New Jersey Chapter 13 Bankruptcy Attorney
For consumer debtors who do not qualify for a New Jersey Chapter 7 Bankruptcy or who wish to reorganize debt while arriving at a reasonable payment plan, there is a Chapter 13 filing. This type of bankruptcy action involves arriving at a payment plan where creditors will be paid through a transfer of money from the debtor to the assigned bankruptcy trustee over a period of 36 to 60 months.
At the conclusion of this time period, when all agreed-upon obligations have been satisfied, the debt designated in the plan is discharged and the bankruptcy case is closed. This is different than the dismissal of the bankruptcy case when the debtor fails to comply with his or her obligations, in which case the debtor does not get the benefit of the bankruptcy action.
There are many reasons why an individual may choose a Chapter 13 filing, including:
- The person’s income exceeds the limits for a Chapter 7 filing;
- The debtor has filed a Chapter 7 case within the previous eight years and, therefore, does not qualify to file another Chapter 7 case;
- The individual is not current on mortgage payments, but would like to make arrangements to keep the residence, if possible;
- The individual is not current on car payments, but would like to negotiate with the loan holder to keep the vehicle;
- The individual has debts that are not eligible for discharge under a Chapter 7 action, but might be discharged in a Chapter 13;
- The individual wants to retain certain non-exempt property after entering into a new payment agreement;
- The individual wants to eliminate or reduce interest payments on some debt; and
- The individual wants to arrive at a plan where he or she can make payments on debt that is owed.
By filing for Chapter 13 in New Jersey, the debtor is agreeing to a plan whereby at least some of the debt owed will be repaid. The length of time that the plan is in place, during which time the bankruptcy payments are made, depends upon the amount of disposable income that the debtor has to put towards the financial obligations.
Determining Eligibility for Chapter 13 Filing in New Jersey
In order to qualify to file a Chapter 13 bankruptcy case, an individual or married couple must have less than $1,149,525.00 in secured debts (this is subject to a scheduled adjustment in April 2016) and unsecured debts that do not exceed $383,175 (this is subject to a scheduled adjustment in April 2016 to account for inflation).
A Chapter 13 plan must demonstrate that the debtor has sufficient income to meet all obligations, including the fee for the administration of the bankruptcy estate by the trustee and other expenses, which are capped at ten percent (10%) of the claims. The debtor must agree to update the file with submissions of future income or earnings provided to the trustee. The debtor also must agree to pay all priority claims in full, and to treat all claims that are classified in the same category in the same manner.
Common Questions People Ask About Chapter 13 Bankruptcy
- What is chapter 13 bankruptcy in New Jersey?
- What is a New Jersey chapter 13 trustee?
- How do I make chapter 13 bankruptcy payments in New Jersey?
- How much does it cost to file bankruptcy in New Jersey?
- What is a New Jersey chapter 7 bankruptcy?
- Where and how to file for chapter 13 in New Jersey?
- How much does a chapter 13 bankruptcy cost in New Jersey?
I would be happy to answer your questions. Please contact me at (609) 400-1302 to discuss your debt relief options and your legal rights today.
Commencing a New Jersey Chapter 13 Case
In order to file for Chapter 13 protections, the debtor must file a Petition, along with required schedules and other documents. This filing triggers the imposition of the automatic stay, which requires that all creditors stop trying to collect on any outstanding debts, including through foreclosure proceedings, lawsuits, collection agencies, wage garnishment, and enforcement of judgments. This is one of the most immediate of the benefits of a bankruptcy action and provides an opportunity for the debtor to begin to focus on reorganizing the debts that are owed and the amount of monthly payments. This initial filing also gets a trustee assigned to the case. The trustee will schedule the first meeting of the debtor and the creditors and will begin to collect necessary information in order to ensure that the debtor has accounted for all property and assets that could be used to satisfy existing debt.
One of the requirements of individual bankruptcy filings is that the debtor receives credit counseling before filing the action. There also are post-filing counseling requirements.
New Jersey Chapter 13 Means Test
As in a Chapter 7 case, there is a Means Test by which the income of the debtor is calculated. This determination forms the basis for how much the debtor will be able to pay into the bankruptcy estate to be used to satisfy general, unsecured debts. This testing establishes income level and then permits certain deductions to arrive at the number that will be used to set payment schedules.
Creating the Chapter 13 Plan
This involves a complex series of calculations and cannot be determined until all facts have been established. Depending on the final analysis, the plan could require the payment of all debts, a certain percentage of debts, or, in certain cases, none of the outstanding debt at all. In calculating payments under a Chapter 13 plan, the following will be considered:
- Income and earnings from all sources, including salary and wages, business interest income, intellectual property, public benefits, Social Security, or child or spousal support;
- Any changes in income or earnings;
- The total amount of debt owed by the debtor;
- Exemptions that are available to the debtor;
- The Means Test;
- How many priority debts exist and the total amount of those debts;
- All non-exempt property owned, in whole or in part by the debtor;
- Information relating to an existing mortgage, any arrearages, and monthly payments;
- Car purchase loans or leasing information;
- Student loans;
- Retirement plan or account contributions;
- Other items that relate to the assets or liabilities of the debtor, or which impact his or her ability to make payments.
A Chapter 13 plan can be in place from 36 months to 60 months, depending on the debtor’s income in relation to the relevant median income.
Completion of a Chapter 13 Bankruptcy Case in New Jersey
In order to satisfy the requirements of the Chapter 13 plan and achieve a discharge of designated debts, the debtor must make all payments that were established under the terms of the plan. The discharge of these debts means that the debtor no longer is liable for any amounts remaining. A failure to meet his obligations will result in the dismissal of the bankruptcy case, which will lift the automatic stay and permit all remaining creditors to take all legally-permissible actions to collect the money owed to them. The debtor will have lost all the court fees and administrative expenses that were paid during the time that the bankruptcy action was open.
A debtor may file a motion with the court for a modification of the plan, whether temporary or permanent, based on an unforeseen change in circumstances.
In order to be eligible for the discharge of certain debts under a Chapter 13, the debtor must not have received a discharge of debt under a previous Chapter 13 filing within the last two years or under a Chapter 7 filing in the last four years. Moreover, the debtor must have remained current on all domestic support obligations.
Certain Debts are not Dischargeable under a Chapter 13
Although a Chapter 13 permits the discharge of more debts than a Chapter 7, including certain tax obligations, property settlements arising out of a divorce action, or judgments that resulted from the malicious destruction of property, there are certain debts that cannot be discharged in a Chapter 13, including:
- Some long-term debts, like mortgages;
- Student loans;
- Some tax debts;
- Personal injury or wrongful death obligations that arose as the result of operating a vehicle under the influence of drugs or alcohol;
- Debts incurred through fraudulent actions; and
- Certain criminal restitution.
An experienced New Jersey bankruptcy attorney, such as Andrew M. Carroll, can explain what all of this means for you and your unique circumstances. I will sit down with you and explain the differences between a Chapter 7 and Chapter 13 and help you determine which of these is right for you, if bankruptcy is the right choice overall. In order to schedule a time, please contact me at (609) 400-1302 to schedule your free New Jersey debt relief and bankruptcy consultation.