You should file for chapter 7 bankruptcy when you are no longer able to meeting your financial responsibilities and require a fresh start.
Bankruptcy is governed by Title 11 of United States Code, a federal law, and the process does not vary widely from state to state. Bankruptcies are generally described as either liquidation or reorganization. Here we will discuss the liquidation, or Chapter 7 bankruptcy.
Chapter 7 is a liquidation bankruptcy meaning it can eliminate most types of unsecured debt. Examples of unsecured debt are credit cards and medical bills. Individuals, married couples, corporations and partnerships can all file a Chapter 7 bankruptcy if eligible.
Chapter 7 Bankruptcy can help you in the following ways:
Keep your property (Car and Home).
1. Bankruptcy may allow you to keep your home and your car. Under most scenarios, your attorney may be able to eliminate your debt and allow you to keep your home, your car, and your personal belongings.
Stop Lawsuits and Creditor Harassment.
2. Once you file for bankruptcy, your creditors will no longer be able to contact you directly to harass you about your debt. The law requires that they stop all debt collecting activities. In addition, filing for bankruptcy will stop all civil actions against you.
Get rid of your debt.
3. All unsecured debts including: credit card loans, utility bills, pay-day loans, car loans, or foreclosure deficiencies may be eliminated through your attorney without payments to your creditors.
Protect your wages.
4. Your creditors may go after your wages and force your employer to garnish your wages for them. Through the help of your attorney and bankruptcy, you can stop the creditors from garnishing your wages.
Chapter 7, Procedural Overview
The Means Test
In order to file for a chapter 7 bankruptcy, you first need to pass the “means test.”
Whether you can pass the means test is determined by the size of your household and your household income. In order to qualify in New Jersey, your household’s income need to fall below the following:
1 Member Household – $60,317.00
2 Member Household – $70,150.00
3 Member Household – $85,575.00
4 Member Household – $103,946.00
5 Member Household – $112,046.00
If your income is the above the median income for the size of your household, you will then need to convert to Chapter 13 bankruptcy, which is commonly referred to as debt reorganization.
If you meet the means test requirement, your attorney then needs to review your debt history to determine whether the way you have incurred your debt would be considered fraudulent by the bankruptcy court.
The courts wants to ensure that the petitioners are not abusing the bankruptcy program. The following activities may trigger the court’s attention and ultimately deny your petition:
1. Incurring large amounts of debt soon before filing for bankruptcy.
2. Spending large amounts money for luxury goods such as: luxury vehicles, handbags, expensive vacations, etc.
3. Incurring loans to pay for other loans such as taking out a cash advance to pay for your other debts.
In addition, your overall financial history has to be reasonable. For example, if you report $50,000.00 of income per year, but your bank statements commonly reflect cash deposits that are unexplained by your reported income, you will need a valid explanation for the additional income reflected.
There are many other concerns that required your attorney to review your financial records before filing for bankruptcy. You may need to bring your attorney about 6 months of bank statements, 6 months of credit card statements, 2 to 3 year worth of income tax returns, and other debt statements for your attorney to make a recommendation.
If you are experiencing serious financial hardships and can no longer afford to make the payments, you should contact this office to schedule a meeting and have us review your financial records to determine your course of action.
* The above is not legal advice but information. Every case must be analyzed based on an individual, case-by-case basis. Please call us for a consultation.