New Jersey Bankruptcy Blog

What Pay Check Deductions Are Allowed In A New Jersey Bankruptcy Case?

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NJ. Bankruptcy Lawyer Explains What Pay Check Deductions Are Permitted For a New Jersey Bankruptcy Case

A debtor’s projected household net (after tax) income must be less than their projected necessary and reasonable household  expenses to receive a chapter 7 discharge. The trustee reviews the pay stubs of the debtor, the debtor’s non filing spouse, and any other household members to ensure that their pay do not include disallowable deductions. The typical allowable deductions include the following: any and all taxes; health insurance; dental; medical; union dues; precriptions.
Generally, any deductions for non essential items will be added back to the net income. For example, funds deducted for items such as savings will be added back to the net income, resulting in the actual allowable net income. If the court permitted savings as an expense, the debtor could reduce thier net income to any amount by deducting additional savings. Sometimes a debtor will deduct funds from their gross income for a mortgage and/or an auto payment. Such payments may be deducted. However, the debtor cannot take the same deduction as an expense on the bankruptcy expense schedules.
This pargraph explains the allowable deductions in a New Jersey chapter 7 bankruyptcy case. Pension or pension like deductions are typically not permitted unless the deduction is mandatory. Most companies do not mandate that their employees contribute to their pension. However, various government entities typically require their employees to contribute a portion of their pay towards their pension, such as the State of New Jersey. If the debtor’s employer requires a contrbution to thier pension, the deduction is permissable. Consequesntly, State of New Jersey employees may use their pension contribution deduction as an allowable deduction. However, a pension contribution from virtually all non governmental entities is not allowable, as the deduction may be stopped to allow additional net income. The bankruptcy code does not specifically deal with pension loan payments. However, generally, all chapter 7 trustee’s allow the deduction on each pay.
The allowable chapter 13 deductions may differ from the chapter 7 deductions based on the trustee who is administering the case. The bankruptcy code permits a reasonable voluntary pension contribution as an allowable deduction, in a New Jersey chapter 13 case only. Therefore, a voluntary contibution to a pension that is not required, may be deducted from a person’s pay to arrive at the net income amount. In a chapter 13, a debtor may also use a pension loan as allowable expense. However, the amount of the deduction and the manner in which the deduction is applied may vary with each trustee.
Tax refunds appear to be applied differently based on the assigned chapter 7 and chapter 13 trustee. A tax refund may be considered an asset in a chapter 7 case depending on the date of the filing. A tax refund may be considered an asset, additional income or disreguarded, in a chapter 13,  based on the time of the filing and the assigned trustee.
Contact Robert Manchel at 866 503 5644 to discuss your NJ. bankruptcy law questions.

What Expenses Are Used In A New Jersey Chapter 7 Bankrutpcy Case?

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New Jersey Attorney Explains The Expenses That Are Used In A New Jersey Chapter 7 Bankruptcy Case

One criteria in a New Jersey chapter 7 bankruptcy case requires the debtor’s projected net household income to be less than the projected reasonable and necessary household expenses. If the income is more than the expenses, the debtor does not meet the chapter 7 criteria. If the debtor’s monthly household income is less than the monthly expenses, there are no disposable funds to pay to the creditors. An individual debtor that files without her spouse, must include her husband’s income in the calculations, if they are residing together in the same household. If the debtor does, in fact, have disposable income, each month, the debtor must pay back, at least, the amount of the disposable income to the creditors, in a chapter 13 case. Please note a New Jersey chapter 7 bankruptcy has additional criteria.
The general list of necessary household expenses is reflected below: rent; mortgage; real estate taxes; homeowners insurance; automobiile insurance; home maintenance; utilites;  electric; heat; natural gas; water; sewer; telephone; cell phone; internet; cable; housekeeping suplies; childcare; children’s educational costs; clothing; laundry; dry cleaning; personal care products and services; garbage collection; home maintenance; food; clothing; out of pocket health care and medications; dental; transportation; entertainment; alimony; support; possibly other necessary expenses; homeowners association; health Insurance; other insurance; car payments; possibly other installment payments; recreation; charitable contributions; renters insurance; life Insurance; payments for additional dependants.
The amount that is allowable for each expense is based on the following: number of household members: each individual’s personal situation; the bankruptcy code; the amount the trustee considers reasonable; the amount the presiding judge deems reasonable; IRS standards. The IRS provides a general guideline of the acceptable allowable amounts that are deemed reasonable for each expense. However, the amount may be increased based on the particular needs of each individual. For example, a household member that has diabetes, may require certain foods, that are more costly. A person that drives 100 miles one way to work each day, will incur more transportation costs than a person who works one block from their employment. Also, the number of household members effects the amount  that will be considered reasonable, such as food, etc. Also, the allowable monthly payments for certain expenses, such as entertainment, are typically standard for each trustee.
Allowable expenses do not include any payments to unsecured creditors, such as credit card debt and personal loan payments. This criteria seems to frustrate some clients. However, such expenses are not included because the unsecured debt will be eliminated if the debt is discharged. The court and trustee want to know how much disposable income will be available after their unsecured debt is discharged. In the event that the debtor has disposable income that may be paid to the creditors each month, the debtor does not meet the New Jersey chapter 7 criteria. In this scenario, the debtor will be required to pay the amount of the disposable income to the creditors, in a chapter 13 case.
The amount of the non filing spouse’s income may be reduced by the amount that such spouse pays each month to towards their credit cards and unsecured debt. The court allows for a deduction in this scenario because the non filing spouse’s debt will not be eliminated by the filing spouse’s bankruptcy filing. Also, such payments will reduce the amount that this spouse is able to contribute to the household.
A debtor cannot use funds for an expense that is frivolous and unnecessary. For example, a debtor cannot use a mortgage expense on a second beach house that is not earning the debtor any money. However, if the beach house results in a positive net cash flow, each month, the debtor may use the mortgage payment as an expense. A debtor could not use an auto payment on his Harley Davidson, that is not necessary for transportation to and from work. However, if the debtor requires the motorcycle for work purposes, the trustee will likely permit the payment.
Contact Manchel New Jersey Bankruptcy Law at 866 503 5644 to schedule an appointment.
 

What Happens When Use Credit Card Debt To Pay Taxes In NJ. Bankruptcy

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New Jersey Attorney Explains What Happens To Credit Card Debt That Is Used To Pay Income Taxes In A New Jersey Bankruptcy Case.

Typically, in a New Jersey chapter 7 bankruptcy case, unsecured debt is discharged (eliminated). If a debtor meets all of the chapter 7 criteria, the unecured debt will be discharged and the creditor will never again, be able to attempt to collect the debt. In general unsecured debt is any debt that is owed to a creditor, that is not secured or connected to property, such as a car or house. Also, unsecured debt is different than certain types of debt that is not dischargeable, such as child support arrears and/or some types of tax debt. The most common types of unsecured debt is credit card debt and personal loans, that are not secured against property.
The bankrutpcy law provides an exception to the discharge of credit card debt, in a chapter 7, in the event that a credit card is used to pay a specific income tax liability, that would not have otherwise been discharged. In other words, if the the income taxes that were paid, would not have been discharged, the credit card debt that was used to pay the taxes are not discharged, as well. Therefore, to determine if such credit card debt is not discharged, we must review how taxes are discharged. There are other blogs, within my website, that provide a detailed explanation as to the criteria that required for discharging tax debt in New Jersey.
There are specific types of tax debt that are never dischargeable, such as sale’s taxes and taxes due from employers that are collected from their employees and not paid to the taxing authority. Income tax debt, in certain circumstances, may be discharged. The criteria for discharging income tax debt is partly based on the tax year in which the debtor is attempting to discharge. A bankruptcy filing may permit the discharge of income tax debt for some years and not others. The determination as to whether a person may discharge income tax debt, is based on whether the debtor meets the criteria of each year. Therefore, a complete discharge analysis must be completed for each year.
The following are the criteria that is required to discharge income tax debt for a specific tax year, in a New Jersey chapter 7 bankruptcy case: (1) The date on which the bankruptcy case is filed must be three years after the date on which the tax return was due (ie. typically April 15th of the following year); the returns of said year was actually filed more than two years prior to the bankruptcy filing date; the tax authority assessed the income taxes, for such year, more than 240 days prior to the bankrupty filing date; no tax lien was filed for such tax year. Please note that the above referenced dates will be tolled and extended for periods that the taxing authority is not permitted to collect a debt from the creditor. For example, the dates are extended for periods in which the debtor is under an agreement to make payments on taxes for a specific year.

The bankruptcy code does not permit a discharge of the portion of the credit card debt that was used to pay income taxes, for a particular year, that would not have been discharged based on the criteria explained in the paragraph above. However, all of the other credit card debt that is due to the same creditor, that was not used to pay the taxes, will be discharged. Typically, the credit card company would be required to prove such circumstances by filing an Adversary Complaint with the court, objecting to the discharge. Also, the credit card company would likely be required to prove that the funds were used to pay certain taxes that would have not been discharged.
Additionally, based on the bankruptcy code, this chapter 7 discharge exception does not apply to a New Jersey chapter 13 case. In other words, if a non-dischareable tax debt is paid with a credit card, the credit card debt would be discharged in a chapter 13. Please note that this blog explains this complex and detailed subject matter in a very consice and general manner. The results will differ under various situations and facts.

Contact Manchel New Jersey Law, at 866 503 5644, to discuss your NJ. bankruptcy law questions.

Explain The New Jersey Chapter 7 Bankruptcy Case Hearing

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Attorney Explains The New Jersey Chapter 7 Bankruptcy Case Hearing.

There is one required hearing for a chapter 7 bankruptcy case that is filed in New Jersey. The hearing is called the “Meeting of Creditors” or a “341(a)” hearing, which is the bankruptcy code section that requires the hearing.  The entire State of New Jersey has three bankruptcy court locations, Camden, Trenton and Newark. The court in which a person’s bankruptcy case is filed, typically depends on the location of their residence. Debtors who file their case in the Camden and Newark locations, attend their “341(a)” hearings in an office building. Debtors who file their cases in Trenton, attend their hearing in the Trenton bankruptcy court, but not in a courtroom.
The court randomly assigns each case to a trustee. A trustee is the person who is responsible for administering each chapter 7 case. The trustee reviews the bankruptcy petition and the various documents that are require to be submitted, such as: pay stubs; bank statements; income tax returns; real estate valuations; mortgage statements, etc. The trustee has the responsibility of researching the debtor’s financial circumstances to determine if the debtor meets the chapter 7 discharge criteria. The trustee provides her recommendation to the presiding judge as to whether the debtor is entitled to a discharge.Typically, if the trustee recommends a discharge, the judge will sign the order of discharge.
Additionally, the trustee is responsible to ensure that the debtor either has no “unexempt” assets to sell. Or, in the alternative, the trustee is required to sell and administer the sale of any assets. Please note that it is very unusual for a debtor to file a case, where an asset is sold. Also, prior to the New Jersey bankruptcy filing, the debtor should know whether the trustee has the right to sell an asset, based on the bankruptcy laws and each person’s financial and asset position.
The Meeting of Creditors Hearing is scheduled about thirty days after the bankruptcy filing. Most likely the only people in attendance, at the hearing, is the debtor and his attorney. It is very unlikely that a creditor appears at the hearing. From my experience, the only creditors that typically appear are individual creditors who had a relationship with the debtor, such as an ex-spouse or individual who made a loan to the debtor. Typically, the trustee and his staff review the debtor’s bankruptcy petition and documents in preparation for the hearing. The hearing is very short and lasts about seven minutes. The hearing is recorded and the trustee “swears in” the debtors prior to questioning.
The trustee will confirm that the debtor read and understood the completed petition prior to signing. The trustee will ask various questions for different reasons. However, In general, the trustee’s main objective is to elicit questions that, (1) determine if the debtor owns valuable assets; (2) determine whether the debtor could sue for valuable assets (money); (3) confirm that the debtor’s household income is less than their reasonable and necessary monthly household expenses, that are required to live. Also, the trustee will ask questions to determine whether the debtor’s financial difficulties and bankruptcy filing was unintentional
Contact Manchel New Jersey Bankruptcy Law at 866 503 5644 to discuss your NJ. bankruptcy law questions.

Consequences of Filing For Bankruptcy In New Jersey

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New Jersey Attorney Explains The Consequences Of Filing For Bankruptcy Protection In New Jersey
The consequences of filing for bankruptcy protection and obtaining a discharge varies based on each person’s: intentions; assets; income; expenses; and financial position.
Chapter 7 Bankruptcy
After the chapter 7 has been completed, in approximately four months, the debtor is free to move forward with their life, without the debt that is discharged. A New Jersey chapter 7 discharge will result in the elimination of unsecured debt, such as credit card debt, personal loans, utility bills, medical bills, etc. A person who does not wish to save or keep their house will eliminate mortgage debt and liens on their house. A person who does not wish to keep their car will eliminate their auto finance and/or lease debt. Additionally, it is possible that none, all, or a portion of tax debt may be eliminated, as well. Any and all wage garnishments and bank levies are permanently eliminated. Also, pending lawsuits in connection with unsecured debt are permanently stopped and/or eliminated.
A person that wishes to keep their house, may possibly eliminate all or a portion of their non-mortgage house liens, depending on various factors. The debtor is liable for any portion of taxes that are not eliminated by the bankruptcy filing. Utility debt is discharged and the utility company must allow the debtor to restore service and/or continue service. Automobile fines will not be eliminated and must be resolved after the discharge.
Chapter 13 Bankruptcy
A New Jersey Chapter 13 debtor will receive a discharge after making trustee payments for 36 to 60 months. A chapter 13 discharge will has similar consequences as a chapter 7, with the following possible exceptions. If a debtor filed a chapter 13 to cure their mortgage arrears and save their house, their house payments should be current at the completion of the case. The debtor may do the same for automobile finance arrears. At the completion of the case, all tax debt will be paid or eliminated. There will be no tax debt that must be paid after the discharge. Also, any child support or alimony debt will have been paid during the life of the bankruptcy case. Therefore, there will be no such debt that must be paid after the discharge. A chapter 13 may allow for additional benefits such as paying one’s automobile fines. Another benefit of a chapter 13 is to allow debtors to eliminate second mortgages in certain situations. Also, any liens that are eliminated and discharged in a New Jersey chapter 7 and chapter 13, do not attach to property purchased after the bankruptcy discharge.
11 U.S.C, section 524, of the bankruptcy code is called the, “Effect of Discharge”. This code section prohibits certain acts by creditors after a bankruptcy discharge, for all chapters. Therefore, after a discharge, certain creditors’ acts may still be a violation of the bankruptcy code. If a creditor violates this code section, the debtor may bring them back into bankruptcy court for the reinforcement and sanctioning of such actions. In general, this section prohibits a creditor’s act to collect a debt that was discharged, or collect on a lien that was eliminated and discharged. This section also prohibits telephone calls, letters, lawsuits, etc., regarding debt that was incurred prior to the filing. There are other non-bankruptcy laws that may be breached by the same acts.
The other portions of this website explain, in detail, other effects of bankruptcy, including, but not limited to: rebuilding credit; obtaining debt after bankruptcy; how to recover; and what to expect.

Saving An Auto Through A New Jersey Bankruptcy Case

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Saving your car from a finance and lease company in a chapter 13 case.
A New Jersey chapter 13 bankruptcy case may save an auto from repossession and/or obtain possession, of a repossessed auto, if the auto has not been sold at auction. Initially, the debtor must provide proof of adequate auto insurance that covers the finance company in the event of auto damage. Also, the debtor must create a feasible chapter 13 plan, that properly pays the finance / lease company, pursuant to the bankruptcy code. The information below applies if all people on the loan are debtors in the bankruptcy case. The information below may not apply if all people on the loan are not included in the bankruptcy filing.
OPTION ONE FOR FINANCING
A person can file a New Jersey chapter 13 bankruptcy case and pay the total amount of the finance arrears, at the time of the filing, through a chapter 13 bankruptcy plan. The bankruptcy plan requires monthly payments for a period of 36 to 60 months. In addition to making the monthly trustee payments, the debtor must also pay the regular monthly finance payments, directly to the finance company, on a monthly basis. The debtor must keep current with the bankruptcy plan and their direct monthly finance payments.
OPTION TWO FOR FINANCING
A debtor may save their auto by paying the entire amount that is due on the loan through the bankruptcy plan. This requires the debtor to pay the entire balance of the loan, plus interest, through a monthly bankruptcy payment. This option does not require that the debtor to make monthly finance payments directly to the finance company, in addition to making the payments through the New Jersey bankruptcy plan.
OPTION THREE FOR FINANCING
If a debtor bought the auto with the financing, at the time of the purchase, uses the auto for personal use, and bought the auto 910 days or more, prior to the bankruptcy filing, the debtor may “cram down” the financing debt. A “cram down” permits the debtor to pay, through the bankruptcy plan, only the value of the auto, plus a fair interest rate. For example, if the auto has a value of $15,000.00 and a finance payoff of $20,000.00, the debtor only needs to pay the $15,000.00, plus a fair interest rate. The $15,000.00, plus the fair interest rate, is paid completely through the bankruptcy plan payments. The $5,000.00 balance may be eliminated, in most circumstances.  The debtor need not make any payments directly to the finance company. The finance company and the debtor may dispute the actual value of the vehicle.
DEALING WITH A LEASE
A debtor may cure the lease arrears through a bankruptcy plan, in addition to making the regular monthly lease payments to the leasing company. However, the bankruptcy code requires that the lease payments, that are paid through the plan, be paid “promptly”. This means that the lease arrears must be paid, through the plan, within a certain time period, that is deemed “promptly” by each particular judge. The amount of months that is considered “prompt” under the bankruptcy code, has not been established in the New Jersey District Bankruptcy Court. Therefore, each judge may deem a different time period as “prompt”.
In a New Jersey bankruptcy case, the debtor may be required to pay other creditors, through the plan, even though the reason for the filing based on saving an automobile. Certain type of debt, such as taxes and other secured debt may be required to be paid through the plan. Also, a portion of unsecured debt, such as credit card debt may be required to be paid, through the plan, based on various factors.
Robert Manchel may be contacted at 866 503 5644 to discuss your New Jersey bankruptcy questions.

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