Chapter 7 Bankruptcy : A Debtor's Guide

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Chapter 7 Bankruptcy
A Debtors Guide
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Bankruptcy Chapters
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The first decision you must make after deciding
to file bankruptcy is what chapter to use
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An individual debtor (or married couple) may use
the following chapters
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Chapter 11 although available to the average
debtor, chapter 11 is usually used by a business
or by an individual who has an interest in a
small business. Chapter 11 requires the debtor to
reorganize and pay off most debts
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Chapter 12 only those who qualify as a family
farmer or family fisherman may use chapter 12.
Like a chapter 13, chapter 12 requires the debtor
to develop a repayment plan to pay back most debts
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Chapter 13 chapter 13 is commonly used by
moderate to high income debtors or those who have
valuable non-exempt assets they wish to protect
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Chapter 13 calls for the debtor to create a
repayment plan that pays back most debts over an
extended period of time
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Chapter 7 chapter 7 is also known as a
liquidation because the debtors non-exempt
assets can be sold and the proceeds used to repay
creditors. Unlike the other chapters, a chapter 7
does not require repayment of debts
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At the end of a chapter 7 bankruptcy most the
debtors debts are discharged, or eliminated
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The Means Test
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To file a chapter 7 bankruptcy you must pass the
means test which is intended to prevent high
income debtors from eliminating debts that could
be repaid
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The means test compares your income with that of
other similar households in your geographic area
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If you are at, or below, the median you are
allowed to file a chapter 7 bankruptcy
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The Chapter 7 Process
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A typical chapter 7 bankruptcy will include the
following steps
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PRE-FILING CREDIT COUNSELING CLASS
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Required of all debtors
Can be completed online for a small fee
Must be completed before the bankruptcy petition
can be filed
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FILING THE PETITION
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A completed petition, along with all required
schedules must be filed in the appropriate
bankruptcy court.
All creditors must be included on the schedule
of creditors for debts to be discharge
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AUTOMATIC STAY The court will enter an automatic
stay which prohibits creditors from any further
action to collect on a debt
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MEETING OF CREDITOS
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The meeting of creditors, also known as a 341
hearing is presided over by the bankruptcy
Trustee who will ask some basic questions to
verify your identity and to ensure that all
information in the petition is correct
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POST-FILING DEBTOR EDUCATION CLASS
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Also required of all debtors and also available
online
Must be completed before the bankruptcy can be
discharged
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DISCHARGE All dischargeable debts of the debtor
are discharged, or eliminated and the case is
closed.
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Exemptions
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A New Jersey debtor may use either the New
Jersey or the federal exemptions but may not
combine them
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Some common exemptions include
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Homestead New Jersey does not have a homestead
exemption however, the survivorship interest of
a spouse in property held as tenancy by the
entirety is exempt from creditors of the other
spouse. Under the federal exemptions you may
exempt up to 22,975 in equity in your home
Motor vehicle New Jersey does not have a
specific motor vehicle exemptions but a debtor
may exempt up to 1,000 of value in a vehicle
using the general personal property exemption.
The federal exemptions allow a debtor to exempt
up to 3,675 of value in a vehicle
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Personal property New Jersey exempts 100
percent of clothing and another 1,000 for
household goods and furnishings plus an
additional 1,000 in general personal property.
The federal exemptions allow you to exempt
12,250 in aggregate value for household goods
and personal items plus additional amounts for
jewelry, health aids, and tools of the trade
Retirement and pensions New Jersey completely
exempts public employee retirement pensions.
Federal exemptions exempt most tax-exempt
retirement accounts
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LEARN MORE ABOUT CHAPTER 7 BANKRUPTCY IN NEW
JERSEY
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Cassidy Law Firm www.thecassidylawfirm.com