New Jersey Chapter 7 Bankruptcy in Six Easy Steps
Aug. 10, 2021
The following section sets forth the easy steps that are involved in preparing, processing, and completing a successful Chapter 7 case. The object is to get a discharge and wipe out all of our client's debts. Let us show you how we help our clients accomplish this goal.
Step One
A Chapter 7 bankruptcy is started by filing a document called a petition. The petition is about 70 pages long. We must conduct several detailed meetings with you to obtain from you all of the important financial information that will be needed to accurately complete the petition. The case officially begins when we electronically file the Chapter 7 with the Bankruptcy Court, and the $335 filing fee is paid to the Court.
Our office can immediately notify any creditors that need to be notified that your case has been officially filed. If a creditor takes action against you after being informed that you have started your bankruptcy, that creditor can be punished by the Bankruptcy Court.
The Bankruptcy Court Clerk's Office also quickly notifies all of your creditors. You will be getting copies of the same notices that your creditors get. Therefore, when you get your notice in the mail you know that your creditors have also been notified.
If you are behind in your utility bills, we can notify utility companies so that your utilities are not shut off. You can normally wipe out your utility bills through a bankruptcy filing.
1. If your utilities have been shut off before your bankruptcy has been filed, the public utility companies will have to promptly restore your service after your bankruptcy has been filed.
2. Mortgage company foreclosure proceedings or sheriff sales are usually stopped.
3. We can notify car finance companies so that there will be no vehicle repossessions. If your vehicle has been repossessed, it would normally be returned to you upon submitting proof of full coverage automobile insurance.
4. If your landlord is trying to evict you, we may be able to stop that.
5. If the IRS is withholding your refund or taking other action against you, that has to stop upon the filing of bankruptcy.
6. If anyone is trying to attach your wages, they will usually have to stop. If anyone already has a wage attachment against you, that will usually have to stop. If any money is taken out of your wages after your bankruptcy has been started, it will usually have to be returned to you by the creditor that took your money. Sometimes we can even get money back that was taken from your paycheck before you filed bankruptcy, so please let us know if you have a wage execution. If they took $600 or more from your salary within the 60 days before your case is filed, there is a good chance that we can get you the money back.
7. If anyone has frozen your bank account, you may still be able to get your money back.
8. If you have lost your driver's license due to the inability to pay surcharges, we can work on helping you get your license back
9. If anyone is suing you for just about anything, that lawsuit will usually have to stop, unless the bankruptcy court gives the creditor or any other party that is suing you permission to continue with the case against you.
Step Two
The court will assign a case number to your case. With electronic filing, we now get an immediate case number. You will also receive a copy of the case number in the mail within a few days after your bankruptcy case has been filed.
You will also receive a document from the bankruptcy court called Notice of Chapter 7 Bankruptcy Case. Your creditors also receive this document, and that is their official notice from the Bankruptcy Court that you have started your case and listed them as a creditor. Please review that document carefully because it gives you information as to when and where you need to appear for your bankruptcy meeting. The meeting is called the Meeting of Creditors, but actually, creditors hardly ever appear.
The bankruptcy meeting is not before a judge. It is simply before a person appointed by the court to act as what is called a “trustee”. The meeting usually takes five to ten minutes and is usually very straightforward. Of course, we prepare our clients in advance for what will take place at the meeting.
The meeting used to require an in-person appearance by the debtor. During the Covid pandemic, however, the rules have changed. You no longer have to personally appear for the meeting. It is all done by phone.
This Is What Happens at Your Chapter 7 Meeting
We will be on the phone with you at the meeting, and you will be fully prepared to answer all questions. They schedule about 5 meetings for every 30-minute block of time, and while you are waiting on the phone, you can listen to the trustee ask questions to any person that is scheduled ahead of you. Most meetings take about 5 minutes or less. You probably already know all the answers to the questions that the lawyer is going to ask you because they are very basic and simple. The most important thing that you need to remember is to simply relax and tell the truth.
The following is the usual procedure:
You are sworn in by the trustee to tell the truth.
You will be asked to verify your signature on the bankruptcy petition. You will also be asked to verify that you reviewed the petition before you signed it and that all the information was true and correct. If there are any changes or additions you want to make, let the attorney from our office that is on the phone with you know before you are sworn in. Tell your attorney about any changes before you go in front of the trustee. An example of a change would be a new address, new job, adding a new creditor that you might have forgotten, or any other corrections or additions that were not originally included for whatever reason.
If you own a house or real estate, the trustee will ask you the following:
when did you buy the house or real estate
what was the purchase price
what is the property worth now.
what is the approximate payoff on any mortgages you owe.
If you have financed a car, the trustee may ask what you think the car is worth, and how much you still owe to pay off the car.
Be prepared to answer the following questions:
Have you transferred, given away, or sold any property to anyone in the last 4 years before you filed for bankruptcy?
Have you been injured in an accident, and are you making a claim against anyone, or have you filed a lawsuit against anyone for your injuries where you are trying to get money?
Do you have any other types of claims or lawsuits against anyone? If the answer to any of the above questions is yes, make sure that you let the attorney that is with you know this before you are sworn in to answer the trustee's questions. In most situations, you will have already been asked these questions by us when we met with you in our office, and you will already have been prepared for these questions.
When is the last time you used any of your credit cards before you filed for bankruptcy? If you used any credit card within 90 days before you filed your bankruptcy, make sure to let us know before you get sworn in for your meeting.
The trustee will also usually make an announcement to all of the people on the line that if they inherit any property within 6 months of the filing of their bankruptcy, make sure to let your attorney know. If you have any inheritances pending as of the date of the trustee meeting, make sure you tell us all about it
The final question by the trustee is usually something like this: “What happened in your life that caused you to file for bankruptcy?” The trustee is not looking for any long-drawn-out answer. You can normally answer this question in 20 words or less. For example, if it was a loss of job, medical problem, Covid, accident, marital issues, legal issues, mismanagement of your money, or anything like that, that's really all that you have to say.
Sometimes the trustee will ask for additional information and documentation, and if that is needed, the trustee will give us a reasonable amount of time to supply that.
After that, the trustee will usually conclude the hearing, and you should now be on your way to obtaining your discharge, wiping out your debts, and getting a fresh start.
Step Three
After the meeting is concluded, the trustee will submit a report to the bankruptcy court to indicate that you qualify for a bankruptcy discharge and that you should be approved. If for some reason the trustee does not feel that your bankruptcy should be approved (this is pretty unusual), the trustee will let us know what has to be done so that your bankruptcy can be approved. This might happen in about 5% or less of the cases that are submitted.
After your meeting, you will be getting one or more documents from the bankruptcy court and you should be aware of what those documents mean. The most important document is the Bankruptcy Discharge. This will be received about three months after you have had your meeting. Before you can get your discharge, you will have to complete a debtor education course, and we can review that procedure with you at the appropriate time.
Please keep your Discharge document because this is the proof that all of your debts have been forgiven and legally wiped out. If any creditor ever tries to collect from you in the future and you have listed that creditor in your bankruptcy, the discharge is your proof that your debt has been wiped out.
If you own real estate, you will probably receive in the mail a document called a Notice of Proposed Abandonment of Property. This means that the trustee is abandoning his right to make any claims against your property, and that you can keep your property without any problem.
If you read this document, it is worded in “legalese”, (legal language that is hard to understand), and it might cause you to worry if you didn't know ahead of time what it meant. Because the document is called Notice of Abandonment, people sometimes think that they must abandon or give up their home or other real estate.
That is totally incorrect. In fact, the opposite is true, and when you get that document it is actually very good news. The notice means that the trustee is agreeing that you can keep your home or other real estate. The document mentions a court date in the event anyone objects. It is extremely rare that anyone objects, and you do not have to go to court on the court date mentioned in the Notice of Abandonment.
Thus, when you receive the Notice of Abandonment, it is great news, and you are on your way to successfully completing your case and receiving your discharge. So, when you get this notice, be happy and celebrate your victory over debt. In fact, why don't you call our office so we can congratulate you.
Step Four
If you are working and paying your new bills after you have filed your bankruptcy case, you might be very pleasantly surprised to see that credit card companies are soliciting you and offering you credit cards after you have been discharged. This is not unusual, and it is not very hard to reestablish credit if you maintain good employment and pay future bills.
If you ever need assistance with buying a house, obtaining a mortgage, or financing a car in the future, feel free to call us because we know people in the business that help our clients who have successfully gone through the bankruptcy process.
Step Five
After you have your discharge, you are legally entitled to the fresh start provided by the bankruptcy laws. Obtaining your discharge is the official conclusion of your bankruptcy case in most situations unless you are expecting to receive a substantial asset in the future, like an inheritance of a large settlement on a personal injury case.
In that type of situation, the bankruptcy court could keep your case open until the court has complete information as to the amount of your personal injury settlement.
If you inherit any property within six months of filing your bankruptcy, you must notify us and the bankruptcy court.
Step Six
Most people find that their lives are much better after they have gone through the bankruptcy procedure. Married couples have told us that their marriage has improved because of much less financial stress and tension.
You actually do not have to wait for your discharge to get your fresh start, because all creditors have to stop contacting you immediately upon the filing of your bankruptcy. Therefore, if any creditors contact you directly after you have filed bankruptcy, simply tell them that you are in a Chapter 7, give them the date your bankruptcy was filed and your case number, and they have to leave you alone. If they do not leave you alone, they may be violating federal laws, you could possibly sue them, and you might be entitled to get a substantial amount of money if the Court were to determine that they violated your legal rights. If something like that happens, obviously you should let us know so we can offer you any legal assistance you might need.
The Goal in Chapter 7
For most clients, the goal in Chapter 7 is to wipe out all of their debts, obtain a discharge from the Bankruptcy Court, and keep all of their assets, including their money, their home, their vehicles, their personal property, and their retirement funds.
Chapter 7 is a pretty liberal law for debtors. When filing Chapter 7, you are allowed to own a home, cars, jewelry, and other assets, and you may maintain active bank accounts. You are allowed to have money and assets and still wipe out your debts. Of course, there are limits as to the value of the assets you own, and we will review those limits with you when we meet with you and prepare your case.
There are also limits on the amount of money you can earn and still qualify for Chapter 7. For example, if you are a single person, and you are making over $100,000 per year, that is well above the legal limit, and instead of filing a Chapter 7, we would probably discuss other alternatives with you, such as debt settlement, or maybe filing a Chapter 13 where you might just pay back a portion of your debts.
The amount of income you earn per month compared to the amount of reasonable expenses you have per month can also be a factor in determining whether you can wipe out all of your debts.
For example, let's assume you have $40,000 in credit card bills that you would like to wipe out. You need to disclose your income and expenses on a monthly basis, and you may need to demonstrate that you simply do not have enough money to pay the normal monthly bills, let alone your credit cards.
Let's assume you earn $4000 per month and also have $4000 in reasonable and necessary expenses, not including your credit card debt. In this example, you obviously can't afford to pay the credit card bills and we would expect you to qualify to wipe them out by filing a Chapter 7 bankruptcy case.
On the other hand, if you earn $4000 per month, but you have only $3500 in reasonable and necessary monthly expenses, the court could say that since you have $500 per month left over, you should use that $500 to pay some of your credit card bills. This type of situation might prevent you from filing a successful Chapter 7. If it turns out that you have excess monthly income that would allow you to pay some of your credit card bills, we may be able to propose some potential alternate solutions that could help you get a fresh financial start.
The ultimate goal in Chapter 7 is to obtain that discharge, have all of your debts forgiven by the federal government, and keep all of your property. As stated earlier, in order to get that discharge, you must complete the debtor education program, and you can do that on the internet or by phone. It usually takes about 90 minutes to 2 hours to complete this program.
Once you get that discharge, why not celebrate your victory over debt. Reward yourself for having taken responsibility, and having used the laws of this country for the purposes for which they were intended. Maybe you'll even feel like throwing a victory over debt party for yourself, your family, and your friends.
Enjoy the new beginning that our United States Constitution has permitted you to achieve. Savor and enjoy the feeling of finally being debt-free. And who knows, a few months from now you just might be saying that having filed a Chapter 7 bankruptcy was one of the smartest financial moves you ever made.