Mounting bills, harassing phone calls, collection letters, and increasing stress and anxiety. Sound familiar? If you feel you’re in unmanageable debt, you’re not alone. In today’s uncertain financial climate, many are having trouble making ends meet. You can put an end to it and regain financial freedom by filing for bankruptcy.
Chapter 7 bankruptcy allows you to discharge your debts in exchange for giving up certain assets and property. The process can be complicated, but bankruptcy lawyers in NJ can walk you through the paperwork and put you back on the road to a less stressful life.
The Means Test
Not everyone is eligible for Chapter 7. First, you must pass a “means test.” Your before-tax household income must be lower than the before-tax household income of a similar household in New Jersey. Then, your filing is considered “good faith.” However, the courts have discretion in this decision. If your filing is considered “bad faith,” your bankruptcy filing can be revoked.
Understanding Chapter 7 Bankruptcy
There are two types of bankruptcy — Chapter 7 and Chapter 13. When dealing with personal debt, Chapter 7 is typically the way to go. Here’s how it works.
When you file for Chapter 7 bankruptcy in NJ, you’re assigned a trustee. That trustee collects all of your assets and sells them off, distributing the proceeds to your creditors. However, don’t panic — you will not lose everything. In NJ, certain items and assets are exempt from being sold. It’s important to note, though, you can use federal exemptions instead of NJ exemptions, but you can’t mix and match. This is why you should consult with bankruptcy lawyers to understand NJ and federal laws.
Some of these exemptions include:
• Home equity
• Household furniture, clothing and jewelry
• Engagement and wedding rings
• One vehicle
• Burial plots
• Tools of your trade
• Tax-exempt retirement accounts
• Unemployment, workers comp and welfare benefits
• Life insurance proceeds
• Certain amount of wages
• IRAs[source: Lawyers.com]On the other hand, there are also certain debts you can’t erase with bankruptcy when filing Chapter 7.
These debts include:
• Income tax debt
• Student loans
• Auto loans (if keeping the car/truck)
• Any fines you may owe Chapter 7 bankruptcy will stay on your credit record for 10 years.
Financial advisors recommend you practice good financial practices to avoid falling into debt again. Try getting a secured credit card or a gas card at first, and pay off the balance in full each month to start rebuilding your credit. Soon, you will find yourself back on the road to full financial recovery.