While New Jersey does not have among the highest number of bankruptcy filings, that rate has nearly doubled in the last two years, resulting in over 35,000 such filings in 2009. There is every indication that there are going to be thousands of filings in the coming years, as well. Bankruptcy is an important decision that should not be entered into without careful consideration and expert advice. For most people, the expert to call for that advice is a bankruptcy attorney who has been successful in helping many others find debt relief successfully.
Finding a Bankruptcy Attorney
When looking for an experienced bankruptcy attorney, it is important to take the time to find one that works well with the debtor. The process can begin with getting recommendations from friends and family, state bar association sites, and even trusted legal websites. The debtor then proceeds to do research on each of the possible candidates, learning their track record and methods. Finally, it’s important to have face-to-face interviews with each candidate before making this important decision.
Bankruptcy Options
The next element to determine is which of the six forms of bankruptcy to file. The two most common are:
- Chapter 7, which includes a liquidation of the filer’s non-exempt assets, if there are any, in order to pay creditors before the remainder of unsecured debt is discharged, or erased. For those with few or no assets, this can be a good choice. The requirements to qualify are stiffer as a result of bankruptcy reform in 2005, so those who cannot meet the “means test” may be required to convert to Chapter 13.
- Chapter 13, which allows the debtor to retain their property while reorganizing their finances and fulfilling a repayment plan that will allow them to pay off their bills in three to five years. This is only appropriate for those who have sufficient income to make regular payments out of their monthly disposable income. The debtor is free from collection attempts during the repayment plan. If any debts remain after that repayment plan is complete, some of those unsecured debts may be discharged, as well.
New Jersey Exemptions
Both federal and state statutes allow those filing Chapter 7 bankruptcy to claim exemptions for certain property, protecting it from liquidation. In New Jersey, filers may claim either federal or state exemptions, but not both. The state exemptions include such items as:
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Homestead |
None |
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Personal Property |
Clothing, goods, personal property, stock or interest in corporations, up to a total of $1,000; household goods and furniture up to $1,000; burial plots |
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Wages |
90% of wages that are earned but unpaid for those whose annual income is less than 250% of the federal poverty level; for higher incomes, 75% |
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Pensions |
Tax exempt retirement accounts; Traditional and Roth IRAs up to $1,095,000/person; civil defense workers; teachers and school district employees; legal trusts; judges; prison employees, public, municipal, county, and city employees; city workers’ ERISA-qualified benefits; police; firefighters; traffic officers; state police |
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Public Benefits |
Worker’s comp; unemployment; old age, permanent disability assistance |
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Insurance |
Civil defense workers’ disability, death, medical, or hospital benefits; health and disability benefits; some forms of life insurance benefits; group life or health policies or proceeds; military disability or death benefits |
Filing the Petition
Filing a bankruptcy petition entails more than just presenting the financial case of a debtor.
- Before they can even file, the debtor must complete credit counselling.
- Once the petition is filed, the court appoints a bankruptcy trustee to analyze and oversee the petition.
- The trustee holds a 341 meeting, named for that section in the bankruptcy code, with the debtor, their attorney, and any creditors who wish to attend. The debtor is required to answer questions about their financial status under oath.
- The trustee determines if any property should be liquidated.
- If the bankruptcy petition is approved, the filer must complete government approved debt education before their debts can be discharged.
- Most of the Chapter 7 filer’s unsecured debt is discharged. The debtor may be required to continue payments on their secured debt if they want to avoid repossession or foreclosure by the lien holder(s).
- The Chapter 13 filer must appear before the judge to have their repayment plan approved. They abide by the plan, and at the end of the repayment period, any remaining debts may also be discharged.
