FAQ

Common Bankruptcy Questions

A decision to file for bankruptcy should be made only after determining that bankruptcy is the best way to deal with your financial problems.

Bankruptcy is a legal process in court. It gives people who are unable to pay their bills a fresh financial start. Federal law gives qualified debtors the right to file bankruptcy in federal court. Filing a bankruptcy immediately stops all creditors from taking any collection activities until your debts are sorted out according to law.
  • Eliminate their legal obligation to pay most or all of their debts. This happens with a "discharge" of debts which is designed to give people a fresh financial start.
  • Stop foreclosure and other legal processes. It can allow people the opportunity to catch up on missed payments.
  • Prevent a repossession, or force the creditor to return property even after it has been repossessed.
  • Stop wage garnishments, collection harassment, and other creditor actions to collect a debt.
  • Restore or prevent termination of utility service.
  • Eliminate certain rights of "secured" creditors. A creditor is secured when it has taken a mortgage or other lien on property as collateral. Typical examples are car loans and home mortgages. People can force secured creditors to accept payments over time and eliminate payment obligations if property is taken. However, people generally are not able to keep the collateral unless they continue to pay the debt.
  • Discharge certain types of debts. These are written into the bankruptcy law for special treatment and can include: child support, alimony, most student loans, court restitution orders, criminal fines, and some taxes.
  • Eliminate cosigners on debts. When someone has co-signed a loan, the cosigner may still have to repay all or part of the loan.
  • Get rid of debts that arise after the case was filed.

There are four types of bankruptcy cases provided under the law. Most people file bankruptcy under Chapter 7 or 13. Either one may be filed by an individual or a married couple filing jointly.

Chapter 7 - sometimes called a straight bankruptcy or liquidation. This type requires people to give up property that is not protected property, limits called exemptions. In a chapter 7 people ask the court to discharge their debts. The basic idea is to discharge and wipe out debts in exchange for giving up property which is not exempt. In most cases, almost all property will be exempt i.e protected but property which is not exempt may be sold so money can be distributed to creditors

If income is above the median income for the family household size, it may be necessary to file a chapter 13 case. These higher-income debtors must then fill out a means test form requiring detailed information about the income and expenses. If, under the applicable standards, certain amounts are left over that could be paid to creditors, the Court may decide to deny discharge in chapter 7, unless special extenuating circumstances are present.

Chapter 11 - known as a reorganization, is for businesses and a few individuals with very large debts.

Chapter 12 - for people who qualify as family farmers and fishermen.

Chapter 13 – can be called debt adjustment or a repayment plan. This type requires people to file a plan to pay their debts (or parts of them) from their future current income. Typically the plan shows how you propose to pay off some of your past-due and current debts over three to five years. The best thing about a chapter 13 is that people can keep valuable property like a home or a car. People can make their regular monthly payments, with some extra plan payments to get caught up on the amount they fell behind.

Chapter 13 may be right for people who: (1) own a home and are in danger of losing it because of financial trouble; (2) are behind on payments but can catch up if given some time; (3) have valuable property which is not exempt, but can afford to pay creditors from your income over time.

Filing fees are determined by the Federal Court, the fee is the same for individuals or a married couple. Form 2010 lists current filing fees: https://www.uscourts.gov/sites/default/files/form_b2010.pdf Sometimes the Court will allow people to pay the filing fee in installments if it cannot be paid all at once, or if people are unable to pay it at all then the court may waive the filing fee. Legal fees will be based on the circumstances of your case.

Before filing you must obtain a credit counseling certificate from credit counseling agency approved by the Bankruptcy Court within 180 days before the bankruptcy is filed. The agency will review options available to you and review your budget. Many provide the counseling online and some offer counseling in-person or by phone. The certificate of credit counseling stating that you completed the counseling is necessary to file the bankruptcy.

Among the services provided by the agencies is to help figure out if you can benefit from debt management plans (also known as DMPs). This is usually a plan to work on paying some or all of your debts in which you send the counseling agency a monthly payment that it then distributes to your creditors. Debt management plans are helpful for only some consumers, for most they do not have a great deal of success. The issue to be aware of is that counseling agencies may offer you a debt management plan as a way of avoiding bankruptcy whether it makes sense for you or not from a legal point of view.

Bankruptcy is not always the best choice but if you sign up for a debt management plan that you are not able to afford, you may end up in bankruptcy anyway (and a copy of the plan must also be filed in your bankruptcy case). There are also approved agencies for bankruptcy counseling that do not offer these DMP’s.

It is a good idea to discuss you circumstance with an attorney before you receive the required credit counseling. Unlike a credit counselor, who is unable to give legal advice, we can provide legal counsel on whether bankruptcy is the best option. If bankruptcy is not the right answer, a good attorney will offer a range of other suggestions. You can find a list of court approved credit counseling agencies at this link: https://www.justice.gov/ust/eo/bapcpa/ccde/CC_Files/CC_Approved_Agencies_HTML/cc_new_jersey/cc_new_jersey.htm

In a typical chapter 7 case, you should be able to keep all property which is "exempt" from claims of creditors. Depending on the type of property or assets the exemptions differ so its important to be truthful in discussing your specific circumstance with your bankruptcy attorney. The Court allows you to choose between your exemptions under state law or federal law.

What Will Happen to My Home and Car If I File Bankruptcy? In most cases, you will not lose your home or car during your bankruptcy if the equity in the property under the amount of the exemption. Even if your property is not fully exempt, we will still be able to propose a plan to keep it, if you pay the property’s non-exempt value to creditors in a chapter 13.

However, this analysis can be nuanced since some of your creditors may have a "security interest" in your house, car or other personal property. This means you gave that creditor security like a mortgage on the house or put other property as collateral for debt. Bankruptcy usually does not make these security interests vanish. If you don't make payments on the secured debt, the creditor may be able to take and sell the property, during or after the bankruptcy case.

There are several ways that you can keep collateral or mortgaged property after you file bankruptcy. We can agree to keep making payments on the debt until paid in full or pay the creditor the amount that the property you want to keep is worth. In some cases, especially those involving fraud or other improper actions by the creditor, we may be able to challenge the debt. Also if you pledged household goods as collateral for a loan (other than the loan to actually purchase the goods), we can usually keep the property without making any more payments on the debt.

In a typical chapter 7 case, you should be able to keep all property which is "exempt" from claims of creditors. Depending on the type of property or assets the exemptions differ so its important to be truthful in discussing your specific circumstance with your bankruptcy attorney. The Court allows you to choose between your exemptions under state law or federal law.

What Will Happen to My Home and Car If I File Bankruptcy? In most cases, you will not lose your home or car during your bankruptcy if the equity in the property under the amount of the exemption. Even if your property is not fully exempt, we will still be able to propose a plan to keep it, if you pay the property’s non-exempt value to creditors in a chapter 13.

However, this analysis can be nuanced since some of your creditors may have a "security interest" in your house, car or other personal property. This means you gave that creditor security like a mortgage on the house or put other property as collateral for debt. Bankruptcy usually does not make these security interests vanish. If you don't make payments on the secured debt, the creditor may be able to take and sell the property, during or after the bankruptcy case.

There are several ways that you can keep collateral or mortgaged property after you file bankruptcy. We can agree to keep making payments on the debt until paid in full or pay the creditor the amount that the property you want to keep is worth. In some cases, especially those involving fraud or other improper actions by the creditor, we may be able to challenge the debt. Also if you pledged household goods as collateral for a loan (other than the loan to actually purchase the goods), we can usually keep the property without making any more payments on the debt.

Yes of course! It’s a misconception that people cannot own anything for a time after filing bankruptcy, its not true. You can keep all of your exempt property and anything you obtain after the bankruptcy is filed. However, if you were to receive an inheritance, a property settlement, or life insurance benefits within 180 days after we filed your bankruptcy, that money or property may end up having to be paid to your creditors if the type of property or money is not exempt.

Yes but there are some exceptions. The typical Bankruptcy discharge will not normally apply to things such as child support or alimony, court fines, and some taxes; it also may not cover certain debts not listed on your bankruptcy petition or loans that were gotten by knowingly giving false information to a creditor, and that creditor reasonably relied on the knowingly false in in making the loan; Debts that are the result of "willful and malicious" harm; Student loans, except if rare cases where a bankruptcy judge decides that payment would be an undue hardship.

In most bankruptcy cases, the only proceeding you would attend is called the "meeting of creditors.” It’s a required appearance to meet with the bankruptcy trustee and an opportunity for any creditor who chooses to come and state their claims. Most of the time, this meeting is short and simple, you are asked a few questions about your bankruptcy forms and your financial situation.

Occasionally, if complications arise, or if you choose to dispute a debt, it may be necessary to appear before a judge at a hearing. If you need to go to court, we will provide you with notice of the court date and time to prepare for court with the attorney.

After your case is filed, you must complete another bankruptcy court approved course in personal finances called debtor education. This course is longer than the credit counseling and will also result in a certificate which we need in order to get your discharge. We recommend that you sign up for the course soon after your case is filed, and will provide you with a list of providers if you need help location one.

There is no clear answer to this question, depending on how you define “my credit”. Your credit score is a totally separate concept that your credit history, which is all related to your creditworthiness. There are people with great credit scores that have no access to credit due to being indebted. Unfortunately, if you are behind on your bills, your credit may already be bad. Bankruptcy will probably not make things any worse. Ultimately we suggest making a informed and educated decision so that you take the right steps for your plan after consulting with us.

The fact that you've filed a bankruptcy case is public record and can appear on your credit history for up to ten years. But because bankruptcy also wipes out your old debts, you are likely to be in a better position to pay your current bills, and you may be able to get new credit. In many cases you will received new credit offers within a few months of your discharge and many of our clients have been able to purchase a home 2 years after the case.

Utilities -- Public utilities, such as the electric gas and water company, are prohibited from refusing or or cutting off service because you have filed for bankruptcy. However, the utility is allowed to require a deposit for future service and you will be responsible for bills which arise after your case is filed.

Driver's License -- If you lost your license solely because you couldn't pay court-ordered damages or fins caused in an accident, bankruptcy will usually allow you to get your license back.

Co-signers -- If someone co-signed a loan with you and you file for bankruptcy, the co-signer may end up responsible for paying your debt. Likewise if you co-signed for someone wlse and they filed bankruptcy you may end up being responsible. In a chapter 13 we may be able to protect co-signers, depending on the terms of your chapter 13 plan.

FAQ of Chapter 13 Repayment Plans In New Jersey

During a Chapter 13 bankruptcy, debtors are required to use their disposable income to pay their debts through fixed monthly payments for anywhere from 36 to 60 months. The amount each debtors will be required to pay depends on the specific income, allowed expenses and types of debts in each individual or joint case, among other factors.

The bankruptcy law describes special status to certain debts, granting them what are known as priority claims. Chapter 13 repayment plans must provide for these debts to be paid in full. Also in order to keep collateral for their secured debts, you must pay off at least the value of the collateral. In cases when people have funds remaining in their plan after their priority and secured claims are paid, these are generally applied toward unsecured debts.

Approving Chapter 13 plans.

With few exceptions, we must file your Chapter 13 repayment plan within 14 days of filing the bankruptcy petition. That way, at the meeting of the creditors, creditors and the trustee will have the opportunity to ask questions and address issues with the plan proposed. Within 45 days of the meeting of creditors, we will hold a confirmation hearing to approve or deny the plan. In order to make this decision, the Court evaluates the plan to determine if it complies with the legal standards and is feasible. If their plan is approved, the funds being paid to the Trustee through the plan will immediately start being distributed to your creditors.

In many cases unsecured debts do not get paid off in Chapter 13 plans. Regardless of how much was paid, once a debtor has completed all of their payments, however, they are be eligible for a discharge of their remaining debts. A discharge may relieve obligations for disallowed debts, as well as those addressed in the repayment plan. It is important to bear in mind that a discharge will typically not apply to many long-term debt obligations such as mortgage loans, alimony or child support debts, or guaranteed education/student loans.

Working with a lawyer.

Financial challenges are difficult enough, but the high cost of living and uncertainty for future economic forecasts make taking the next step more challenging than ever before. Experienced straightforward legal counsel is necessary to deal with the legalities involved with getting bankruptcy relief. Call or Text Torres Legal (973) 815-0075 when you are ready to benefit from the relief Bankruptcy offers qualified debtors.