Tag Archives: Chapter 7

Can I File for Bankruptcy Again? Understanding the Rules and Timing

Filing for bankruptcy can be a lifeline for those overwhelmed by debt. But what if you’ve already gone through the process once and find yourself in financial trouble again? Can you file for bankruptcy a second time? The short answer is yes, but there are specific rules and waiting periods you need to understand.

Filing for Bankruptcy More Than Once: Is It Possible?

Yes, you can file for bankruptcy more than once. The U.S. Bankruptcy Code allows individuals to file multiple bankruptcies throughout their lifetime. However, there are important restrictions and time limits between filings, depending on the type of bankruptcy you filed previously and the type you plan to file next.

How Long Do I Have to Wait to File Bankruptcy Again?

The waiting period between bankruptcy filings depends on the chapters under which you filed and plan to file. Here’s a breakdown:

1. Chapter 7 to Chapter 7

Waiting Period: 8 years from the date of the first filing.
If you previously filed for Chapter 7 bankruptcy and received a discharge, you must wait eight years before you can file for Chapter 7 again. This extended period is designed to prevent abuse of the bankruptcy system.

2. Chapter 7 to Chapter 13

Waiting Period: 4 years from the date of the first filing.
If you initially filed for Chapter 7 and received a discharge, you can file for Chapter 13 bankruptcy after four years. Filing for Chapter 13 after a Chapter 7 discharge is sometimes referred to as a “Chapter 20” bankruptcy. While you won’t be able to discharge your debts in Chapter 13, you can use it to catch up on missed mortgage or car payments.

3. Chapter 13 to Chapter 13

Waiting Period: 2 years from the date of the first filing.
If your previous bankruptcy was a Chapter 13, you must wait at least two years before filing for Chapter 13 again. Since Chapter 13 plans typically last three to five years, this means you can file again almost immediately after your previous case is discharged.

4. Chapter 13 to Chapter 7

Waiting Period: 6 years from the date of the first filing.
If you previously filed for Chapter 13 and received a discharge, you must wait six years before filing for Chapter 7. However, there are exceptions. If you paid back 100% of your unsecured debts or 70% with a good-faith effort, you may be able to file Chapter 7 earlier.

Why Are There Waiting Periods?

The waiting periods between bankruptcy filings exist to ensure that bankruptcy is used as a last resort and not as a regular financial strategy. These rules are meant to encourage individuals to work toward financial stability rather than relying on multiple bankruptcies. Multiple bankruptcies in a relatively short period of time may be considered a form of bankruptcy abuse.

What If I Didn’t Receive a Discharge?

If your previous bankruptcy case was dismissed or you didn’t receive a discharge for some reason (e.g., you didn’t complete the required paperwork, or the court denied your discharge due to fraud), the waiting periods mentioned above don’t apply. You may be able to file again immediately, but the outcome of your case will depend on the reasons for the dismissal or denial.

Considerations Before Filing for Bankruptcy Again

Before deciding to file for bankruptcy again, consider these important factors:

Impact on Credit: Multiple bankruptcies will significantly impact your credit score, which may make it more difficult to obtain loans, mortgages, or credit cards in the future.
Legal and Filing Fees: Filing for bankruptcy multiple times can be costly. Make sure you understand the financial implications, including attorney fees and court costs.
Alternatives to Bankruptcy: Explore other debt relief options, such as debt consolidation, negotiation with creditors, or financial counseling, before resorting to bankruptcy again.

Final Thoughts

Filing for bankruptcy more than once is possible, but it’s important to understand the rules and waiting periods that apply. Bankruptcy can provide relief, but it’s not a decision to be taken lightly. If you’re considering filing again, consult with a bankruptcy attorney to discuss your options and develop a plan that’s right for your financial situation.

By understanding the timing and implications, you can make an informed decision that helps you regain control of your financial future.

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

Understanding Federal Bankruptcy Exemptions for Chapter 7 and Chapter 13 Filings in New Jersey

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Filing for bankruptcy can be a complex and daunting process. If you are considering either Chapter 7 or Chapter 13 bankruptcy in New Jersey, it is essential to understand how federal bankruptcy exemptions work. These exemptions play a crucial role in determining which assets you can keep and how your debts will be handled. This blog post will guide you through the step-by-step process of using federal bankruptcy exemptions when filing for either Chapter 7 or Chapter 13 bankruptcy in New Jersey.

What Are Federal Bankruptcy Exemptions?

Federal bankruptcy exemptions are specific laws that protect certain assets from being seized by creditors during bankruptcy proceedings. These exemptions are designed to help individuals retain essential property, allowing them to maintain a basic standard of living while they work through their financial difficulties.

Choosing Between Federal and State Exemptions

In New Jersey, you have the option to choose between federal bankruptcy exemptions and state-specific exemptions. It’s important to note that you cannot mix and match; you must select one set of exemptions entirely. Here’s a brief overview of how to decide:

Federal Exemptions: Generally more favorable for protecting certain types of personal property, retirement accounts, and wildcard exemptions that can be applied to any property.
State Exemptions: May offer protection for specific personal property or other assets; generally, the Federal bankruptcy exemptions are more generous than the New Jersey state exemptions. Most people choose the Federal exemptions.

Since the focus here is on federal exemptions, let’s dive into the specifics of how they apply to Chapter 7 and Chapter 13 bankruptcies in New Jersey.

Filing for Chapter 7 Bankruptcy in New Jersey

Step 1: Determine Eligibility

Chapter 7 bankruptcy, also known as “liquidation bankruptcy,” requires you to pass a means test. This test compares your income to the median income for a household of your size in New Jersey. If your income is below the median, you are eligible to file for Chapter 7.

Step 2: List All Assets and Debts

You must provide a comprehensive list of all your assets and debts. This includes real estate, personal property, bank accounts, and any other financial interests.

Step 3: Apply Federal Exemptions

Federal bankruptcy exemptions are crucial in Chapter 7 filings because they determine which assets you can keep. Key federal exemptions include:

Homestead Exemption: Up to $27,900 of equity in your primary residence.
Motor Vehicle Exemption: Up to $4,450 of equity in one vehicle.
Household Goods and Furnishings: Up to $700 per item, not exceeding $14,875 in total.
Jewelry: Up to $1,875.
Wildcard Exemption: Up to $1,475 plus up to $13,950 of any unused portion of the homestead exemption, applicable to any property.
Retirement Accounts: Exempt up to $1,512,350 in IRAs and Roth IRAs. Other tax-exempt retirement accounts are fully exempt.

The dollar amounts listed above change regularly. Please consult a bankruptcy attorney to discuss whether the items you own may be exempt.

Step 4: Liquidation of Non-Exempt Assets

Any assets that are not covered by federal exemptions may be sold by the bankruptcy trustee to pay off your creditors. However, the exemptions typically allow most filers to retain essential property.

Step 5: Discharge of Debts

Once the non-exempt assets are liquidated, the remaining qualifying debts will be discharged, giving you a fresh financial start.

Filing for Chapter 13 Bankruptcy in New Jersey

Step 1: Determine Eligibility

Chapter 13 bankruptcy, or “reorganization bankruptcy,” is designed for individuals with a regular income who can repay some or all of their debts over a three to five-year period. There are no technical income requirements like in Chapter 7, but your secured and unsecured debts must be below certain limits. In most circumstances, you must be able to afford a regular monthly payment throughout a three to five-year Chapter 13 case.

Step 2: Develop a Repayment Plan

You will propose a repayment plan detailing how you intend to pay off your debts over the plan period. This plan must be approved by the bankruptcy court.

Step 3: Apply Federal Exemptions

Federal exemptions in Chapter 13 bankruptcy serve to protect your assets from being liquidated to pay creditors. As in Chapter 7, the exemptions determine what property you can keep while making payments under your repayment plan. The same federal exemptions apply:

Homestead Exemption: Protects equity in your home.
Motor Vehicle Exemption: Protects equity in your vehicle.
Household Goods and Furnishings: Protects essential household items.
Wildcard Exemption: Offers additional protection for other property.
Retirement Accounts: Ensures your retirement savings remain intact.

Step 4: Court Approval of Repayment Plan

The bankruptcy court will review your Chapter 13 repayment plan, ensuring it is feasible and meets the requirements of the bankruptcy code. Once approved, you will begin making payments to a bankruptcy trustee, who will distribute the funds to your creditors.

Step 5: Completion of Repayment Plan and Discharge

After successfully completing your Chapter 13 repayment plan, any remaining qualifying debts will be discharged. This discharge releases you from personal liability for the discharged debts, marking the end of your bankruptcy case.

Conclusion

Navigating federal bankruptcy exemptions is a critical part of the bankruptcy process, whether you are filing for Chapter 7 or Chapter 13 in New Jersey. By understanding how these exemptions work, you can better protect your assets and make informed decisions about your financial future. If you are considering bankruptcy, consulting with a knowledgeable bankruptcy attorney can provide valuable guidance tailored to your specific situation.

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

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:

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.
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:

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.
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.
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.

Getting Rid of Debt: How Bankruptcy Transformed Sarah’s Life

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Introduction

Meet Sarah, a hardworking individual who found herself drowning in a sea of credit card debt. Like many others, Sarah initially turned to credit cards to cover unexpected expenses and make ends meet. However, as interest rates climbed and payments became unmanageable, Sarah realized she was trapped in a cycle of debt with no clear way out. That’s when she turned to our consumer bankruptcy service for help.

Please note that while “Sarah” is not a real client, this story is broadly representative of many that this practice has assisted with in real life. That said, every individual’s financial situation is unique and deserves to be separately evaluated to determine whether bankruptcy might be beneficial, and if it is, which chapter of bankruptcy would be the best choice. There are situations in which bankruptcy may not be a good idea.

Sarah’s Struggle

Sarah’s journey began with a single credit card, but soon spiraled into multiple accounts with mounting balances and relentless collection calls. Despite her best efforts to keep up with payments, Sarah found herself falling further behind, her credit score plummeting with each missed payment. Feeling overwhelmed and hopeless, Sarah knew she needed a lifeline to break free from the burden of bad credit card debt.

Finding a Solution

Enter our consumer bankruptcy service, where Sarah found the support and guidance she needed to navigate the complex world of bankruptcy. With our expert assistance, Sarah explored her options and ultimately decided to file for Chapter 7 bankruptcy, which allowed her to discharge her unsecured debts, including credit card balances, and start fresh with a clean slate.

The Transformation

The moment Sarah’s bankruptcy was finalized, she felt a weight lift off her shoulders. No longer burdened by the constant stress of overdue bills and harassing collection calls, Sarah could finally breathe a sigh of relief. With our help, Sarah not only achieved her goal of freedom from bad credit card debt but also gained a newfound sense of financial empowerment and control over her future.

Moving Forward

Today, Sarah is on a path to rebuilding her credit and securing a brighter financial future. Armed with the knowledge and tools provided by our consumer bankruptcy service, Sarah is making smart financial decisions, budgeting wisely, and prioritizing her long-term goals. While her journey was not without challenges, Sarah’s story serves as a reminder that there is hope and a way forward, even in the face of overwhelming debt.

Conclusion

At our consumer bankruptcy service, we understand the impact that bad credit card debt can have on individuals and families. That’s why we’re dedicated to providing compassionate and effective solutions to help our clients achieve financial freedom. If you’re struggling with credit card debt and seeking a way out, don’t hesitate to reach out to us. Together, we can help you write the next chapter of your financial story—one of empowerment, freedom, and hope.

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

The Impact of Chapter 7 Bankruptcy on Credit Scores

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Introduction

Chapter 7 bankruptcy is a legal process designed to provide individuals and businesses with a fresh start by liquidating non-exempt assets to pay off creditors. While it offers relief from overwhelming debt, there are significant consequences, particularly in terms of credit scores. This article explores the complex relationship between Chapter 7 bankruptcy and credit scores, shedding light on the short-term and long-term effects, as well as strategies to rebuild credit post-bankruptcy.

Immediate Impact on Credit Scores

Upon filing for Chapter 7 bankruptcy, the debtor’s credit score typically experiences a sharp decline. The bankruptcy entry itself remains on the individual’s credit report for ten years, affecting their ability to secure new credit or loans. Creditors view Chapter 7 as a serious negative event, as it implies an inability to repay debts as agreed.

However, it’s crucial to recognize that individuals considering Chapter 7 bankruptcy often already have severely damaged credit due to late payments, defaults, and high levels of debt. In some cases, bankruptcy might be the best option for a debtor to break free from an unsustainable financial situation.

Long-Term Credit Score Rebuilding

While Chapter 7 bankruptcy can have a profound initial impact on credit scores, its long-term effects are not as dire as one might assume. Over time, the negative impact on credit scores tends to diminish, especially if the debtor takes proactive steps to rebuild their credit responsibly.

Here are some key factors that influence the recovery of credit scores post-Chapter 7 bankruptcy:

Debt Discharge:
- Chapter 7 discharges most unsecured debts, allowing individuals to start fresh without the burden of overwhelming financial obligations.
- This can create a foundation for responsible financial behavior moving forward.
Rebuilding Credit Responsibly:
- Obtaining new credit after bankruptcy is challenging, but it’s not impossible.
- Securing a secured credit card or a credit-builder loan can be instrumental in rebuilding credit. Timely payments -in full – on these accounts can positively impact credit scores.
Credit Counseling:
- Participating in credit counseling programs can demonstrate a commitment to financial responsibility.
- Some credit counseling agencies offer educational resources to help individuals manage their finances more effectively.
Timely Bill Payments:
- Making timely payments on remaining obligations, such as mortgage or car payments, does not usually contribute positively to credit scores if those obligations existed prior to your bankruptcy case.
- The key is to obtain new, post-bankruptcy accounts and to pay those bills on time and in full each and every month.
- Establishing a history of on-time payments is crucial for rebuilding credit.
Patience and Persistence:
- While the bankruptcy entry remains on the credit report for ten years, its impact lessens over time.
- With responsible financial behavior, individuals can see gradual improvement in their credit scores.

Conclusion

Chapter 7 bankruptcy undoubtedly has a significant and immediate impact on credit scores. However, it is not a permanent scar, and individuals can take steps to rebuild their credit over time. By adopting responsible financial habits, participating in credit counseling, and strategically obtaining new credit, individuals can navigate the post-bankruptcy landscape and work towards a healthier financial future. Ultimately, the decision to file for Chapter 7 bankruptcy should be made after careful consideration of one’s unique financial situation and with a clear understanding of the potential consequences on credit scores.

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

Decoding the Chapter 7 Means Test

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Introduction:

When considering Chapter 7 bankruptcy, understanding the means test is essential. The means test helps determine eligibility by comparing your income to the median income in your state. This article provides a comprehensive guide to help you understand how the Chapter 7 means test works and its significance in the bankruptcy process.

Purpose of the Means Test: The means test was introduced as part of the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) to prevent abuse of Chapter 7 bankruptcy by individuals with higher incomes. Its primary purpose is to ensure that those who have the means to repay some of their debts are directed towards Chapter 13 bankruptcy instead.
Calculating Median Income: To begin the means test, you must determine your household’s current monthly income. This includes income from all sources, such as employment, self-employment, rental properties, and retirement benefits. Next, compare your income to the median income for a household of the same size in your state. The median income figures are regularly updated and can be obtained from the U.S. Trustee Program’s website or your local bankruptcy court.
If Your Income Is Below the Median: If your income falls below the median income for your state, you automatically pass the means test and are eligible to file for Chapter 7 bankruptcy without further scrutiny. However, it’s important to note that passing the means test doesn’t guarantee approval, as other factors will be considered during the bankruptcy process.
If Your Income Is Above the Median: If your income exceeds the median income, you’ll need to proceed with the second part of the means test, which analyzes your disposable income. This calculation deducts specific allowable expenses from your current monthly income to determine the amount available for debt repayment.
Deducting Allowable Expenses: The means test allows deductions for certain standardized expenses based on predetermined guidelines. The remaining income after deducting allowable expenses represents your disposable income.
Disposable Income and Chapter 7 Eligibility: The amount of disposable income you have plays a significant role in determining your eligibility for Chapter 7 bankruptcy. If your disposable income falls below a certain threshold, you are likely to qualify for Chapter 7. However, if your disposable income exceeds the threshold, you may be required to file for Chapter 13 bankruptcy, which involves a repayment plan based on your income and debts.
Seeking Professional Guidance: Navigating the means test and its complexities can be challenging. It is highly recommended to consult with a qualified bankruptcy attorney who can provide personalized advice based on your unique financial situation. They will help ensure accurate completion of the means test and guide you through the bankruptcy process.

Conclusion:

The Chapter 7 means test is a crucial component of determining eligibility for bankruptcy relief. Understanding how it works and its implications is vital when considering filing for Chapter 7 bankruptcy. By calculating your income, comparing it to the median income, deducting allowable expenses, and determining your disposable income, you can gain clarity on your eligibility. Remember, consulting with a knowledgeable bankruptcy attorney is crucial for accurate completion of the means test and obtaining the best possible outcome in your bankruptcy case.

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

Understanding the Chapter 7 Bankruptcy Process: A Step-by-Step Guide

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Introduction:

When faced with overwhelming debt and financial hardship, Chapter 7 bankruptcy can provide a fresh start and a chance to regain control of your financial future. However, understanding the bankruptcy process is crucial to navigate it successfully. This article will guide you through the Chapter 7 bankruptcy process, providing a step-by-step explanation of how it works.

Eligibility and Pre-Filing Requirements: Before filing for Chapter 7 bankruptcy, it’s important to determine if you meet the eligibility criteria. To qualify, you must pass the means test, which compares your income to the median income in your state. Additionally, you are required to complete credit counseling from an approved agency within 180 days prior to filing.
Hiring a Bankruptcy Attorney: While it’s possible to file for Chapter 7 bankruptcy on your own, it’s highly recommended to seek professional guidance from a qualified bankruptcy attorney. They will help you understand the intricacies of the process, navigate legal requirements, and ensure that your rights are protected throughout the proceedings.
Filing the Bankruptcy Petition: To initiate the Chapter 7 bankruptcy process, you must file a bankruptcy petition with the bankruptcy court. The petition includes detailed financial information, including your income, expenses, assets, debts, and a list of creditors. Additionally, you must submit supporting documents, such as tax returns, pay stubs, and bank statements.
Automatic Stay and Credit Counseling: Once the bankruptcy petition is filed, an automatic stay goes into effect. The automatic stay prohibits creditors from taking further collection actions, including lawsuits, wage garnishments, and harassing phone calls. It provides immediate relief and allows you to focus on the bankruptcy process.
Appointment of a Trustee: After filing the bankruptcy petition, a bankruptcy trustee will be appointed by the court to oversee your case. The trustee’s role is to review your petition, verify the accuracy of the information provided, and ensure compliance with bankruptcy laws.
Creditors Meeting and Asset Liquidation: Approximately 20-40 days after filing, you will attend a meeting of creditors, also known as a 341 meeting. During this meeting, the trustee and your creditors have the opportunity to ask you questions about your finances and the bankruptcy filing. In Chapter 7 bankruptcy, the trustee may liquidate certain non-exempt assets to repay a portion of your debts. However, many individuals filing for Chapter 7 bankruptcy are able to retain most, if not all, of their assets due to state exemptions.
Discharge of Debts: If all goes well and no objections are raised, you will receive a discharge order from the court. The discharge order releases you from personal liability for most unsecured debts, including credit card debt, medical bills, and personal loans. This means you are no longer legally obligated to repay these debts, providing you with a fresh start.
Rebuilding Credit and Financial Recovery: After receiving your discharge, it’s crucial to focus on rebuilding your credit and regaining financial stability. While a Chapter 7 bankruptcy filing remains on your credit report for up to ten years, you can start improving your creditworthiness by establishing responsible financial habits, such as paying bills on time, using credit sparingly, and gradually reestablishing credit.

Conclusion:

The Chapter 7 bankruptcy process in New Jersey offers individuals overwhelmed by debt an opportunity to obtain a fresh start and regain control of their financial lives. By understanding the eligibility requirements, seeking professional guidance, and following the necessary steps, you can successfully navigate the Chapter 7 bankruptcy process. Remember, consulting with a qualified bankruptcy attorney is essential to ensure a smooth and legally compliant process. With careful planning and responsible financial management, you can pave the way for a brighter financial future.

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

Chapter 7 vs. Chapter 13 Bankruptcy: Understanding the Key Differences

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Introduction:

Considering bankruptcy as a solution to overwhelming debt? It’s essential to understand the differences between Chapter 7 and Chapter 13 bankruptcy, the two most common types of personal bankruptcy in the United States. This comprehensive guide will provide insights into each chapter’s unique characteristics, eligibility requirements, and the potential impact on your financial situation.

Chapter 7 Bankruptcy:

Chapter 7 bankruptcy, often referred to as “liquidation bankruptcy,” offers a fresh start by discharging most unsecured debts. Here are the key aspects to know:

Eligibility: Individuals with limited disposable income and who pass the means test can qualify for Chapter 7 bankruptcy.
Asset Liquidation: A bankruptcy trustee may sell non-exempt assets to repay creditors. However, many essential assets, such as clothing, household items, and retirement accounts, are typically exempt from liquidation.
Debt Discharge: Upon successfully completing Chapter 7 bankruptcy, most unsecured debts like credit cards, medical bills, and personal loans are discharged, providing significant debt relief.

Chapter 13 Bankruptcy:

Chapter 13 bankruptcy, known as the “reorganization bankruptcy,” enables individuals to create a manageable repayment plan over several years. Consider the following points:

Eligibility: Chapter 13 bankruptcy suits individuals with a regular income who can afford a repayment plan.
Repayment Plan: Debtors propose a 3-5 year plan to repay a portion or all of their debts based on their disposable income. This allows them to retain assets like homes and cars while catching up on arrears.
Debt Adjustment: Chapter 13 bankruptcy consolidates debts and establishes a court-approved repayment plan, often reducing interest rates and eliminating penalties.

Key Differences:

Debt Discharge: Chapter 7 bankruptcy typically results in a discharge within a few months, while Chapter 13 involves a repayment plan lasting several years.
Asset Protection: Chapter 7 may require liquidation of non-exempt assets, whereas Chapter 13 allows individuals to retain their assets while repaying creditors through the plan.
Income Requirements: Chapter 7 focuses on income limitations, while Chapter 13 evaluates the debtor’s ability to make regular payments.
Repayment vs. Discharge: Chapter 13 emphasizes repaying debts over time, whereas Chapter 7 prioritizes debt discharge.

Conclusion:

Understanding the differences between Chapter 7 and Chapter 13 bankruptcy is crucial when considering the best option for your financial situation. Consult an experienced bankruptcy attorney who can assess your circumstances and guide you towards the most suitable path. Whether seeking a fresh start through debt discharge or reorganizing debts for manageable repayments, bankruptcy can provide relief and pave the way to financial stability.

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.

How To Increase Your Credit Score After Bankruptcy

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So many people who are in debt are concerned about the impact of bankruptcy on their credit reports that they hesitate to file for bankruptcy. People are afraid that their credit will never recover from bankruptcy, especially since they know that a bankruptcy will be on their credit reports for ten years.

Does Bankruptcy Ruin Your Credit?

Because of the common view that bankruptcy ruins credit, I started paying attention to the post-bankruptcy credit reports of my clients, especially those clients who had gone through a Chapter 7. I started asking them to tell me about what credit offers they received, if any, right after their bankruptcy case ended. If they took those new credit offers, I wanted to hear what the freebie credit score estimators like Credit Karma (ad) said about their credit scores.

Surprisingly, these clients mostly received offers of new credit right after their Chapter 7 bankruptcy case was over. The offers were not great – often, they were for secured credit card accounts with low limits – but the point here is that my post-discharge Chapter 7 clients were receiving unsolicited offers of credit.

Not all of these post-bankruptcy clients accepted offers of new credit. When these clients checked their credit reports months after their bankruptcy cases were over, there was virtually no change. Their credit scores of those who had not accepted new credit offers had taken a hit from the bankruptcy itself, but then those scores hadn’t changed.

Steps To Improving Your Credit

However, there was significant improvement in the credit scores of post-bankruptcy clients who had accepted and used offers of new credit. The elements of building back up your credit score are key:

Clear out the bad debts from your credit reports (hint: debt settlement often doesn’t help);
Then accept offers of new credit – don’t go overboard here, because next…
You’ll need to use the new credit accounts, so don’t charge any more than you can easily pay off, in full and on time, each and every month. Even if you only charge $20 a month, that’s fine;
As your credit improves, accept the new, better credit offers that you receive;
Keep paying off your credit cards in full and on time every month.

After you’ve used bankruptcy to clear out your old, bad debts, you would use the above method to build your credit score back up.

How Debt Settlement Affects Your Credit

The above process is usually much faster than debt settlement, since debt settlement involves paying large amounts to creditors over time and then waiting 7 1/2 years for those bad debts to fall off your credit reports. The timeline may not matter for people whose bad debts have already fallen off their credit reports, but unless you fall into that category, you may want to speed things up.

Looking for bankruptcy help? Make a telephone appointment with attorney Jennifer Weil at (201) 676-0722. Or you can schedule your own phone appointment here.