Chapter 13 Bankruptcy FAQs NJ
Chapter 13 bankruptcy is a debt repayment proceeding which is typically filed to cure a default in a loan, or where the debtor’s income exceeds the median income permitted for Chapter 7. The debtor turns over a specified portion of his/her future earnings to the Chapter 13 trustee on a monthly basis, who then distributes dividends (payments) to creditors who have filed proofs of claims. The method of determining the dividend distribution is determined by a Chapter 13 Plan which the debtor files with the Bankruptcy Court. The debtor receives a discharge of all dischargeable debts after the Plan is completed and all payments under the Plan have been made.
The amount of your Chapter 13 payments are based upon your income, your monthly living expenses, and the amount of your total debts. This is known as the means test which is a pre-determined standard of living based on Internal Revenue Service standards. The Court will allow you to keep and spend so much of your income as determined by the means test.
A first payment must be made to the Chapter 13 trustee within thirty (30) days of the filing date of your bankruptcy plan. This payment should be delivered to the trustee in advance of the First Meeting of Creditors. After the first meeting, your plan payments should be sent only to the trustee’s payment address, which you will be provided shortly after the case is filed. It is imperative that you retain receipts for each trustee payment or transaction. If your case is up for a motion or hearing in court, please give your attorney a copy of the payment receipt to prove the payment. Do not
send your payments to the Bankruptcy Court or to your attorney.
All Chapter 13 plan payments must be tendered in the form of bank money order, postal money order or cashier’s check. Make sure you include your name, address, and bankruptcy case number on the money order or check. The Chapter 13 trustee will not accept cash payments or personal checks. You must continue to make monthly payments to the Chapter 13 trustee; skipping a payment, or continually failing to make payments on a timely basis may result in the trustee filing a motion to dismiss your case
No. You are not allowed to “pick and choose” some particular creditors and decide to pay them “on the side” to the exclusion of other creditors. One of the central concepts under the Bankruptcy Code is the equal treatment of creditors in the same class. If all unsecured creditors are to receive a 10% distribution under your Chapter 13 plan, then this means you cannot pay your Aunt Sally 20% simply because you prefer her over credit card creditors. All of your debts must be dealt with through your Chapter 13 bankruptcy plan. Any payments which you make to a creditor must be paid under the authority of the Bankruptcy Court, by the terms of your plan, and not by any personal preferences. This includes debts to family members, close friends, and business partners.
It is very important to contact your attorney if you ever expect to miss a payment due to layoff, medical disability, emergency, etc. If you are temporarily unemployed or out of work, injured, or otherwise unable to make the payments required under your Chapter 13 plan, the Bankruptcy Court may permit you to suspend payments for an interim time period. If you suspect that your inability to make the required Chapter 13 plan payments will continue for an extended period, you should speak to your bankruptcy attorney about amending your plan. Alternatively, if you take no action your case may be dismissed or converted to Chapter 7. Remember — the trustee’s does not have authority to let you miss a payment or allow you to pay less than your Chapter 13 plan requires. Only the bankruptcy judge has the discretion to make that decision. Your bankruptcy lawyer can file a motion asking the judge to change the requirements of your plan if you feel that you cannot meet its requirements.
The Chapter 13 bankruptcy trustee is an individual, usually an attorney, who is appointed by the United State’s Trustee’s Office to administer Chapter 13 cases. In New Jersey there are 3 Chapter 13 trustees, with each being assigned to a specific district: Newark, Trenton, and Camden. Their names and telephone numbers are:
To retain all of your property your Chapter 13 plan must satisfy the criteria required for court approval or “confirmation”. By filing a Chapter 13 Plan, you arrange for the repayment of your debts and for the repayment of liens on your property. In Chapter 13 cases the debtor must pay creditors at least what creditors would receive if the debtor sold or “liquidated” his/her property. So long as your Chapter 13 plan satisfies this criteria you should be able to keep all of your property.
You must reside or have a domicile, a place of business, or property in the United States; you must not have had a bankruptcy filing dismissed for cause within the last 180 days; you must have regular income; and your total debts cannot exceed $1,440,875 (secured debts cannot exceed $1,081,400 and unsecured debt cannot exceed $360,475).
Chapter 13 Plans are for up to 36 months long [or sixty (60) months where the debtor is making his best efforts]. After that time, the Debtor is discharged [forgiven] for his debts.
The most common reasons for consumer bankruptcy are (a) loss of a job or long-term layoffs; (b) loss of overtime hours; (c) lengthy illnesses and large medical expenses; (d) death or disability of a spouse; (e) separation, divorce and marital problems; (f) seriously over extended credit; and (g) substantial borrowings in the form of home equity loans and property falls in value; and (h) large unexpected expenses.
Your Chapter 13 case is filed with the Clerk of the Bankruptcy Court in the federal district where you have lived, had your principal place of business, or had your principal assets located for the greater part of the last 180 days. New Jersey has 3 federal bankruptcy court districts: Newark, which covers Northern New Jersey, Trenton, which covers Central New Jersey, and Camden which covers Southern New Jersey
The Bankruptcy Court charges a $289 filing fee to file a Chapter 13 case. The standard Chapter 13 legal fee for a non-business case is $3,500.00 for all basic or “base fee” services. These fees are established by federal law and local bankruptcy court rules. You may incur additional fees for “extra services” such as defending motions for relief from the automatic stay, amending your petition to list creditors omitted from the original filing, court appearances, resolving plan confirmation objections filed by the Chapter 13 bankruptcy trustee and other creditors, and for court appearances. Most all additional or “non-base” fees can be paid through your Chapter 13 plan. The Chapter 13 bankruptcy trustee receives an administrative fee of up to ten percent (10%) of the amount paid through the Chapter 13 plan.
Yes. You will have to appear for at least one court hearing generally known as the First Meeting of Creditors which is conducted by the Chapter 13 trustee. The bankruptcy judge does not attend this meeting. This meeting will be held within 30 to 60 days after your case is filed. You will be notified of the time, date and place of this hearing by your attorney and by the Chapter 13 trustee. This is a mandatory court appearance on your part; failure to appear at this meeting will result in the dismissal of your Chapter 13 case. Confirmation hearings (i.e., final approval of your plan) are handled by your attorney and the Chapter 13 Trustee.
The Bankruptcy Code allows you either to voluntarily dismiss a Chapter 13 case or to convert it to Chapter 7 at any time, unless your case has previously been converted from another chapter of the Bankruptcy Code. No one can force you to remain under a Chapter 13 plan if you do not wish to remain. If you desire to stop your case, contact your attorney.
However, if you simply stop making the Chapter 13 payments, any trustee or any creditor in your case may ask the Court to dismiss your case. The Trustee will ask the Court to dismiss your case or place you on payroll deductions if:
(1) you fail to make your first payment(s)at the First Meeting of Creditors; and/or
(2) if you fail to make your required payments regularly during any months of your plan.
You should understand, however, that a dismissal of your case will reactivate all unpaid or disputed debts, all interest, finance charges, legal fees, all late charges not allowed by the Bankruptcy Court, and all debts of creditors who did not file their claims. Consider also that you will be forced to deal with those creditors on their terms, not yours or the Court’s.
Unsecured creditors are required to file a proof of claim with the Bankruptcy Court within 90 days after the first date set for the First Meeting of Creditors. Government agencies have 180 days from the date of filing to file a proof of claim. If the claim is disallowed or not filed at all, then the creditor will not be entitled to receive a distribution under your Chapter 13 plan and will be discharged or wiped out upon the completion of the Chapter 13 plan.
A secured creditor can file a claim at any time while your case is open. A creditor must file a claim in order to be paid. The Chapter 13 trustee will pay the amount claimed by the creditor, not the amount listed in your petition. If you disagree with the creditor’s claim amount, you should contact your attorney about filing a motion objecting to the claim. The debtor may file a claim on behalf of a creditor if he or she wishes to do so. A creditor may file an amended claim increasing or decreasing the claim amount at any time.
Yes. owever, you must abide by the following Bankruptcy Code requirements:
(1) the debt must be for consumer debt and “for a property or services necessary for the debtor’s performance under the plan”;
(2) you must be able to prove you have the ability to pay the debt; and
(3) the Bankruptcy Court must approve or deny such additional credit. Bankruptcy Court approval requires the filing of a motion and notice to your creditors and the Chapter 13 trustee.
Once the bankruptcy is filed, all the property of the debtor at the time of the filing and certain other property to be received in the future, becomes the property of the bankruptcy estate. This means that the bankruptcy trustee will take control of this property for purposes of satisfying the creditors. HOWEVER, there is certain property which is either excluded or exempt and the debtor will be able to keep it. Property or asset exemption are determined based upon your situation, income and the laws of your state. The best way to determine which property to keep requires a detailed analysis of your situation. You need an experienced bankruptcy lawyer to do this.
Residents of New Jersey can choose between New Jersey state law exemptions and federal law exemptions. Since New Jersey does not recognize a homestead exemption, New Jersey debtors can select the federal bankruptcy homestead exemption providing for up to $21,625 for the debtor’s principal residence. When calculating your equity you should use a value that is based upon a fair market valuation. Once you determine this value, subtract the amount owed plus selling and transfer costs from the value to calculate the equity. As for personal property, in New Jersey, you are permitted an exemptions for only $1,000.00 of personal property. This includes, automobiles, household furnishings and personal effects, jewelry, tools of the trade, retirement plans, unmatured life insurance, personal injury awards, earnings, animals and some other miscellaneous property. The value of each exemption and which exemptions can be used are determined by the statutory exemption scheme is selected. Again, state laws vary.
Depending upon which exemption scheme is selected, you make keep your car if your equity is equal to or less than the allowed exemption. Generally speaking, depending upon the exemption scheme selected, you may exempt as little as $1,000 under New Jersey state law, or as much as $3,450 under federal bankruptcy law. When calculating your equity you should use the Kelly Blue Book or a comparable guide. Once you know the value, then subtract the amount owed from the value to calculate the equity.
Generally, most courts understand that you need a car to work to get back on your feet. Apply rules of common sense here: If you own vintage cars which are free and clear and worth thousands of dollars, you are probably not going to be able to keep them. If, on the other hand, you have a car worth 10,000 and you owe $7,000 on it, you will most likely keep it. Again, the need to talk to an experienced bankruptcy attorney should be evident. Most leased vehicles have no equity and therefore are entirely exempt. If you owe money on your car or it is leased you must still make the payments. In those instances you will have to redeem or reaffirm the property to keep it.
However, in some circumstance your representative can re-negotiate the loan or the lease to get a more favorable deal for you.
The answer depends upon how much equity you have in your home. New Jersey state law provides a mere $1,000 exemption to be used for any assets. Federal law provides a homestead exemption of up to $21,625 for property that the debtor maintains as his/her principal residence. New Jersey residents filing for bankruptcy should use the federal homestead exemption. When calculating your equity you should use a value that is based upon a forced liquidation as opposed to the best selling conditions to arrive at a value for your home. Once you know the value, subtract the amount owed plus selling and transfer costs from the value to calculate the equity.
Under some circumstances you may be able to keep your credit cards. There are many factors which must be considered. Some of those include the credit card balance at the time of the bankruptcy, what the credit card company is willing to do and your ability to pay the present and future credit card debt.
Yes, so long as you have not filed previous bankruptcy cases which may result in the automatic stay not applying.
Even if the bankruptcy filing temporarily stops a foreclosure case, a home is an asset usually secured by a mortgage. The lender is entitled apply to the court for relief from the automatic stay, the order preventing creditor action by virtue of the bankruptcy. Depending upon several factors, you may be able to prolong a foreclosure until you have received your discharge from bankruptcy. Usually, to keep a home that is in foreclosure you will have to make a deal with the lender.
Yes, provided that your Chapter 13 petition was filed before your legal rights were extinguished under state law and your Chapter 13 plan proposes to cure the default.
Yes. Most civil judgments are stopped by bankruptcy.
Under some circumstances once the bankruptcy proceedings have started, a special motion can be filed to remove certain liens including secondary or home equity loans where there is no equity in the property above that which is owed to the priority lienholders; i.e., your house is underwater because the value of the home is equal to or less than the amount of the debt owed to the first mortgage. It will take a bankruptcy court order to remove them. This is a complicated area of the bankruptcy law and an experienced bankruptcy attorney should be consulted.
In general, you will be discharged from all dischargeable community debts. However, you should discuss this with your family law attorney to understand the other implications of the filing of a bankruptcy during the pendency of a dissolution action (divorce case). Also, remember that if you are discharged from community debts, your spouse is responsible for the entire balance owing on the debt. Put another way, they shift the responsibility on to you.
If the debt is a dischargeable debt then you will not have to pay it. However, the cosigner will become primarily responsible for the debt. Be sure to list the co-signer as a creditor in your schedules as they have a contingent claim against you.
After your bankruptcy case is filed, the court mails a notice to all the creditors listed in your schedules. This usually takes a couple of weeks. If this is not soon enough, then you should have your representative inform the creditors immediately.
Yes, there are certain debts that are NOT dischargeable in bankruptcy. Generally speaking, the following debts will not be discharged: Taxes; Spousal and Child Support; Debts arising out of willful misconduct and or malicious misconduct by the debtor; liability for injury or death from driving while intoxicated; nondischargeable debts from a prior bankruptcy; student loans and criminal fines, penalties and forfeitures.
Those debts which are secured will be discharged, however, expect the creditor to take the necessary legal steps to take back the property. In most cases if the debtor’s equity interest in the property is exempt, the debtor may retain the property by redemption or reaffirmation.
Yes. There are several forms. There could be between 30 and 60 pages in your petition, schedules and other papers filed at the time of your bankruptcy. You must follow the local and federal bankruptcy court rules in completing the forms. Preparing these forms requires an understanding of both bankruptcy law and local state law in order to enter the information correctly and accurately. The forms are typed and filed electronically by a bankruptcy lawyer. If you intend to file the forms pro se, the bankruptcy court clerk will accept your paper copy though you would be wise to personally deliver the papers yourself to the clerk.
You are permitted to file an amendment to your schedules up to a certain time before discharge. If the amendment is timely filed then the omitted creditor is added to the bankruptcy. It is perjury to intentionally omit a creditor. However, if you do not know that a creditor exists and there are no assets for your creditors, the debt will be discharged.
This is a hassle after the fact and will result in your incurring additional legal and court filing fees, so be sure you be thorough and list everything.
Chapter 13 bankruptcy filings stay on your credit report for a period of up to 7 years after the discharge in bankruptcy. It usually takes between 18 -24 months to rebuild your credit after a bankruptcy, provided that you have installment debt that remains after your bankruptcy and you make every payment on time. Car loans, car leases, and mortgage payments would be the primary examples of installment debt that you should timely pay after your bankruptcy discharge.
Sure. Because an individual can receive only 1 Chapter 13 bankruptcy discharge over a 4 year period, consumers who have just received a Chapter 13 bankruptcy discharge may be besieged with unsolicited credit offers. Be careful though, because the interest rates will likely be high. You should also use the credit carefully – only charge what you can pay in full at the end of the billing cycle so that you avoid getting socked with high interest charges and other fees – the likely reason you filed for bankruptcy in the first place!
There are several areas related to this question. You should consult your attorney. In particular there are 4 items worth mentioning.
- Consider not paying your minimum monthly credit card bills. If you’ve decided that bankruptcy is inevitable, there is no point in spending hundreds of dollars to make minimum payments to creditors whose debts you will be attempting to discharge in bankruptcy. Of course, if there are credit cards with nominal debts (less than a few hundred dollars) and you don’t want those creditors to cancel your credit then those debts should be paid.
- Under bankruptcy law, certain luxury purchases over $600 made on or within 90 days of the bankruptcy filing are presumed nondischargeable.
- Under bankruptcy law, cash advances aggregating more than $875 made on within 70 days of the bankruptcy filing are presumed nondischargeable.
- Debts involving materially false financial statements are nondischargeable under certain circumstances.
Yes. You are not entitled to receive a Chapter 13 discharge if you have received a discharge under Chapter 7 within 4 years of the date you filed the Chapter 7 case. Also, you are not entitled to receive a Chapter 13 discharge if you previously received a Chapter 13 discharge within 2 years of the prior discharge. Also, under certain circumstances you may be barred from filing a new bankruptcy case for a 180-day period from the date of dismissal of your prior bankruptcy case; this 180-day bar applies if your bankruptcy case was dismissed for willful failure to abide by court orders, or dismissed for willful failure appear before the court in connection with the prosecution of your bankruptcy case, or was voluntarily dismissed following the filing of a motion for relief from the automatic stay.
We’re just going to say it one more time: the best person to help is an experienced bankruptcy attorney. When you discuss your situation with your bankruptcy lawyer you will need to be prepared to discuss all areas of your case. This includes each and every debt you owe and creditor you have. It is very important to list all your creditors in your bankruptcy. One of the best ways to know all your creditors is to get a credit report about your credit history. This should list the majority of your creditors, even ones you did not know about. You should also have a post-bankruptcy budget prepared before you go to the attorney’s office. This budget should contain your income and expenses that you will have after you file your bankruptcy.
In addition to Chapter 7 there are other alternatives available under the bankruptcy laws. An in-depth discussion of these alternatives is beyond the scope of this FAQ. Aside from debtor protection under the bankruptcy law there are some other alternatives. These include loan extensions, compromises, workout agreements and taking no action. NOTE: These alternatives may alert your creditors to existence of nonexempt property that the creditor could reach. In any event you should seek professional advise in dealing with most of these alternatives.
Disclaimer: This information deals with Chapter 13 consumer bankruptcy. Each state has its own bankruptcy laws, so you need to check with your state for details. The information contained in the preceding FAQ’s is provided for general information purposes only and is not intended to be a legal opinion nor legal advice nor is it intended to be a complete discussion of all the issues related to the area of Chapter 13 consumer bankruptcy. Every individual’s factual situation is different and you should seek independent legal advice regarding specific information.