From our experience, we know that people file for bankruptcy for a number of reasons. Unemployment, death of a spouse, a costly illness or a divorce all may lead people to decide that bankruptcy is their best course of action.
There are a number of fallacies that people have about filing for Chapter 13 and Chapter 7 bankruptcy. Here are a few of the more popular ones
Fallacy #1: You Will Lose Your Home and Other Assets If You File For Bankruptcy
There are many exemptions in the bankruptcy code which may allow filers to retain assets while discharging their debts. In most cases, our clients retain all of their assets. Of course, that may vary depending upon your circumstances.
Fallacy #2: You May Lose Your Job for Filing for Bankruptcy
Both private and public employers are legally prohibited from discriminating against their employees as well as job interviewees because of filing bankruptcy.
Fallacy #3: Bankruptcy Will Prevent You from Getting Credit
Initially, it is hard to obtain credit after being discharged in bankruptcy. But it is possible. One option is to apply for a secured credit card, in which you deposit funds with a bank or other issuer, and then the funds or some multiple of the account balance can be borrowed and repaid. Also, it is critical to pay all of your bills on time. Further, a mortgage lender cannot discriminate against a loan applicant because of a bankruptcy filing after two years have elapsed from the date that the discharge was issued.
Fallacy #4: Bankruptcy Will Wipe Out All of Your Debts
Most of your debts will be eliminated after bankruptcy. However, there are debts that are not erased in a Chapter 7 or Chapter 13 bankruptcy. Even after discharge, you will still be required to pay recent federal and state taxes, student loans and child support and alimony.
If you have any other questions or concerns, please contact us by phone or email.
Most bankruptcies filed in the United States are either under Chapter 7 or Chapter 13. The kind that you file depends on a few criteria, including your income, assets, debts, and your financial goals.
Here is a quick thumbnail of the differences between Chapter 7 and Chapter 13 bankruptcies.
Chapter 7 is a liquidation bankruptcy designed to discharge your general unsecured debts such as credit cards and medical bills. Filing for Chapter 7 requires that you have little or no disposable income, and few assets. There is an income limit for Chapter 7 filers, and those in excess of that limit may turn to Chapter 13 bankruptcy.
A trustee is appointed to administer your case when you file for Chapter 7. S/he will review your bankruptcy petition and other documentation. The trustee’s role is also to sell your nonexempt property to pay back your creditors. If you don’t have any nonexempt assets, you keep everything and your creditors receive nothing. Most Chapter 7 cases result in no distribution to creditors.
It is critical to carefully evaluate the value of assets before choosing a bankruptcy chapter. Because if a debtor has excess equity in her home and files a Chapter 7 petition, the trustee is likely to seek to sell the house, which is usually unwanted by the debtor.
Chapter 13 is a wage earner repayment bankruptcy. Filers need to show that they earn enough to resume their regular secured debt payments, as well as their usual monthly expenses, and a percentage of their unsecured debt. Many people choose to file for Chapter 13 bankruptcy because it offers many benefits that Chapter 7 bankruptcy does not, such as the ability to modify mortgages, to catch up on missed mortgage payments, or strip wholly unsecured junior liens from their homes.
In Chapter 13 bankruptcy, you are allowed to keep all of your assets. In turn, you must pay back all or a portion of your debts through a repayment plan. The amount to be paid through the plan depends on your income, expenses, and types of debt. Typically, Chapter 13 bankruptcy is for debtors who can afford to make monthly payments to catch up on missed mortgage, rent or car payments and/or pay off nondischargeable debts such as taxes and child support arrears.
If you have any other questions about choosing between Chapter 7 and Chapter 13, please give us a call.
Bankruptcy exemptions protect your property from your creditors.
You have two choices when filing for bankruptcy in New Jersey. When you file you can choose between using the state exemptions or federal exemptions. Determining which set of exemptions to use is a crucial decision. Federal exemptions are usually more favorable.
The federal bankruptcy exemptions available to New Jersey residents are as follows:
-Up to $23,675 in a house or real property
-Spousal and child support income
-Jewelry valued at up to $1,600
-Motor vehicles valued at up to $3,775
-Public benefits such as workers’ compensation or unemployment benefits
-Implements, books and tools of trade, up to $2,375.
-Wild card exemption up to $1,250 plus an additional $11,850 of any unused
portion of the home exemption
The following exemptions are available in New Jersey:
-Disability and health benefits
-No exemption for a home
-Personal property and company stock up to $1,000
-Furniture and other household goods up to $1,000
-Public benefits such as workers’ compensation or unemployment benefits
-Wages unpaid but already earned
-Life insurance proceeds from a spouse
Your bankruptcy attorney can help you to evaluate and choose which set of exemptions to claim in your bankruptcy case. Call today for a free consultation.
If you intend to file for bankruptcy, you might be concerned about the effect it might have on your employment. Can your employer find out about your Chapter 7 or 13 bankruptcy? Can you be fired because of the bankruptcy? And can a possible employer deny you a job because you filed for bankruptcy?
No employer—government or private—can terminate you solely because you filed for bankruptcy. And no employer may use a bankruptcy filing as cause to change other terms or conditions of your employment, such as a salary reduction, demotion or other negative action.
If you are fired shortly after your employer learns that you filed for bankruptcy, and no other cause exists, you might have a case against the employer for illegal bankruptcy discrimination.
There are various ways that your employer can find out about your bankruptcy. If for instance you are subject to a wage execution, the employer will receive notice of the filing in order to stop the garnishment. Other if you are in a Chapter 13, the court may require that your monthly trustee payment be automatically deducted from your wages and sent to the bankruptcy court. Effectively, your employer will be enlisted to ensure that you honor your Chapter 13 plan.
Will bankruptcy affect your future job prospects? The answer is: it depends. No federal, state, or local government agency can consider your bankruptcy when deciding whether to employ you. Private employers, however, are not restricted by a similar rule, and some debtors find that having a bankruptcy in their past comes back to haunt them—primarily when applying for jobs with financial responsibilities (payroll, bookkeeping, accounting, etc.).
Many private employers conduct a credit check on job applicants as a matter of course and will find out about your bankruptcy from the credit report. While employers need your permission to run a credit check, employers can also refuse to hire you if you do not authorize that. If you are asked to give this consent, you should consider speaking openly about what the employer will find in your file. Being candid upfront about problems that are behind you might impress the interviewer and outweigh any negative effects of the bankruptcy filing itself.
In the course of doing all that, here are some specific issues that we will review and discuss with you:
• Gather all information regarding your debts. We will obtain a credit report for you if you authorize it, to make sure that nothing is left out.
• We need to determine whether you are current on secured debts such as home mortgages and car loans. You need to be current on those in order to file a Chapter 7, and you need to continue making timely payments on those secured debts after filing bankruptcy if you wish to keep the home or car.
• I will provide you with a list of approved providers for credit counseling. You must take a credit counseling course in order to be able to file for bankruptcy.
• You need to decide whether to reaffirm your debts and to assume any leases. What this means is that you may decide to make a particular debt an exception to discharge. For example, you may decide to keep a leased or financed vehicle.
This list is not inclusive for each and every client, but is provided to give you a better idea of the process.
People seeking relief from their liabilities may include gambling debts. Particularly in New Jersey, there are many casinos in the region as well as online gambling, as well as the proposed sports betting which may be legalized here. The problem gambler may easily lose control and find himself in substantial debt.
The answer to whether gambling debts may be discharged is: it depends. And it is not necessarily so easy. The threshold question is whether it appears that you have incurred the debt without any intention of paying it back.
Any debt incurred under false pretenses is considered to be fraud according to the United States Bankruptcy Code, and is not allowed to be discharged. However, it can be very difficult to prove false pretenses or fraud in most cases. A casino operator will investigate whether you used deception when borrowing money from a casino. When you sign for a marker at a casino to borrow money to gamble, you are representing that you have sufficient funds to cover any money that you borrow. If a casino files an adversary proceeding to its debt excluded from the discharge and if you did not have adequate funds to cover the marker, the bankruptcy court may determine that you used deception to borrow the money. (See https://www.middlesexcountybankruptcyattorney.com/2015/10/)
Similarly, a credit card issuer may seek a determination of nondischargeability for cash advances taken inside a casino, if you fail to make any attempt to repay those advances.
A bankruptcy judge may consider whether you have sought help for your gambling addiction and if you made payments toward the debt. This kind of proof can evidence that you did not file bankruptcy to escape a debt you never intended to repay. It is essential that you demonstrate that you thought you would be able to repay the debt and that you attempted to do so.
It is important to consider that if a gambling debt is incurred a few months before you file for bankruptcy, the court may conclude that you never intended to repay it.
Give me a call today for a free initial telephone consultation.
Part of filing for bankruptcy is listing all of your assets on the petition. Most people have checking and savings accounts and want to know if they are protected once they file.
At least part of your personal property is exempt under the Bankruptcy Code, see https://www.middlesexcountybankruptcyattorney.com/2013/11/
For debtors who do not own a home, the wildcard exemption is $13,125.00. To the extent that a homeowner seeks to protect a bank account, the exemption is $1,225.00 plus up to $11,850.00 in any unused residency exemption. If a homeowner does not have equity in the home, the full exemption should be available.
However, if you have a delinquent account with your bank, such as a credit card or a loan, the bank may have the right under the terms of your agreement with it to freeze your account and offset the amount owed to it against the funds in your account. It is therefore important to consider closing out any such account before filing your bankruptcy petition and opening a new account at a bank that does not have the right of offset.
Another situation that occurs is when a judgment creditor levies against your bank account prior to you filing for bankruptcy. In order for the creditor to obtain the levied funds, it must file a turnover motion with the court. They would result in the entry of an Order requiring the bank to turn over the levied funds to the creditor. So if the bankruptcy is filed before a turnover Order is entered by the court, then the debtor can keep the levied funds. If on the other hand, the Order is issued before the bankruptcy is filed, the creditor gets the money.
You should consult with an experienced bankruptcy attorney to protect your bank accounts before filing. Contact me today to schedule a consultation to learn more about the bankruptcy process.
However, a whole life insurance policy is a different matter. This type of insurance has a cash surrender value, meaning that you may turn in the policy to the insurance company at any time in exchange for payment of the cash surrender value.
Whether a whole life insurance policy is an exempt asset for bankruptcy purposes depends in large part on the amount of cash surrender value associated with the policy. You are permitted to exempt up to $12,625.00 cash value in your whole life insurance policy under the Bankruptcy Code. This exemption must be specifically claimed in the preparation of your bankruptcy petition. You may also, depending on your other assets, have a wildcard exemption of $13,100.00 to apply to the cash surrender value as well.
Filing a no asset Chapter 7 bankruptcy petition can provide some relief. A Chapter 7 debtor is entitled to discharge all motor vehicle surcharges. It is necessary to forward a copy of your bankruptcy petition to the Surcharge Administration Office in Trenton. Once you receive a Chapter 7 discharge, the Surcharge Administration will write off the surcharges from your record.
If your surcharge has been reduced to judgment, then you will need to file a motion with the court to vacate the judgment after one year has expired from discharge. That is an extra expense and cost. Whether there is a judgment against you can be checked by your bankruptcy attorney on line using the New Jersey Judiciary website.
Unfortunately, NJMVC restoration fees and municipal court fines are not dischargeable in bankruptcy. There is a special exception to discharge in the Bankruptcy Code for debts owed to governmental units. Motor vehicle surcharges are an exclusion from that rule.
Our client was happy to get this advice from us. Call us today to see if filing Chapter 7 is right for you!