Unfortunately, not everyone is eligible to file a Chapter 7 bankruptcy petition. The New Jersey Federal Court requires chapter 7 debtors to complete Bankruptcy Form 122A-1, "Statement of Your Current Monthly Income," as part of their petition. To be eligible to file a Chapter 7 case, your current monthly income, as calculated on this form, must not be higher than the state median income.

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During the initial consultation with our office, assuming that all relevant information provided is accurate,  the attorney is often able to immediately know whether you are eligible to file a Chapter 7. If the facts provided are more complex, then, after additional documentation is provided, we will be able to do the necessary calculations in order to verify eligibility.

Are you eligible to remove your debt under Chapter 7 bankruptcy?

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Most unsecured debt is dischargeable. Unsecured debt refers to a type of debt that is not backed by any collateral or asset. This means that, in the case of non-payment, the creditor does not have the right to seize any property, such as a home or car. Here is a list of a few examples:

• medical bills

• credit cards

• some personal loans

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Once a petition is filed, all collection efforts must stop during the duration of the case, including pending foreclosures, court proceedings and post-judgments, such as garnishment of wages. 

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What are you personally able to eliminate if you file a Chapter 7 bankruptcy?

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A Chapter 7 Bankruptcy affects what property you may lose or keep. When contemplating a Chapter 7 bankruptcy, it is critical to confirm that you are able to protect all your assets PRIOR to filing. The New Jersey Federal Bankruptcy Code places a cap on all assets that may be exempt. In other words, the higher in value an asset is, there is a lesser likelihood of being able to fully protect it, if at all. Here is a list of assets that may be exempt:

• Real estate: amount of equity is key; less equity means a higher chance of exemption

• Automobiles

• Bank accounts

• Social Security Benefits

• Retirement Accounts

• Wages

• Furniture and other fixed assets

• Work equipment

• Disability Benefits

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Will you be able to protect and keep your assets if you file a Chapter 7 bankruptcy?

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Chapter 7 Bankruptcy is a helpful tool for those struggling with debt, but it's important to understand the potential consequences. Not all debts are discharged, and not all assets are exempt. Additionally, a bankruptcy will negatively impact your credit report for up to 10 years, making it harder to apply for credit and make major purchases. However, it's important to remember that these effects are temporary and may be overcome at a much quicker rate, with effort, by actively working on improving your credit after the bankruptcy is finalized.

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The obvious upside to filing for Chapter 7 bankruptcy is the debt relief it provides in a relatively short amount of time (about 4 to 6 months). It's not only a quick process, but, compared to other debt relief options, it is often the cheapest route to eliminating debt.

Additionally, you can get relief from most unsecured debts, no matter how much you owe. That's right, there's no maximum limit that disqualifies you! Filing Chapter 7 bankruptcy automatically stops all collection actions, any lawsuit, wage garnishment, repossessions and harassing phone calls from debt collectors. The Bankruptcy Code also allows debtors to protect most of their property considered necessary for life, such as a car, household items, a portion of your home’s equity and certain financial accounts.

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Last, we do all the work for our clients. Other than providing the necessary information and documentation, their role as a client is to breath easy knowing that they are being taken care of.

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Individuals, self-employed workers, small business owners, and corporations may all file Chapter 7 bankruptcy. Are you eligible to file? Do you need to discuss the pros and cons specific to your financial situation?

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While married couples may be eligible to jointly file a Chapter 7 petition, it is not mandatory for both individuals to file merely on the basis of their marital status. In fact, it is recommended that if one spouse is able to avoid bankruptcy, then that is usually the better option.

In the event that one spouse files, the credit score of the non-filing spouse will not be affected. However, if there are any jointly-held debts, then the non-filing spouse will be held solely responsible to pay off that debts.

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Creditors have the legal right to pursue joint bank accounts, cars, or other property where both parties are listed as owners. It's important to be aware of this possibility. 

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Last, obtaining a joint mortgage or other form of joint credit may be challenging after a bankruptcy since your credit score will be low. However, it is possible to work on improving your credit after getting discharged from a Chapter 7 bankruptcy and raising your credit score at a much faster rate than is estimated.

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Not sure whether to jointly file for a Chapter 7 bankruptcy or want to discuss its effect on your spouse?

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A business that is overwhelmed by debt may be a good candidate for a Chapter 7 business bankruptcy. In some instances it may be possible for the business owner to file a Chapter 7 and be able to keep the business. However, an owner will need to surrender their business for a court-ordered liquidation process if the trustee can sell (1) the company itself, (2) the ownership interest or (3) any essential property required to keep the business running. 

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Are you a business owner and need advise as to whether to file a Chapter 7 bankruptcy for your business?

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