Consumer Bankruptcy

Which One is Right For You?

New Jersey Bankruptcy

Consumer Bankruptcy in NJ

Filing bankruptcy is a big decision.  Once you decide you need to file, most of you will need to determine whether to file your petition under Chapter 7 or Chapter 13 of the Bankruptcy Code.  This page is intended to provide some introductory information regarding basic bankruptcy concepts and some of the factors we will consider when determining if bankruptcy is right for you and if so, which type of bankruptcy is appropriate for your situation and how we can structure the filing to help you achieve a “fresh start.”

The Basics

First, some basics.  The Bankruptcy Code is federal law designed to give the honest but unfortunate debtor the means to obtain “fresh start” by “discharging” or eliminating that debt which simply cannot be paid.  Although some people may feel embarrassed in contemplating bankruptcy for themselves, consider the fact that studies show that most who file for bankruptcy relief have fallen victim to circumstances outside their control, such as a costly medical emergency, a job loss or divorce.  For these reasons Congress has through the Bankruptcy Code provided an orderly and fair way for debtors and their creditors to move on from an untenable situation.  That is, essentially, the relief afforded by bankruptcy.  But bankruptcy is also protective:  once a bankruptcy petition is filed, all collection efforts by creditors is stopped or “stayed” during the pendency of your bankruptcy case, providing you with relief from creditor harassment and stopping collection lawsuits as well as garnishment, levy and foreclosure.

Bankruptcy may not be for you

At this point, you may be contemplating your debt settlement options as well.  Bankruptcy is not for everyone, and in some cases negotiating settlement on a past-due debt is more prudent than filing a Bankruptcy petition.  Please visit our Debt Settlement page to learn more.

What happens once you file?

If you do decide to file a Bankruptcy petition, what can you expect?  A Bankruptcy case is commenced when one files a “petition.”  And again, once the petition is filed, the “automatic stay” goes into effect, which stops or “stays” collection actions against you.  When you file your petition, you will also file “schedules” in which you set forth your personal information and your debts, your income, your expenses, and the nature and value of your possessions and assets.  Your assets, less some “exemptions,” constitutes your Bankruptcy “estate.”   The estate is administered by a Trustee.  The Trustee will meet with you and your attorney at the “341(a) hearing” to establish your identity and verify facts set forth in your petition and schedules, and to make further inquiries if warranted.

The way certain types of debt are treated in Bankruptcy

It’s concern about your debt that has prompted you to read this far, so let’s talk about debt a bit.  Your debts will fall into two general categories: “secured” and “unsecured.”  “Secured” creditors hold a lien on collateral.  For example, an auto lender holds a lien on your car until you pay the loan off – that auto lender is a secured creditor and, in your Bankruptcy case, has a secured claim in the amount you owe on your car.  The mortgage on your home works the same way.  When you file a Bankruptcy petition you must decide whether you want to retain the collateral securing these debts.  If you wish to surrender the collateral, you may have any remaining debt on that account discharged as unsecured.  If you wish to retain the collateral, you can Reaffirm or Redeem these debts and if you file a Chapter 13 petition, you can cure any account arrearage over time.  During your consultation you will have the opportunity to discuss and weigh these options carefully.

“Unsecured” debts are those not secured by collateral, such as most credit card debt and medical bills, and these are dischargeable to the extent that there can no disbursement to unsecured creditors through the Bankruptcy case and to the extent that the debt was not incurred in violation of the Bankruptcy Code or is not exempted from discharge.  The types of debts generally not dischargeable in Bankruptcy include alimony and child support, student loans, and back taxes and government fees.

Chapter 7 Bankruptcy vs. Chapter 13 Bankruptcy

This is all generally applicable whether you file your petition under Chapter 7 (“straight” or “liquidation” bankruptcy), Chapter 13 (reorganization/repayment plan), or in rare cases, Chapter 11 (business reorganization, or for individual debtors whose income is too great to qualify for Chapter 13) or Chapter 12 (if you qualify as a family farmer or fisherman).  Most individuals with mostly consumer debt will file under either Chapter 7 or Chapter 13.

If you file your petition under Chapter 7, you have passed the “means test” (an evaluation of your debt and your income and family size in relation to the median income for your state).  You can expect to receive a “discharge” of unsecured debt within four to six months from filing, barring complications, and then your case will close, giving you your fresh start.  Be aware however that certain debts such as most taxes, student loans, family support obligations, and debts arising from certain criminal behavior set forth in the Bankruptcy Code are “nondischargeable” and you will remain responsible for those debts after your bankruptcy case closes.   Also, to the extent your “estate” (your assets and possessions) exceeds your allowable “exemptions” (statutory means of exempting assets/possessions from the estate), the Chapter 7 trustee may liquidate (sell) and distribute that portion of your estate to your creditors.  This can be problematic if, for example, you have equity in your home or car; in other words, if your home or car are worth more than you owe on them.  One of the purposes of your consultation is to determine whether this is the case, and if so, and you want to retain possessions that are non-exempt and/or in which you have equity, Chapter 7 may not be right for you.  Please visit our Chapter 7 and Chapter 13 pages to learn more.

If instead of filing a Chapter 7 petition you have filed your petition under Chapter 13, you will have experienced all of the aforementioned procedure and also will have filed a proposed repayment “plan” lasting three or five years.  You will commence making monthly plan payments to the trustee, who will in turn make distributions to your creditors in order of priority as set forth in that plan.  When all plan payments have been made, your Chapter 13 plan is completed and you will receive a discharge as to that portion of unsecured debt which was not be paid through your plan.

Please take note of this important caveat:  the information on this page is not legal advice, nor is it intended to be legal advice.  The purpose of this page is merely to introduce you to some basic bankruptcy concepts so that you can have an informed discussion about your options when you attend your bankruptcy consultation.    We look forward to meeting with you and to helping you to achieve your “fresh start.”

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Office Locations

Burlington County
10 North Chestnut Ave
Maple Shade, NJ 08052

Camden County
1812 Berlin Rd
Cherry Hill, NJ 08003

Office Hours by Appointment Only

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