Unfortunately, many individuals across the United States and in the state of New Jersey face extremely difficult financial conditions which significantly affect their way of life. For some, filing for bankruptcy may be the best (or only) option to relieve themselves of their financial burdens. Federal bankruptcy laws allow individuals who qualify to have a fresh start.
There are four types of bankruptcy that an individual can file for, depending on their situation, which include:
- Chapter 7;
- Chapter 11;
- Chapter 12; and
- Chapter 13.
Chapter 11 is a reorganization effort used by businesses and some individuals who are burdened by large sums of debt. Chapter 12 is solely reserved for family farmers or fishermen. The two main types of bankruptcy options for individuals are Chapter 7 and Chapter 13.
Chapter 7 bankruptcy is also known as straight bankruptcy or liquidation. To be eligible to file for Chapter 7, a debtor’s average income for the six-month period prior to filing must fall below the median income for New Jersey residents of the same household size with the same number of dependents. This is known as the Means Test. A bankruptcy trustee will be appointed by the Court to gather and sell the debtor’s nonexempt property and assets, if any, and distribute the funds to the creditors.
If one does not qualify for Chapter 7, they may be eligible to file for bankruptcy under Chapter 13. Chapter 13 is often referred to as a debt adjustment. Here, the debtor will be required to file a plan to pay debts (in full or in parts, as applicable) from their current and future income over a term of five years. This plan is based on a debtor’s disposable income after regular and ordinary monthly expenses are accounted for. A Chapter 13 bankruptcy trustee will be appointed by the Court to receive the Debtor’s plan payments and make distributions to creditors based on the approved plan schedule.
Once the proper documents are filed and the applicable filing fees are paid, an automatic stay is enacted, which prohibits creditors from contacting the individual about unpaid debts and taking any action to collect on such debts. A 341 Meeting of Creditors will be scheduled where the Debtor must answer questions about their financial situation under oath before the Court-appointed trustee. Creditors may attend this meeting if they choose to do so. Lastly, if the debtor is filing a plan, he or she will need to appear, either personally or through counsel, before a bankruptcy judge to have their plan approved by the Court.
Filing for bankruptcy is a difficult process. If you are facing bankruptcy, it is best to contact an experienced New Jersey bankruptcy attorney to discuss your options. The Law Offices of Hunziker, Jones & Sweeney are experienced in helping families and individuals deal with the devastating effects of financial distress and in mapping out potential strategies, including the possibility of filing for bankruptcy, to help them obtain relief from overwhelming debts. The attorneys at the firm understand that financial distress is an extremely emotional and difficult time for anyone to go through. If you are experiencing severe financial distress and may be considering bankruptcy as an option or want to learn more about what a bankruptcy filing may do to help you, call The Law Offices of Hunziker, Jones & Sweeney at (973) 256-0456 or fill out our contact form for a consultation.