There are times when individuals or married couples accumulate a lot of debt and find it hard to pay it off or otherwise manage it. These individuals or couples may fear filing for bankruptcy because they worry about their home, their vehicles, other assets, credit cards, and credit scores––all of which can be impacted by bankruptcy. Fortunately, you can safeguard your home, vehicles, and other assets and get a handle on your debt by filing Chapter 13 bankruptcy in New Jersey.
At Boyer Coffy LLC, our Chapter 13 bankruptcy lawyer in New Jersey will walk you through the process so that you understand the stakes, know the benefits, and can make informed decisions about your financial future. Contact our bankruptcy attorney today at 973-798-6131 to schedule a consultation.
What is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy is a type of bankruptcy that allows individuals and married couples to restructure their debt. Like most other types of bankruptcies, the court assigns a trustee to oversee the bankruptcy. In Chapter 13 bankruptcies, however, trustees have two critical additional tasks:
- Receiving payments from the debtor; and
- Making payments to the creditors.
Thus, in a Chapter 13 bankruptcy, debt is not immediately discharged, but a three- to five-year repayment plan is set up. After completion of the plan, any remaining debt is discharged unless some disqualifying circumstance exists.
Chapter 13 aims to help people get caught up on secured loans (like mortgages) and resolve most debts. This type of bankruptcy carries certain benefits not available through Chapter 7 bankruptcy and is often referred to as “wage earners' bankruptcy because you must have a regular income to qualify.
Eligibility for Chapter 13 Bankruptcy
The criteria to qualify for Chapter 13 bankruptcy are technical and include:
- Regular Income. You have a regular income, even if self-employed or operating an unincorporated business.
- Individual or Married Couple. You are filing as an individual or married couple and not as an organization, company, or partnership
- Unsecured Debt Limit. You have unsecured debts that do not exceed $465,275 [subject to change pursuant to 11 U.S.C. § 109(e)]
- Secured Debt Limit. You have secured debts that do not exceed $1,395,875 [subject to change pursuant to 11 U.S.C. § 109(e)]
- No Prior Bankruptcy Dismissals. A prior bankruptcy petition was not dismissed within the past 180 days due to a willful failure to appear before the court or comply with orders of the court. A prior bankruptcy petition was also not voluntarily dismissed within the past 180 days because creditors asked the bankruptcy court to lift an automatic stay to recover property upon which they hold liens
- Credit Counseling. You completed credit counseling from an approved credit counseling agency
Who Should File for Chapter 13 Bankruptcy in New Jersey?
Any person or company can file bankruptcy under Chapter 13 if they
- Own property in the United States
- Have a permanent residence in the United States
- Have not filed bankruptcy under Chapter 7 within the last four years
- Have not filed bankruptcy under Chapter 13 within the last two years
- Satisfy eligibility criteria
Reasons You Should File
Even though you can file for Chapter 13 bankruptcy, it does not mean you should. You should consider Chapter 13 bankruptcy if
- You are behind mortgage payments, risk foreclosure, and do not want to lose your home
- You are behind on loan payments for vehicles (like cars, motorcycles, or boats), risk repossession, and do not want to keep the vehicle
- You are behind on utility payments, risk having utilities shut off, and to keep on the electricity, gas, and/or water
- You have already filed for Chapter 13 bankruptcy more than four years ago and are still struggling to pay off debt
- You need to protect your finances after a creditor has filed a lawsuit, garnished your wages, or implemented a bank freeze
- You have a sole proprietorship and are behind on payments to third parties or have accumulated too much debt––you can file Chapter 13 under your name but not the name of the sole proprietorship if different than your legal name
- You have student loans, which are non-dischargeable debt––you cannot eliminate this debt under Chapter 7 but under Chapter 13, if you can prove economic hardship, there is a chance it can be discharged.
Reasons Not to File
On the other hand, you may not want to file for bankruptcy in New Jersey if you think you will not be able to commit to the repayment plan. Chapter 13 bankruptcies have a higher failure rate than Chapter 7 bankruptcies. If you fail, creditors can once again begin harassing you for payment, garnishing wages, and freezing bank accounts. You may also lose the assets you fought so hard to keep, like your home or car.
You should speak to a Chapter 13 bankruptcy attorney to obtain advice on the best debt solution for you. After reviewing your financial situation, a lawyer can also discuss with you the real chances you have at succeeding with a Chapter 13 bankruptcy.
How Much Does It Cost to File for Chapter 13 Bankruptcy in New Jersey?
The cost to file Chapter 13 bankruptcy in New Jersey depends on whether you file on your own or retain a bankruptcy attorney. Certain fees mandated by the U.S. Bankruptcy Court must be paid when you file your bankruptcy petition. Fees for Chapter 13 include
- Filing fee
- Administrative fee
- Trustee surcharge
These fees are subject to change periodically but are roughly set just over $300 and are similar to Chapter 7 filing fees.
Retaining legal representation adds to the cost. Some attorneys may charge as little as $1,000 while others can charge upwards to $5,000 or more. Much of it depends on the geographic location, experience, skill, and total sum of the services provided. When compared to Chapter 7 Bankruptcy cases, keep in mind that Chapter 13 requires more extensive work.
In terms of costs, the repayment plan is a cost all on its own. The amount of the payments will depend on your income, the amount of your debt, and the type of debt.
Due Diligence Checklist for Chapter 13 Bankruptcy
There are quite a few documents and information you need when you file for Chapter 13 bankruptcy in New Jersey. Here's a list of what you may need to begin the process.
- List of creditors, including a copy of the most recent statement or underlying document for each creditor
- List of cosigners, including their names and addresses
- List of property – this includes real and personal property
- List of monthly living expenses – this includes food, clothing, shelter, utilities, medicine, transportation, taxes, etc.
- Source, amount, and frequency of income (paystubs are a good starting point)
Other helpful information includes things like:
- Most recent tax return
- Credit reports from Equifax, Experian, and TransUnion
- Bank account statements covering the last 12 months
- Divorce decrees and/or domestic court orders related to debt and/or support obligations
If you are married, both spouses must provide information on income and expenses. This is true even if only one spouse files for Chapter 13 bankruptcy. The bankruptcy court needs to determine what your household financial situation is. Other documents will likely be needed, and a Chapter 13 attorney in New Jersey will advise you on exactly what those documents are––much of it will depend on the circumstances and your financial situation.
What Happens When I File for Chapter 13 Bankruptcy in New Jersey?
After you file for bankruptcy, you are given a case number and a Notice of Bankruptcy Case Filing, which you can use to prove to any creditor that you are under the protection of an Automatic Stay. Your credit score will also be affected––Chapter 13 bankruptcy stays on your credit history for seven years.
The important thing to know here, however, is not what happens after you file Chapter 13, but what you are obligated to do after you file. Three main obligations include:
- 341 Meeting of Creditors. You must attend the Meeting of the Creditors. If you have an attorney, your attorney will be present and guide you through the process. If you have provided all required documents and shared all assets and financial information, then you will likely not have to contribute in any way to the meeting, but you must attend.
- Financial Management Course. This course must be completed before the end of the bankruptcy. Your bankruptcy will last for three to five years. You must pass the course and file the certificate with the court before the completion of the bankruptcy.
- Payment Plan. You have a payment plan, and you must make timely payments to avoid problems. Your first payment is typically due the first of the month after bankruptcy is filed, but so long as it is received within the month, problems will not materialize. If you fail to timely make payments, bankruptcy could fail, and you may start receiving calls from creditors, have your wages garnished, or experience a freeze on your bank account. You also risk losing your home to foreclosure or having a vehicle repossessed.
Making sure you uphold your end of the Chapter 13 Bankruptcy is key to successfully completing it. Any dischargeable debt that remains at the end of your bankruptcy will be discharged. You will get your debts in order and save your home and vehicles in the process.
Contact a Bankruptcy Lawyer in New Jersey Today
At Boyer Coffy LLC, we know how debt can impact an individual or married couple. If you have difficulty paying bills, have a steady income, and want to save your home and vehicle, speak to a bankruptcy attorney in New Jersey today by filling out our online form or calling us at 973-798-6131. We will schedule a consultation so that you get the answers you need to all your financial questions.