New Jersey Bankruptcy Laws: Everything You Need To Know

New Jersey bankruptcy laws govern the process of filing for bankruptcy in the state of New Jersey. Bankruptcy is a legal process that allows individuals and businesses to eliminate or restructure their debts. If you are considering filing for bankruptcy in New Jersey, it’s important to understand the state-specific laws that apply to your case. In this article, we will cover the key aspects of New Jersey bankruptcy laws.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy is also known as “liquidation” bankruptcy because it involves the sale of non-exempt assets to pay off creditors. In New Jersey, the means test is used to determine whether an individual or business is eligible to file for Chapter 7 bankruptcy. The means test compares your income to the median income in New Jersey for a household of your size. If your income is below the median, you are eligible to file for Chapter 7 bankruptcy. If your income exceeds the median, you may still be eligible if you pass a second means test based on your disposable income.

One of the benefits of Chapter 7 bankruptcy is that it allows you to discharge most unsecured debts, such as credit card debt and medical bills. However, certain types of debts cannot be discharged through Chapter 7 bankruptcy, including student loans, child support, and most tax debts.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy is a reorganization bankruptcy that allows individuals and businesses to create a plan to repay their debts over a period of three to five years. In contrast to Chapter 7 bankruptcy, Chapter 13 bankruptcy does not involve the sale of assets. Instead, the debtor makes monthly payments to a trustee, who then distributes the payments to creditors according to the repayment plan.

In New Jersey, the eligibility requirements for Chapter 13 bankruptcy are less strict than those for Chapter 7 bankruptcy. There is no means test for Chapter 13 bankruptcy, but there are limits on the amount of debt you can have to be eligible for this type of bankruptcy.

Exemptions in New Jersey Bankruptcy

New Jersey bankruptcy laws provide exemptions that protect certain types of property from being sold to pay off creditors. Some of the most common exemptions in New Jersey include:

• Homestead exemption: Protects up to $25,000 of equity in your primary residence.
• Personal property exemption: Protects up to $1,000 of personal property, including furniture, clothing, and electronics.
• Vehicle exemption: Protects up to $3,450 of equity in one motor vehicle.
• Retirement account exemption: Protects certain types of retirement accounts, such as 401(k)s and IRAs.

It’s important to note that these exemptions are not automatic and must be claimed in your bankruptcy filing. Working with an experienced bankruptcy attorney can help ensure that you claim all applicable exemptions.

Credit Counseling and Debtor Education Requirements

Before filing for bankruptcy in New Jersey, you must complete a credit counseling course from an approved provider. This course will help you understand your financial situation and explore alternatives to bankruptcy. After filing for bankruptcy, you must also complete a debtor education course from an approved provider. This course will provide you with information about budgeting, managing credit, and other financial skills.

Hiring a Bankruptcy Attorney in New Jersey

Filing for bankruptcy can be a complex and stressful process. Working with an experienced bankruptcy attorney can help ensure that your case is handled correctly and that you achieve the best possible outcome. A bankruptcy attorney can help you navigate the New Jersey bankruptcy laws and provide guidance on the best course of action for your situation.

Conclusion

If you are struggling with debt in New Jersey, bankruptcy may be an option worth considering. New Jersey bankruptcy laws provide individuals and businesses with a path to eliminate or restructure their debts and start fresh. Whether you choose Chapter 7 or Chapter 13 bankruptcy, it’s important to understand the eligibility requirements, exemptions, and credit counseling requirements that apply to your case. Working with an experienced bankruptcy attorney can help ensure that you achieve the best possible outcome.

FAQs

What is bankruptcy?

Bankruptcy is a legal process that allows individuals and businesses to discharge their debts and start fresh.

What are the types of bankruptcy?

The two most common types of bankruptcy are Chapter 7 and Chapter 13. Chapter 7 is a liquidation bankruptcy, while Chapter 13 is a reorganization bankruptcy.

What is the means test?

The means test is a calculation used to determine whether an individual or business qualifies for Chapter 7 bankruptcy. It looks at income, expenses, and other factors.

How do I know if I qualify for bankruptcy?

To determine if you qualify for bankruptcy, you should consult with an experienced bankruptcy attorney who can evaluate your financial situation and advise you on the best course of action.

Can bankruptcy stop foreclosure?

Yes, filing for bankruptcy can stop foreclosure proceedings and give you time to catch up on missed mortgage payments.

Will bankruptcy eliminate all of my debts?

While bankruptcy can eliminate many types of debt, there are some debts that cannot be discharged, such as student loans and certain tax debts.

How long does the bankruptcy process take?

The length of the bankruptcy process can vary depending on the type of bankruptcy and the complexity of your case. Chapter 7 typically takes 3-6 months, while Chapter 13 can take 3-5 years.

Will bankruptcy affect my credit score?

Yes, filing for bankruptcy will have a negative impact on your credit score. However, it may also provide you with the opportunity to start rebuilding your credit.

Can I keep my assets if I file for bankruptcy?

In many cases, individuals filing for bankruptcy are able to keep their assets, such as their home and car. However, this will depend on the specifics of your case.

How can a bankruptcy attorney help me?

A bankruptcy attorney can help you navigate the complex bankruptcy process, evaluate your financial situation, and advise you on the best course of action to achieve a fresh start.

Glossary

• Bankruptcy – A legal process where an individual or organization declares they are unable to pay their debts.
• Chapter 7 Bankruptcy – A type of bankruptcy where a debtor’s assets are liquidated to pay off creditors.
• Chapter 13 Bankruptcy – A type of bankruptcy where a debtor reorganizes their debts and pays them off over a period of time.
• Automatic Stay – An order that stops creditors from attempting to collect a debt from a debtor once bankruptcy is filed.
• Trustee – A court-appointed individual who manages a debtor’s assets in bankruptcy proceedings.
• Debtor – An individual or organization that owes money to creditors.
• Creditor – An individual or organization that is owed money by a debtor.
• Discharge – The release of a debtor from liability for certain debts after bankruptcy is completed.
• Exempt Property – Property that is protected from being sold to pay off creditors in bankruptcy.
• Non-Exempt Property – Property that can be sold to pay off creditors in bankruptcy.
• Means Test – A calculation used to determine if an individual’s income is low enough to qualify for Chapter 7 bankruptcy.
• Reaffirmation – A debtor’s agreement to continue paying a debt after bankruptcy is completed.
• Priority Debt – Debt that is given priority over other debts in bankruptcy proceedings.
• Secured Debt – Debt that is backed by collateral, such as a car or house.
• Unsecured Debt – Debt that is not backed by collateral, such as credit card debt.
• Liquidation – The process of selling a debtor’s assets to pay off creditors in bankruptcy.
• Bankruptcy Trustee – A court-appointed individual who manages a debtor’s assets in bankruptcy proceedings.
• Bankruptcy Discharge – The release of a debtor from liability for certain debts after bankruptcy is completed.
• Bankruptcy Court – The court that oversees bankruptcy proceedings.
• Bankruptcy Petition – A document filed by a debtor to initiate bankruptcy proceedings.