NJ Bankruptcy Lawyer Answers Common Questions People Have About Filing Bankruptcy
Immediately upon filing, bankruptcy stops:
- any and all of your creditors’ telephone calls, letters and contact of any kind;
- any and all creditors’ actions or law suits
- any and all wage attachments;
- bank account levy;
- utility service shutoff;
- foreclosure actions;
- auto repossessions;
Bankruptcy also permits:
- elimination of debt (circumstances differ);
- restoration of drivers’ license if suspended solely due to surcharges;
- pay child support arrears over time;
- may allow elimination of income tax debt ( circumstances differ)
How will bankruptcy affect my credit?
There is no definitive answer. Generally, bankruptcy has a negative effect on your credit and fico score. However, generally, people considering filing for bankruptcy have poor credit and fico scores. Poor credit results in the inability to obtain any credit or low cost credit. Prospective creditors are concerned that if you maintain substantial debt, the individual will pay the other debt and not them. The immediate effect of a bankruptcy will likely not have a substantial negative effect because the filer likely has poor credit. However, if one is able to eliminate the debt, through bankruptcy, the individual has an opportunity to repair their credit, within a reasonable time period.
Banks understand that an individual cannot file a Chapter 7 for another eight years. Most of our clients receive many offers and solicitations for credit, immediately after the bankruptcy is complete. In any event, this does not mean that bankruptcy is right for you.
Is one spouse responsible for the other spouse’s debt because they are married?
No. Only the spouse that is obligated to pay the debt is responsible to pay the debt and not the other spouse. However, if both spouses are obligated to pay the debt, than both spouses are responsible for the debt and owe 100% of the debt. If both spouses are obligated to pay the debt, the creditor may get 100% of the debt from one or the other.
Is my spouse required to file with me?
No. An individual should file only if the filing benefits that particular individual. A bankruptcy filing of a husband who owes a debt without the wife, will not effect the non filing wife. A bankruptcy filing of a husband who owes a debt with the non filing wife, will not effect the wife, as well. However, in general, the creditor may pursue (with exceptions) the non filing wife with regard to a joint debt.
Can I pick and choose which creditors I will include in the bankruptcy?
No. All creditors must be included. Generally, if you do not include a credit card, the credit card company will deny your use of the card, after filing.
Can I keep my auto?
- Chapter 7
- If auto is financed:
You may keep your auto if you meet the following: 1. The value of your auto is not substantially more than the payoff on your loan; 2. You are current with your payments or can bring your payments current, immediately. 3. Your ability to make the monthly payments does not present an undue hardship.
- If auto is leased:
You may keep your auto if you meet the following: 1. You are current with your payments or can bring your payments current, immediately. 1. Your ability to make the monthly payments does not present an undue hardship (may not apply).
- If auto is not leased or financed:
The value of your auto is not substantially more than the payoff on your loan. (virtually all debtor’s may keep their autos)
- If auto is financed:
- Chapter 13
Whether leased or financed, generally, you may keep your auto if you are able to make payments on the lease and financing. Bankruptcy may effect the terms and conditions of the payments.
- Chapter 7
You may keep your house if the value of your house is not substantially more than the payoff on your mortgage(s) and you are current or virtually current with your mortgage payments. If you keep your house, you must continue to make mortgage payments.
- Chapter 13
- current with mortgage:
You can keep your house if you are able to make monthly mortgage payments. If you have substantial equity (difference between value and liens) in your house, you may be required to pay additional monthly funds to the trustee, in addition to making monthly mortgage payments.
- behind with mortgage payments:
You can keep your house if you are able to make monthly mortgage payments, in addition to paying the total mortgage arrears, over the life of your bankruptcy plan. If you have substantial equity (difference between value and liens) in your house, you may be required to more funds to the trustee on a monthly basis.
- current with mortgage:
Can I keep my house?
Should I file for bankruptcy?
How soon should I file?
The time to file depends on each individual’s circumstance.
Generally, if you have decided to file, you should file as soon as possible. However, prior to the filing, you should feel comfortable that you will have sufficient funds to make your first mortgage and trustee payments, the month after the filing. It may be beneficial to wait to acquire additional funds to make the first payments and start out on the right foot.
Each client’s financial situation is different. This means that it may more be advantages to file immediately or wait, based on your total circumstances.
If my house is in foreclosure, when will I be removed from my house if I do not protect myself?
In New Jersey, an individual may live in the house until after the sheriff’s sale, which may last approximately 6 months after you are served with the law suit papers.
How much does it cost?
All face to face consultations are free.
Prior to filing, the court requires that all individuals complete credit counseling from a court approved credit counselor. Credit counseling, generally costs $50.00 per person.
The court requires that I obtain a credit report. If the client is unable to provide a credit report, I will obtain the report from my vendor who charges $20.00 per report.
The court costs to file a chapter 7 is $299.00.
Prior to filing, I request reimbursement for fees and costs. The office’s charge is based on the complexity of each case.
Prior to filing, I request reimbursement for fees and costs. There are no up front fees prior to the filing. My entire fee is paid through the monthly trustee payment. The amount of the fee is based on the complexity of each case.
Chapter 13 requires a monthly trustee payment. What happens if I miss a trustee payment?
The trustee is responsible to ensure that the debtor is making timely trustee payments. Generally, if you fall behind with your payments, the trustee will file papers with the court, requesting to dismiss (through out) your case. Different trustee’s may permit a larger default before the filing of the petition to dismiss. In other words, one trustee may wait 2 months to file the petition, while another trustee may wait until an individual is 4 months in arrears. Generally, the trustee will permit the individual to avoid the dismissal by paying off the arrears with a lump sum and the balance paid over a reasonable time period.
A chapter 13 may require the debtor make a monthly mortgage payment directly to the mortgage company. What happens if I miss a mortgage payment?
The mortgage company is responsible to ensure the debtor is making timely mortgage payments. Generally, if one falls behind with the mortgage payment, the mortgage company will file papers with the court, requesting permission to proceed with the mortgage foreclosure action and sheriff’s sale. Different mortgage companies may permit a larger default before they file the petition with the court. In other words, one mortgage company may wait 2 months to file the petition, while another mortgage company may wait until the debtor is 3 months in arrears. Generally, the mortgage company will permit the individual to resolve the matter by paying off the arrears with a lump sum payment and the balance paid over a reasonable time period.
Can the mortgage company contest the bankruptcy case?
Filing for bankruptcy protection is your right. Therefore, you do not need the mortgage company’s consent to file and save your house. However, as I stated previously, you must have sufficient income / monetary contributions to make the monthly trustee and mortgage payments.
How long does it take?
You may file immediately after providing the office with the required information and documentation which is explained under a different heading of this website. If it is an emergency, you may file immediately.
What is the new bankruptcy law about?
Generally, the new law does not negatively effect most individuals. The new law requires a debtor to provide substantial financial information to the court, such as: six months of pay stubs, four years of tax returns and other financial documents.
There are numerous aspects of the new law. The most significant aspect of the new law is the “Means Test”, which is an analysis that determines whether a bankruptcy case is filed in good faith. The test may also mandate the amount that must be paid to certain creditors. Furthermore, the new law requires that an individual completes credit counseling prior to the filing and a financial management course prior to discharge.
Can I file a second bankruptcy case?
The new law limits a chapter 7 filing to 8 years after the filing of a prior chapter 7 and 6 years after the filing of a prior chapter 13 case. An individual may file a chapter 13 after a chapter 7 and chapter 13 dismissal and/or discharge, with some possible limitations.
What happens at the hearing?
What is the difference between Chapter 7 and Chapter 13?
A detailed explanation is provided under separate headings of this web site.
What debt is discharged (eliminated), what debt is not?
- Credit Card Bills
- Medical Debt
- Miscellaneous Consumer Debt
- Personal loans
- Possibly some tax liability
- Possibly auto surcharges
- Student Loans
- Child Support
- Possibly some tax liability
- Criminal fines, penalties and restitution
Will my name be published in the newspaper?
No. Bankruptcy filings are not published in any newspapers.
How does bankruptcy impact my Taxes?
All state and federal tax returns must be filed, as usual, whether one is a chapter 7 or a chapter 13 debtor. If a chapter 13 debtor owes taxes, the taxing entity may intercept the tax refund to the extent of the tax liability.