Chapter 7 Bankruptcy

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.

New Jersey Lawyer Explains When A Person May Keep A Motorcycle In A Chapter 7

Over the many years of practicing bankruptcy law, I have noticed that peoples’ motorcycles are their most treasured property. When I counsel a person about their Harley Davidson, there is great concern on their faces. I understand that in some instances their motorcycle may hold more importance than their house or car.
In a New Jersey chapter 7 bankruptcy case, typically, a motorcycle is treated as a luxury item, unless the debtor needs the vehicle for work transportation. I have stated, on numerous occasions, the chapter 7 bankruptcy criteria, in other blogs. The criteria as to whether a motorcycle owner is entitled to a bankruptcy discharge is different than the criteria that is applied to whether the motorcycle owner can keep his motorcycle. In other words, a person may be entitled to a discharge and lose his motorcycle. Also, a person may not meet the criteria for a chapter 7 discharge and be permitted to keep his motorcycle, if they filed a chapter 13.
In New Jersey, a debtor can only keep assets that are fully exempt and that do not have a substantial value.  The application of exemptions is explained, in detail, in numerous other blogs. I will briefly explain the exemption process, as follows.  If a debtor can fully exempt the value of a motorcycle, the debtor may keep the motorcycle. The bankruptcy code exemptions are listed in 11 U.S.C., section 522(d). Section 522(d)(2) allows a $3,675.00 exemption in one motor vehicle. Typically, this exemption is used for the debtor’s car. However, theoretically, this exemption may be applied to a motorcycle.
A debtor may also apply, in any property, a portion of the exemption that is not used or needed for their house. Each debtor has a $22,975.00 exemption that may be applied towards the equity in their house. Bankruptcy code section 522(d)(5) permits the debtor to use up to $11,500 of the unused portion of this household exemption in any property, in any amount. Additionally, section 522(d) permits the debtor to apply 1,225.00 in any property. By way of example, said $11,500.00 and $1,225.00 exemptions may be applied to: $5,000.00 checking account funds; $4,000.00 of stock; and, a $3,725.00 antique vase.
The debtor may clearly keep a motorcycle, if there is no profit to be earned from selling the motorcycle. For example, a debtor may keep a motorcycle that has a $20,000.00 value, with a $21,000.00 financing payoff amount. The debtor is permitted to keep the vehicle because the bankruptcy code does not permit the elimination of the motorcycle’s financing lien. For example, if the motorcycle’s value is $20,000 and the motorcycle financing payoff balance is $21,000, the trustee will be unable to payoff the $21,000.00 lien with a $20,000.00 sales’ price.
However, a trustee will be permitted to sell the motorcycle, if there are funds available after deducting the motorcycle financing payoff and all of the applied exemptions. Look at the following example:
Auto value:                         $25,000.00
Financing Payoff:              $2,000.00
522(d)(5) exemption:       $11,500.00
522(d)(5) exemption:       $1,225.00
Balance                                $10,275.00
Based on the above example, the trustee could sell the motorcycle and receive $10,275.00 from the sale. The debtor would receive $12,725.00, which is the amount of the debtor’s applied exemptions. Please note that the calculations generally include the costs to sell the motorcycle. Also, there may be many other issues that modify the figures that are used.
Contact Robert Manchel at 866 503 5644 to discuss your NJ. bankruptcy law questions.

New Jersey Lawyer Explains How A Second Property Is Handled In A Chapter 7 Case

Keeping a second house in a New Jersey chapter 7 case is much different than keeping a second house in a chapter 13. In a chapter 7, no monthly payments are required. Therefore, the court and trustee are not concerned about the debtor paying all of their disposable income into a chapter 13 plan. The bankruptcy laws simply focus on the chapter 7 criteria.
As stated simply and concisely, there are three criteria of a chapter 7. 1) The value of the debtor(s) assets, after reducing any secured debt, may not be substantial. 2) The debtor’s gross household income for the six months prior to the bankruptcy filing must be less than the average income of a New Jersey Household of the same size. Or, in the alternative, the debtor(s) have substantial, but reasonable and necessary monthly expenses that exceed the average monthly net income for the six months prior to the filing. 3) The debtor(s) projected future monthly net household income is less than the debtor’s household’s projected future monthly necessary and reasonable expenses. In other words, the debtors cannot have any disposable income, after payment of their necessary and reasonable expenses that are needed to live.
The debtor must include all reasonable and necessary expenses that are required to live, including, but not limited to the following: mortgage on the house the debtor resides: food; clothing; utilities; auto finance payment; auto insurance payment. The debtor may not use an unnecessary monthly payment on a second luxury  beach house as a legitimate, necessary and reasonable expense. In other words, the bankruptcy criterion requires the debtor to be in the red without the monthly beach house mortgage payment.
There is an exception to this rule, if the debtor’s beach house has a net monthly profit, In other words, if the debtor is earning a monthly profit from rent, after the expenses from the house, the debtor must include the rental income, minus the house expenses. Under this scenario, the rental income is deemed a profitable business.
If the beach house does not have a substantial value and the debtor meets all of the other chapter 7 criteria, the bankruptcy laws do not allow the court and/or the trustee to take the house. In other words, under this scenario, the debtor may keep the house through the New Jersey bankruptcy. However, based on this scenario, the debtor has insufficient income to make the necessary house payments to keep the house. Therefore, unless the debtor can somehow determine how to keep the house, the house will be lost through foreclosure, but not through the bankruptcy.
Robert Manchel, the NJ. bankruptcy practitioner may be contacted at 866 503 5644.

New Jersey Attorney Details How Chapter 7 Impacts Rental-Investment Properties

Debtor owned rental and investment property is considered an asset and a source of income in a New Jersey bankruptcy case. As a result, I will explain how the courts and the bankruptcy code deal with both issues. I will first explain how the bankruptcy code analyses’ the asset valuation issue.
In a chapter 7, a trustee may sell any unexempt asset with a substantial value. Typically the debtor must provide the trustee with a valuation statement from a licensed New Jersey real estate professional, such as a sales representative, broker, or appraiser. One must determine the equity in the property, which is the retail value minus the mortgage payoff. Thereafter, the trustee will typically permit an additional deduction of 10% of the sale’s value.
Example: One individual who owns 100% of an investment property, files a chapter 7 bankruptcy case.
Property value is $150,000;
Minus the mortgage payoff of 90,000;
Minus $15,000, which is 10% of the cost of the sale of $150,000.
The result after the deductions Is $45,000.00.
Minus the bankruptcy code’s allowable exemptions of approximately $12,725 is $32,275.00. Please note that allowable exemptions vary based on the circumstances of each case.
Based on the above example, the New Jersey chapter 7 trustee will sell the real estate and make an immediate payment of $12,725.00 to the debtor, in the amount of his exemptions. The balance of the $32,275.00 will be distributed to the creditors in the order required under the bankruptcy code. The trustee and his attorney will also be paid from the sales’ proceeds. The debtor will be paid the balance, if any, after the above referenced distributions.
Please note that one should not rely on the figures of the above example, as the figures will change based on numerous facts and each individual’s circumstances. The exemptions that are applied to investment real estate is different than the exemptions that may be applied to your residence. Also, the analysis is different when a debtor owns the house with a spouse or other individual.
As explained in another part of this website, two criteria of a chapter 7 case relate to the household disposable income. Investment and rental property is a source of income that must be considered as additional household income. As a result, one must determine the monthly income that is derived from the property, which is the rent received minus all property expenses, including: mortgage; property taxes; insurance; maintenance; estimated income tax, etc. The income must be added to the other household income in connection with, both, the current monthly income (means test) analysis and the future income and expense analysis. In general, if either analysis results in disposable income, the debtor does not meet the chapter 7 criteria.
Robert Manchel, the New Jersey bankruptcy lawyer, may be contacted at (866) 503-5655, to discuss your options.

All of the debtor’s assets owned at the time of the chapter 7 bankruptcy filing in NJ are part of bankruptcy estate. However, the debtor is permitted to keep all of his bankruptcy estate assets that are exempt under the bankruptcy code. The details of exemptions and how they work are explained in a separate portion of my website.
There is a very limited list as to when a debtor’s right to an asset after the filing, is included in the bankruptcy estate. An inheritance is an asset of the bankruptcy estate, if the decedent passed away prior to the bankruptcy filing or within 180 days after the bankruptcy filing. The time in which the debtor receives the inheritance is irrelevant.
The following is an example as to how this works. Please note that this fact scenario is extremely unlikely. Five months after the bankruptcy filing, the debtor’s relative passes away and leaves him $100,000. The debtor does not receive the funds until 9 months after the decedent’s demise. After the trustee receives notice of the asset, he will likely file a Motion to Reopen the case. Thereafter, when the debtor receives the funds, the trustee will obtain control of the asset and make a distribution to the creditors.
If the person passes away, prior to the bankruptcy filing and the debtor has not yet received the inheritance, the entire inheritance is still part of the bankruptcy estate. If the debtor has a right to a substantial inheritance, prior to the filing, the debtor may not wish to file the chapter 7. Prior to the bankruptcy filing, in New Jersey, the debtor should consider the health of an individual who may leave them an inheritance.
Robert Manchel, who handles chapter 7 and chapter 13 cases in New Jersey, may be reached at 866 535 5655.

A chapter 7 case allows a person a fresh start in New Jersey. The bankruptcy court allows a debtor to keep certain property to commence their fresh start. However if the amount of an asset is substantial, the trustee may require the debtor to sell that specific asset. The only assets that are subject to scrutiny are the assets of the bankruptcy estate.
In general, the assets that are included in a New Jersey bankruptcy estate are all of the debtor’s assets in which he has an interest at the time of the bankruptcy filing. This includes any and all property- including any partial interests. This also includes a present right to an asset or money in the future. An example of a present right to future money is the right to sue someone from an automobile accident injury that occurred prior to the bankruptcy filing. If the accident occurred after the bankruptcy filing, the right to the money, would not be a part of the bankruptcy estate. In this circumstance, the bankruptcy courts look to the date of the accident.
However, the bankruptcy code sets forth a very limited list as when an asset becomes part of the bankruptcy estate, when the debtor’s right to that asset was initially received after the filing. The bankruptcy code’s list is as follows:
1. The debtor’s right to an inheritance that was derived within 180 days after the bankruptcy petition filing. This means that if the debtor has a right to receive an inheritance, from someone who passed away within 180 days after the filing, the inheritance is included in the bankruptcy estate.
2. The debtor’s right to an asset, that is related to the debtor and his (ex) spouse’s property settlement agreement and/or divorce court order, that commenced within 180 days after the bankruptcy petition filing. This means that if within 180 days after the filing, the debtor initially becomes entitled to an asset by way of a divorce or related court order, in connection with the debtor’s spouse or ex spouse, such interest is part of the bankruptcy estate.
3. Proceeds, product, offspring, rents or profits derived from the bankruptcy estate property, not including earnings from the debtor’s services after the filing. This is very atypical and generally applies to proceeds related to real estate in which the trustee has a right to take from the debtor. Again, this is extremely unusual.
4. An interest that the bankruptcy estate acquires. This is also very atypical and generally applies when the trustee purchases another asset with an estate asset that he has the right to take or control.
In the event that an asset is deemed a bankruptcy estate asset does not mean that the trustee can take any portion of the asset. All bankruptcy assets that are exempt may not be taken by the trustee. The explanation as to how exemptions work is located in another part of this site.
Robert Manchel is a bankruptcy lawyer in New Jersey, who may be contacted at 866 503 5655 to discuss your questions.