determine how much, if any, of the debt you may pay back. Feel free to check out the Chapter 13 calculator for an estimate.
ADD CALCULATOR HERE
b) Debt Relief Program
If you're considering going the debt settlement route, you should keep a few things in mind. First off, consider the impact it might have on your credit score.
When you partner with a debt settlement firm, they will make you fall behind on the accounts you choose to include by about six months. They will then negotiate with your creditors on a lower overall amount you pay back over 2-4 years. This may hurt your credit score since you have to fall behind.
Ultimately, it is up to your creditors if they want to agree or deny negotiations, so there is quite a bit of risk involved. If they agree, you can pay the lower amount through an escrow account, which is a particular bank account, but they will expect you to keep up on all the payments. If the creditors disagree, they may try to sue you, which is why this may be a higher-risk option. However, you can choose which accounts to include in the program. There may also be potential taxes on the forgiven debt, but consult with the firm to understand more about the process.
c) Debt Management
Debt management companies focus on negotiating lower interest rates, and the program usually lasts about 3 to 5 years. Debt management is generally a more expensive option compared to the others. Some creditors, like personal loan lenders, may not want to work with a debt management company; your credit score has a potential impact.
Debt management can be a good option for folks with a lot of high-interest credit card debt, so the firm will work to lower those so you can pay the principal significantly.
d)Debt Payoff Planning
Debt payoff planning involves cutting down on expenses and putting any cash flow you have toward your debts to avoid interest charges. Remember that this may not work for everyone, especially if you're dealing with a significant financial setback, because you are paying the total amount back, so it's helpful if you can afford your debt but want to pay it off more efficiently.
An app called the Savvy debt payoff planner will help you prioritize your debts by combining efficient methods to create a plan to pay things off as quickly as possible. On average, it saves folks around $2,000 in interest.
3) Specific New Jersey Chapter 7 Bankruptcy Information:
Before you file bankruptcy, there are some things to be aware of so you can feel fully confident in your decision to file. First, a Chapter 7 bankruptcy is a legal process that can provide you with a fresh start by wiping out most of your debts. However, you will have to pass the means test. This test determines whether you qualify for Chapter 7 bankruptcy based on income and expenses.
Another thing to remember is that Chapter 7 bankruptcy is a liquidation process. That means some of your assets may be sold to repay your creditors. However, there are exemptions to protect certain property types, like your home or car, so you won't lose everything.
One major pro of Chapter 7 bankruptcy is that it can give you a fresh start, relieve the burden of overwhelming debt, and allow you to rebuild. But there are also challenges to consider. For starters, filing for Chapter 7 bankruptcy will hurt your credit score; however, you can rebuild your credit afterward; it just may take some time. It will also stay on your credit report for ten years. It's a big decision, but with the correct information and guidance, you can make the best choice for your financial future.
Credit Counseling and Debtor Education Courses
When you're going through the bankruptcy process, there are a couple of courses you need to take which are required if you want a discharge. The first course you need to bring is a credit counseling course. This has to be done before you file your bankruptcy case. It's designed to guide and help you better understand your financial situation.
The second course is called a debtor education course. It's meant to educate you on financial management and give you the tools you need to make better financial decisions in the future and get back on your feet after the bankruptcy.
The United States Trustee's office has approved certain companies in New Jersey that offer these bankruptcy courses. You can find a list of these companies on the UST website, and these courses can be completed online. A small fee is involved, but they're designed to help you navigate bankruptcy and improve your financial future.
New Jersey Chapter 7 Bankruptcy Court Locations
When filing for bankruptcy, you must attend the 341 creditors' meetings. Many of these meetings have been happening over the phone or through Zoom; however, if you have a meeting that needs to happen in person, it's essential to know where the courthouse is.
Here are the court locations for filing bankruptcy in New Jersey, based on the bankruptcy district.
District of New Jersey
1. 4th & Cooper Streets, Camden, NJ 08101
2. 50 Walnut Street, Newark, NJ 07102
3. 402 East State Street, Trenton, NJ 08608
Chapter 7 Bankruptcy Trustees New Jersey
Below is a breakdown of the Chapter 7 bankruptcy trustees in New Jersey, organized by bankruptcy district. You can check it out here on the website.
Before you file a bankruptcy case, review the local bankruptcy rules in New Jersey. They might have some slight differences from the Federal Bankruptcy Rules.
Conclusion
If you want to dive deeper and get an estimate of whether you qualify and how much it might cost you, you can check out the Chapter 7 bankruptcy means test calculator below.
You may be wondering if you need a bankruptcy attorney to file. To answer that, most people work with one for Chapter 7 or Chapter 13 bankruptcy. But believe it or not, you do have the option to file without an attorney. If you're curious about how that works, you can learn more about filing bankruptcy without an attorney.