The Bankruptcy Code places limitations on the ability of people to file under the various chapters of the Code. For example, there are income limitations to file a Chapter 7 petition, by the number of people in the debtor’s household. In New Jersey, the income
limit for a one person household is $59,906.00, while for a two person household it is $68,284.00, for a three person household it is $83,292.00 and for a four person household
it is $101,682.00. You can add $7,500.00 to this for each additional household member. The total household income from all sources is considered for purposes of this threshold. These limitations are adjusted annually.
The filing of any debtor whose household income exceeds the applicable figure will be presumed to be an abuse of the Bankruptcy Code. Then the burden is on the debtor
to prove that it is not an abuse, which can be difficult, in the absence of exceptional circumstances. Ultimately, sanctions can be imposed against the debtor and the debtor’s attorney if it is found that the debtor’s filing is an abuse.
For debtors who cannot file Chapter 7 due to the income limitation, Chapter 13 is an option. In Chapter 13, the debtor proposes a plan to pay the debtor’s available income
monthly through the trustee to the debtor’s creditors over a period of three to five years.
There are limits on filing Chapter 13 as well. A Chapter 13 debtor cannot have more than
$1,081,400.00 in total secured debts, and more than $360,475.00 in total unsecured debts. In any filing in excess of these limits, it is likely that the bankruptcy trustee will object to the debtor’s plan, and it is unlikely for that reason that the court will approve the plan. These limits are adjusted every three years.
Please feel free to call Mr. Whelan at 732-214-0300 for more information.