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Understanding Bankruptcy Options: Why Chapter 7 May Not Be Available for High-Income Earners in New Jersey and the Viable Alternative of Chapter 13

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Filing for bankruptcy is a significant decision that many individuals facing financial difficulties consider. In New Jersey, like in other states, the type of bankruptcy one can file depends on several factors, including income level. If you are a consumer with a gross income above the median income for your state and household size, you might be ineligible to file for Chapter 7 bankruptcy. Instead, Chapter 13 bankruptcy could be a more suitable option. This post will explore why higher-income earners might not qualify for Chapter 7 and how Chapter 13 serves as an alternative.

Understanding Chapter 7 Bankruptcy

Chapter 7 bankruptcy, often referred to as “liquidation bankruptcy,” allows individuals to discharge most of their unsecured debts. This means debts like credit card balances, medical bills, and personal loans can be wiped out. However, to qualify for Chapter 7, you must pass the “means test,” which evaluates your income, expenses, and overall financial situation.

The Means Test: A Gatekeeper for Chapter 7 Eligibility

The means test is designed to limit the availability of Chapter 7 bankruptcy to those who genuinely cannot repay their debts. Here’s how it works:

  1. Median Income Comparison: First, your gross income is compared to the median income for your state and household size. If your gross income exceeds this median, you move to the next step of the means test.
  2. Disposable Income Calculation: The next step involves calculating your disposable income by subtracting allowable living expenses and secured debt payments from your gross income. If your disposable income is above a certain threshold, you fail the means test and cannot file for Chapter 7 bankruptcy.

Why High-Income Earners Might Fail the Means Test

If your gross income is higher than the median income in New Jersey for your household size, it’s likely that you will not qualify for Chapter 7 bankruptcy. This is because the means test assumes that individuals with higher incomes have the financial capacity to repay at least a portion of their debts. Therefore, high-income earners are often steered towards Chapter 13 bankruptcy instead.

Chapter 13 Bankruptcy: A Structured Repayment Plan

For those who cannot qualify for Chapter 7, Chapter 13 bankruptcy offers a structured way to manage and repay debts. Here’s how Chapter 13 differs and why it might be a better option:

  1. Repayment Plan: Unlike Chapter 7, Chapter 13 does not discharge all debts immediately. Instead, it involves creating a repayment plan that spans three to five years (5 years if your income is over median), allowing you to pay off your debts over time based on your disposable income.
  2. Protection of Assets: Chapter 13 allows you to keep your property, as long as you adhere to the repayment plan. This can be particularly beneficial if you have significant assets or secured debts, such as a home mortgage or car loan, that you wish to retain.
  3. Debt Consolidation: Under Chapter 13, your debts are consolidated into one monthly payment made to a bankruptcy trustee, who then distributes the funds to your creditors. This can simplify the repayment process and make it easier to manage your finances.

Advantages of Chapter 13 for High-Income Earners

For individuals with incomes above the state median, Chapter 13 offers several advantages:

  • Debt Management: Chapter 13 provides a manageable way to pay off debts without the pressure of immediate liquidation; it can protect you from the lawsuits of your creditors, unlike debt settlement.
  • Credit Impact: While bankruptcy will impact your credit, Chapter 13 may be seen as less severe than Chapter 7 since it involves repaying your creditors over time.
  • Legal Protection: Filing for Chapter 13 triggers an automatic stay, which halts all collection actions, including foreclosure, repossession, and wage garnishment, giving you time to reorganize your finances.

Conclusion

If you are a higher-income earner in New Jersey struggling with debt, understanding your bankruptcy options is crucial. While Chapter 7 might seem appealing due to its debt discharge feature, failing the means test because your income is above the median could disqualify you. However, Chapter 13 bankruptcy offers a viable alternative, providing a structured repayment plan that allows you to manage your debts effectively while protecting your assets. Consulting with a bankruptcy attorney can help you navigate the complexities of the bankruptcy process and choose the best option for your financial situation.

By exploring Chapter 13 as an alternative to Chapter 7, high-income earners can find relief from debt while maintaining a path toward financial stability. Schedule a free bankruptcy consultation with Jennifer Weil, a New Jersey bankruptcy attorney, to discuss your options.

Understanding Chapter 13 Bankruptcy: Safeguarding Co-Signers and Their Assets

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Are you facing the daunting prospect of bankruptcy, but worried about how it might affect your co-signers? Bankruptcy can be a complex and stressful process, especially when considering the potential impact on those who have co-signed loans or debts with you. However, there’s a solution that provides significant protection not just for you, but also for your co-signers: Chapter 13 bankruptcy.

While Chapter 7 bankruptcy offers valuable protection through the automatic stay, Chapter 13 takes it a step further by extending this protection to include co-signers. Let’s take a closer look at how Chapter 13 bankruptcy can safeguard the interests of both primary debtors and their co-signers:

  1. The Automatic Stay: Much like Chapter 7, Chapter 13 initiates an automatic stay upon filing. This legal provision halts creditor actions such as foreclosure, wage garnishment, and debt collection efforts. However, what sets Chapter 13 apart is that this stay also extends to cover co-signers. This means that not only are you protected from creditor harassment and legal actions, but your co-signers are as well.
  2. Co-Signer Stay: Chapter 13 introduces a concept known as the “co-signer stay.” This provision prevents creditors from pursuing co-signers for repayment of consumer debts included in the bankruptcy filing. As a result, your co-signers are shielded from potential financial repercussions arising from your bankruptcy proceedings, providing them with much-needed relief and protection.
  3. Debt Repayment Plan: Unlike Chapter 7, which typically involves the liquidation of assets to repay debts, Chapter 13 allows debtors to restructure their debts through a court-approved repayment plan. This plan, which typically spans three to five years, prioritizes the repayment of secured debts, such as mortgages and car loans, while also addressing unsecured debts like credit card balances and medical bills. By entering into a Chapter 13 repayment plan, you can alleviate the financial burden on your co-signers, as the plan aims to repay debts over time in a manageable manner.
  4. Co-Signer Liability: By adhering to the terms of the repayment plan and fulfilling your obligations under the bankruptcy process, you can protect your co-signers from potential legal actions by creditors seeking repayment. This offers peace of mind to both you and your co-signers, knowing that their financial well-being is safeguarded throughout the bankruptcy process.
  5. Preserving Co-Signer Assets: In addition to protecting co-signers from creditor actions, Chapter 13 also safeguards their assets from being liquidated to satisfy debts. This ensures that your co-signers retain ownership of their property and assets, providing them with greater financial security and stability during the bankruptcy process.

In summary, Chapter 13 bankruptcy offers a comprehensive solution for individuals seeking debt relief while also protecting their co-signers and their assets. By initiating an automatic stay and implementing a structured repayment plan, Chapter 13 enables debtors to address their financial challenges while minimizing the impact on their co-signers.

If you’re considering bankruptcy and have co-signers on your debts, Chapter 13 may offer the protection and relief you need while preserving the financial well-being of your co-signers. It’s essential to consult with a qualified bankruptcy attorney to explore your options fully and determine the best course of action for your financial situation. With the right guidance and support, you can navigate Chapter 13 bankruptcy with confidence and take steps towards a brighter financial future for both yourself and your co-signers.

Schedule a free bankruptcy consultation with Jennifer Weil, a New Jersey bankruptcy attorney, to discuss your options.

Chapter 13 vs. Debt Settlement: Which one is better?

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Introduction

When financial storms hit, individuals are often faced with tough decisions on how to regain control. Two common paths are Chapter 13 bankruptcy and debt settlement. In this article, we’ll explore why Chapter 13 bankruptcy stands out as a more comprehensive and advantageous option compared to debt settlement.

Understanding Chapter 13 Bankruptcy

Chapter 13 bankruptcy, often dubbed the “wage earner’s plan,” is a structured legal process that enables individuals with a regular income to reorganize their financial affairs. The process involves creating a realistic and manageable repayment plan, typically spanning three to five years, allowing debtors to regain control of their finances.

**1. Structured Repayment Plan:

  • Chapter 13 Advantage: One of the primary advantages of Chapter 13 bankruptcy over debt settlement is the creation of a structured repayment plan. This plan is tailored to the debtor’s income, expenses, and debt obligations, ensuring a realistic and sustainable path to financial recovery.
  • Debt Settlement Challenge: In contrast, debt settlement often involves negotiating with creditors to settle debts for a reduced amount. However, the lack of a structured plan can lead to unpredictable outcomes, leaving debtors vulnerable to unexpected financial challenges.

**2. Court Protection and Oversight:

  • Chapter 13 Advantage: Filing for Chapter 13 bankruptcy triggers an automatic stay, providing immediate relief from creditor actions such as wage garnishments, foreclosure, or harassment. Additionally, the court oversees the entire process, ensuring fair treatment of creditors and debtors.
  • Debt Settlement Challenge: Debt settlement lacks the same level of court protection. Creditors may continue their collection efforts, and the debtor is left to navigate negotiations independently, without the structured oversight provided by bankruptcy courts.

**3. Debt Discharge vs. Settlement:

  • Chapter 13 Advantage: Upon successful completion of the repayment plan, Chapter 13 allows for the discharge of remaining qualifying debts. This means that debts included in the plan can be eliminated, providing a true fresh start for the debtor.
  • Debt Settlement Challenge: Debt settlement, while reducing the overall debt amount, does not guarantee a complete discharge of the remaining balance. Creditors may still pursue the debtor for the outstanding amount, and the impact on credit can be significant.

**4. Credit Impact and Rebuilding:

  • Chapter 13 Advantage: While both Chapter 13 bankruptcy and debt settlement have an impact on credit, Chapter 13 provides a clearer path to rebuilding credit. Debtors can start the process of rebuilding credit immediately after completing the repayment plan.
  • Debt Settlement Challenge: Debt settlement may result in negative entries on the credit report, potentially affecting the debtor’s ability to secure credit in the future. Rebuilding credit after settlement can be a more prolonged process.

Conclusion: A Comprehensive Solution for Financial Recovery

In the realm of financial recovery, Chapter 13 bankruptcy emerges as a more comprehensive and structured solution compared to debt settlement. The protection, oversight, and potential for a complete discharge of qualifying debts make Chapter 13 a powerful tool for those seeking a fresh start. While debt settlement may offer some relief, the lack of a formalized plan and the uncertainty surrounding debt resolution make Chapter 13 the preferred choice for individuals navigating the complexities of financial challenges. Before making a decision, consulting with a qualified bankruptcy attorney is essential to understand the unique advantages Chapter 13 bankruptcy can offer based on individual circumstances.

Schedule a free bankruptcy consultation with Jennifer Weil, a New Jersey bankruptcy attorney, to discuss your options.

Chapter 13 Bankruptcy: Your Path to Debt Collection Relief

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Introduction:

When faced with overwhelming debt and relentless debt collection efforts, Chapter 13 bankruptcy can provide a powerful solution for regaining control of your financial life. This form of bankruptcy allows individuals to restructure their debts and establish a manageable repayment plan. In this article, we will explore how Chapter 13 bankruptcy can provide relief from debt collection and pave the way towards financial recovery.

  1. Understanding Chapter 13 Bankruptcy: Chapter 13 bankruptcy, also known as a wage earner’s plan, is a legal process that allows individuals with regular income to create a structured repayment plan to repay their debts over a specified period, usually three to five years. It provides an opportunity to regain control of your finances while protecting your assets from liquidation.
  2. Automatic Stay and Halting Debt Collection: One of the most significant advantages of filing for Chapter 13 bankruptcy is the automatic stay. As soon as you file your bankruptcy petition, an automatic stay goes into effect, halting all debt collection activities. This means creditors must cease all collection efforts, including lawsuits, wage garnishments, phone calls, and letters. The automatic stay provides immediate relief, allowing you to focus on the restructuring and repayment process.
  3. Creating a Repayment Plan: In Chapter 13 bankruptcy, you work with a bankruptcy trustee to create a repayment plan tailored to your income and financial situation. This plan consolidates your debts into a single monthly payment, which is then distributed to creditors over the designated repayment period. The repayment plan takes into account your essential living expenses and allows for a reasonable repayment of your debts.
  4. Debt Reduction and Discharge: Under the Chapter 13 repayment plan, you may be eligible for debt reduction or discharge. Certain debts, such as credit card balances, medical bills, and personal loans, can be reduced or discharged based on your income and the repayment plan. However, it’s important to note that some debts, such as child support, alimony, and certain tax obligations, must be paid in full.
  5. Protection of Assets: Chapter 13 bankruptcy offers a distinct advantage in protecting your assets from liquidation. Unlike Chapter 7 bankruptcy, where non-exempt assets may be sold to repay creditors, Chapter 13 allows you to retain your assets while repaying your debts over time. This enables you to maintain your home, car, and other essential belongings, providing a stable foundation for financial recovery.
  6. Financial Rehabilitation and Credit Repair: While Chapter 13 bankruptcy may impact your credit score, it also offers an opportunity for financial rehabilitation and credit repair. By adhering to the repayment plan and consistently making payments, you demonstrate financial responsibility, which can positively impact your creditworthiness over time. Establishing responsible financial habits during and after the bankruptcy process will aid in rebuilding your credit.
  7. Working with a Bankruptcy Attorney: Navigating the complexities of Chapter 13 bankruptcy requires professional guidance. Hiring a qualified bankruptcy attorney is crucial to ensure a smooth and successful process. They will help you evaluate your financial situation, guide you through the legal requirements, negotiate with creditors, and create a repayment plan that is feasible and sustainable.

Conclusion:

Chapter 13 bankruptcy offers a powerful solution for individuals burdened by debt and struggling with relentless debt collection efforts. By taking advantage of the automatic stay, creating a structured repayment plan, protecting assets, and working towards debt reduction or discharge, Chapter 13 bankruptcy provides relief from debt collection and the opportunity for financial recovery. Consulting with a knowledgeable bankruptcy attorney will ensure that you navigate the process effectively, helping you establish a solid foundation for a brighter financial future.

Schedule a free telephone appointment to discuss your unique debt situation with attorney Jennifer Weil at my Setmore page.

Why Bankruptcy Attorney Fees are a Wise Investment – A Guide to Debt Relief

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If you’re facing overwhelming debt, you may be considering various options for debt relief. While the cost of hiring a bankruptcy attorney may seem like an added expense, it can actually be a wise investment. In this post, I’ll explore why bankruptcy attorney fees are a good deal and how they can help you achieve a fresh start.

Expertise: Bankruptcy is a complex legal process, and working with an experienced attorney is crucial for ensuring a successful outcome. Attorneys are knowledgeable in bankruptcy law and can guide you through the process, meeting all necessary deadlines and requirements.

Protection: A bankruptcy attorney provides legal protection and representation in court. They can help protect your assets and negotiate with creditors on your behalf, ensuring your rights are protected and that you are not taken advantage of.

Fresh Start: Bankruptcy offers individuals a fresh start by discharging most unsecured debts, allowing you to rebuild your financial future. A bankruptcy attorney can help ensure the process is completed correctly and all of your debts are discharged.

Savings: While attorney fees may seem costly, the savings from a successful bankruptcy can often outweigh the cost. In many cases, individuals can save thousands of dollars by discharging their debts through bankruptcy instead of negotiating a settlement or paying off debts over a longer period.

In conclusion, hiring a bankruptcy attorney is a wise investment for individuals struggling with debt. With expert guidance, legal protection, a fresh start, and potential savings, bankruptcy attorney fees can be a good deal for those seeking debt relief. Find a reputable and experienced attorney to help guide you through the bankruptcy process.

Struggling to Make Minimum Credit Card Payments? Explore Your Options

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Struggling to make minimum payments on your credit card debt and unable to save any money? You may want to consider bankruptcy as an option for debt relief. If your credit card debt has become overwhelming, debt settlement and bankruptcy are the two main options for financial relief.

While debt settlement may seem like an attractive option, it can often be more expensive than bankruptcy. You will have to pay back at least a portion of your debt, and there’s no protection from debt collection lawsuits.

On the other hand, filing for bankruptcy offers protection from debt collection activities such as lawsuits. With Chapter 7 bankruptcy, you may be able to have your entire credit card debt discharged for the cost of attorney fees and filing fees. If you file for Chapter 13, you’ll pay back a portion of your debt under the protection of bankruptcy from debt collection activity.

It’s important to weigh your options and consider the financial and legal implications before making a decision on debt relief. Contact a bankruptcy attorney to discuss your options and determine if bankruptcy is the right choice for you.

Do you have questions about whether you should file for bankruptcy? Schedule a phone consultation with attorney Jennifer Weil on the Setmore page.

Do you really need Ch. 13 to save your home?

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When does filing a Chapter 7 bankruptcy case help enough so that you don’t need a 3-to-5-year Chapter 13 case?

If you are behind on your mortgage payments but want to keep your home, you have likely heard that a Chapter 13 “payment plan” is what you need. And that IS a powerful package, with an impressive set of tools to deal with a wide variety of home-related problems—everything from the mortgages themselves to property taxes, income tax liens, and judgment liens.

But what if you need to discharge other debts to get a fresh start and you have managed to fall only a couple of months behind on your mortgage? Or what if you are not keeping the house, but just need a little more time to find another place to live?

Then you might not need a Chapter 13 case – you may be able to avoid the disadvantages it comes with. Some of these disadvantages are that it takes so much longer and generally costs more than Chapter 7. The extra time and cost can be well worthwhile when you need the great advantages of Chapter 13, but let’s look at ways that Chapter 7 can do enough for your home:

In a Chapter 7 case:

1. The “automatic stay”—the bankruptcy provision that stops virtually all actions by creditors against you or your property—applies to Chapter 7 just as it does to Chapter 13. So the filing of a Chapter 7 case STOPS a foreclosure in its tracks, just as quickly as a Chapter 13 filing. But if you are just trying to buy time to save money to rent an apartment, the tough question is HOW LONG that break in the mortgage company’s foreclosure efforts will last, and how much extra time it’ll buy you. An aggressive creditor could quickly ask the court for “relief from the stay”—permission to resume the foreclosure process—thus potentially getting you only a few extra weeks. Or in the other extreme, a mortgage creditor could just do nothing for the 3 months or so until your Chapter 7 case runs its course and the “automatic stay” expires with the completion of your case. So, Chapter 7 often does not come with much predictability about how much time you’d gain. On the other hand, your bankruptcy attorney may have experience in how fast certain mortgage lenders tend to ask for “relief from stay” under facts similar to yours.

2. Chapter 7 stops—at least briefly—not only mortgage foreclosures, but also prevents other potential liens from being placed against your house, including the IRS’s tax liens and judgment liens. But why would the few weeks or months that Chapter 7 gains make any difference with these kinds of creditors? In the right set of facts, it can make many thousands of dollars of difference.

• A timely filing of a Chapter 7 case can prevent you from having to pay a debt that would otherwise have become a lien against your house. For example, let’s say you have an older IRS debt that meets the necessary conditions for discharge, and you also have a little equity in your home but not more than your homestead exemption allows. If you waited until after the IRS recorded a tax lien for that debt against your house, that lien would continue being attached to your house even if you filed a bankruptcy and would eventually have to be paid. However, if your Chapter 7 filing happened before the IRS recorded a tax lien, the “automatic stay” would prevent that tax lien from being filed and the debt would be discharged.

• Or if instead let’s say you have a debt that is NOT going to be discharged in bankruptcy—say a more recent tax debt—but you also had some assets that you were going to have to surrender to the Chapter 7 trustee, what we call an “asset case.” If again you filed the bankruptcy case before the recording of the tax lien, your Chapter 7 trustee could well pay those taxes as a “priority” debt in front of any of your other debts, potentially leaving you with no tax debt at the completion of your case.

3. Chapter 7 allows you to concentrate on your house payments by getting rid of your other debts. If you’ve managed to keep current on those mortgage payments, but don’t know how long you will be able to do so, the relief you get from discharging your other debts improves your odds of staying current on your home long term. Or if you have missed only a few mortgage payments, AND can reliably make future ones, PLUS enough to catch up on your arrearage within year or less, then Chapter 7 would likely do enough for you. Most mortgage creditors will let you enter into an agreement –often called a “forbearance agreement”—to catch up the missed payments by paying a sufficient specific amount extra each month until you’re caught up, again, as long as that period of catch-up time is relatively short. Otherwise, you may well need a Chapter 13.

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Wage Garnishments: Can bankruptcy stop them?

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Paycheck

Are you facing wage garnishment and seeking swift relief through bankruptcy? Discover how bankruptcy can quickly halt wage garnishment and provide much-needed financial relief.

Wage garnishment can be a distressing experience, leaving individuals struggling to make ends meet while creditors seize a portion of their earnings. Fortunately, bankruptcy offers a powerful solution to stop wage garnishment and regain control over your financial situation.

In this comprehensive guide, we’ll explore how bankruptcy works to stop wage garnishment, the timeline for achieving relief, and the steps you can take to navigate the process effectively.

Understanding Wage Garnishment

Wage garnishment is a legal process through which a creditor can collect debts by deducting money directly from an individual’s paycheck. Common reasons for wage garnishment include unpaid medical bills, credit card debts, and outstanding loans.

While wage garnishment laws vary by state, creditors typically must obtain a court order before initiating garnishment. Once in effect, wage garnishment can significantly impact an individual’s finances, making it challenging to cover essential expenses and maintain a decent standard of living.

How Bankruptcy Stops Wage Garnishment

Bankruptcy provides immediate relief from wage garnishment through the automatic stay—a legal injunction that halts creditor actions, including wage garnishment, upon filing for bankruptcy. The automatic stay goes into effect as soon as the bankruptcy petition is filed with the court, providing instant protection against further garnishment.

Chapter 7 vs. Chapter 13 Bankruptcy

Both Chapter 7 and Chapter 13 bankruptcy offer protection against wage garnishment, but they differ in how they address debt repayment:

Chapter 7 Bankruptcy: Also known as liquidation bankruptcy, Chapter 7 involves the sale of non-exempt assets to repay creditors. Once the bankruptcy petition is filed, the automatic stay immediately stops wage garnishment. However, if the debt that led to garnishment is dischargeable, it will be eliminated entirely, providing long-term relief from wage garnishment.

Chapter 13 Bankruptcy: In contrast, Chapter 13 bankruptcy allows individuals to restructure their debts through a court-approved repayment plan. The automatic stay stops wage garnishment upon filing, and the repayment plan provides a structured framework for repaying debts over three to five years. This can offer a more sustainable solution for individuals who want to keep their assets and repay debts over time.

The Timeline for Stopping Wage Garnishment with Bankruptcy

The timeline for stopping wage garnishment with bankruptcy can vary depending on several factors, including the type of bankruptcy filed and the specifics of the individual’s financial situation:

Immediate Relief: The automatic stay goes into effect as soon as the bankruptcy petition is filed with the court, providing immediate relief from wage garnishment. Creditors are legally required to cease all garnishment activities once they receive notice of the bankruptcy filing.

Notification to Employer: Once the automatic stay is in place, the bankruptcy trustee will notify the individual’s employer to halt wage garnishment. Employers typically receive notification within a few days of the bankruptcy filing and must comply with the court order to stop garnishing wages.

Resolution of Garnishment: In some cases, it may take additional time for the employer to process the notification and stop wage garnishment entirely. However, the automatic stay prevents creditors from continuing garnishment efforts during this period, providing temporary relief until the matter is fully resolved.

Long-Term Debt Relief: Beyond stopping wage garnishment, bankruptcy offers individuals the opportunity for long-term debt relief and financial stability. Whether through Chapter 7 or Chapter 13 bankruptcy, individuals can eliminate or restructure debts, regain control over their finances, and work towards a brighter financial future.

Navigating the Bankruptcy Process

Navigating the bankruptcy process can be complex, especially when seeking relief from wage garnishment. To ensure a smooth and successful outcome, consider the following steps:

Consult with a Bankruptcy Attorney: A knowledgeable bankruptcy attorney can provide valuable guidance and assistance throughout the bankruptcy process. From determining the best type of bankruptcy for your situation to preparing and filing the necessary paperwork, an attorney can help you navigate the process with confidence.

Gather Financial Documentation: Be prepared to provide detailed information about your financial situation, including income, expenses, assets, and debts. This information will be essential for completing the bankruptcy petition and developing a repayment plan (if applicable).

Attend Credit Counseling: Individuals filing for bankruptcy must complete a credit counseling course from an approved provider before filing. This course offers valuable financial education and guidance to help individuals make informed decisions about their financial future.

Follow Court Orders: Once the bankruptcy petition is filed, it’s essential to comply with all court orders and requirements. This includes attending scheduled court hearings, providing requested documentation, and adhering to the terms of the bankruptcy process.

Monitor Progress: Stay informed about the progress of your bankruptcy case and communicate regularly with your attorney and the bankruptcy trustee. This will ensure that you stay on track and address any issues or concerns promptly.

Conclusion

Wage garnishment can have a significant impact on your financial well-being, but bankruptcy offers a powerful solution for stopping garnishment and regaining control over your finances. Whether through Chapter 7 or Chapter 13 bankruptcy, individuals can achieve immediate relief from wage garnishment and work towards long-term debt relief and financial stability.

If you’re facing wage garnishment and considering bankruptcy, consult with a qualified bankruptcy attorney to explore your options and determine the best course of action for your financial situation. With the right guidance and support, you can navigate the bankruptcy process successfully and take steps towards a brighter financial future.

Schedule a free bankruptcy consultation with Jennifer Weil, a New Jersey bankruptcy attorney, to discuss your options.

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How bankruptcy can help save your small business

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Bankruptcy isn’t just for winding up after the end of a business.  It can help keep your business around for longer.

Bankruptcy saves a lot of companies.  Companies can get out of a lot of debt, restructure their operations, and save a lot of jobs.  If you own and run a small business, bankruptcy may be able to save your job, too.

Let’s assume you have a small, simple business.  One so simple that you did not form a corporation or any other kind of legal entity when you set it up.  And let’s assume that you don’t have any partners – that is, you have a sole proprietorship.

In a sole proprietorship, you and your small business are treated as a single unit—unlike a corporation, which is legally separate from you and which owns its own assets and has its own debts.  In the right circumstances, a sole proprietorship can be easier to handle in a bankruptcy.

A Chapter 7 liquidation is seldom a good option if you own a business that you want to keep operating during and after the bankruptcy.  You can discharge your debts in return for liquidation—the surrender of your assets to the trustee to sell and distribute to your creditors. Except that in most Chapter 7 cases everything you own is protected–“exempt”—so that you lose nothing or very little. But if you own an ongoing business, you are likely to have some non-exempt assets.  So the Chapter 7 trustee could take some important parts of your business to sell off or otherwise shut down.

Instead, a Chapter 13 case— sometimes called a “wage-earner plan”—is much better designed to enable you keep your personal and business assets.  You get immediate relief from your creditors under the automatic stay, and for a much longer period of time, usually with a significant reduction in the amount of debt to be repaid.  So Chapter 13 can help both your immediate cash flow and your long-term prospects.  It is also a good way to address tax debt, which is often an issue for struggling businesses.  Overall, it can be a relatively inexpensive tool that combines the discipline of a court-approved payment plan with the flexibility of continuing the operation of your business.

Please understand that when you own ANY kind of business, solving your financial problems will be more complicated.  This is because you are  not dealing merely with the size and timing of a paycheck, but instead with all the financial and practical aspects of running a business.  In addition,  timing issues are often more important in business bankruptcy cases and they require more pre-bankruptcy planning to plot out the best path for you.  So, no matter how small your business, be sure to get thorough legal advice as soon as possible.

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Is a Creditor Getting a Judgment Against You?

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If you have a judgement against you from a creditor, it can hurt you. Judgments can hurt in three ways:  1) They allow the creditor to use powerful collection tools against you; 2) A judgment can make you rush into bankruptcy at a bad time; and 3) Under some circumstances, a judgment can make it harder to discharge the debt in your bankruptcy.  This post addresses only the first of these three.

Most creditor and collection-agency lawsuits for debt collection result in judgments against those who owe the debts. That’s because the reason for debt collection suits is to legally establish that the debt is owed, which is usually not in dispute. Also, much of the time the debtors are at the ends of their financial ropes and can’t afford an attorney to find out their options or to defend the lawsuit. So judgments are entered “by default”—meaning the deadline for the debtors to respond passed without any action by them, allowing the creditor to get a judgment. Sometimes debtors do not receive notice that a judgment has been entered against them or they receive notice and do not recognize it for what it is. Thus, many debtors do not realize there are judgments against them, especially when nothing apparently happens for months or even years afterwards. And very few people are fully aware of the possible consequences.

Most people know that a judgment gives a creditor the power to garnish wages and/or to levy against bank accounts. But preventing garnishments by keeping your bank account empty and by not being paid a regular wage often are not enough to make you “judgment proof.” For example, a judgment usually becomes a lien against any real estate you own now or will own in the future. That includes not only property held in your own name but also your rights to property held jointly with a spouse, parent, or through a trust or estate. A creditor has other tools available, including getting a judge to order you to answer questions under oath, in writing, about what you own – in New Jersey, this is called an “information subpoena”.

Beyond the direct damage a creditor with a judgment can do to you before you file your case, such a creditor can cause you problems in your bankruptcy case.

If you file bankruptcy quickly to stop a garnishment or other collection activity, you lose one of your most important advantages: the timing of your bankruptcy filing. Much of what happens in your bankruptcy case turns on exactly when it was filed. Not having the flexibility to pick the best timing can, among other things, turn a Chapter 7 into a Chapter 13, can mean a difference of many thousands of dollars, and can turn a straightforward case that meets your goals into a more complicated matter.

The lesson here is, whenever possible, take the time to see a bankruptcy attorney if you have overall financial problems, particularly if you are being sued. Try not to wait until after a judgment has been entered against you.

Photo by Dennis Wong.