Bankruptcy is one option for dealing with overwhelming debt.
New Jersey residents may opt to file Chapter 7 or Chapter 13 bankruptcy to deal with their debts. Chapter 7 bankruptcy enables you to eliminate your liability for certain kinds of debt and gain a fresh start financially. Chapter 13 bankruptcy allows you to repay some or all of your debt over time and still keep your assets. Before filing bankruptcy, you should understand how the process works.
Eligibility Requirements
In order to file a personal bankruptcy case in New Jersey, you must meet the eligibility requirements. For Chapter 7 bankruptcy, this means you must pass a means test. The means test compares your income against federally established median income levels for your household size. As of 2010, the median income limit for a single filer in New Jersey was $59,812. The limit for joint filers was $71,744. If your median income exceeds this limit, you will have to file Chapter 13 instead. To qualify for Chapter 13, you must have regular income and your debt must be within federal limits. As of 2010, Chapter 13 debtors were allowed a maximum of $360,475 in unsecured debt and $1,081,400 in secured debt.
Filing
All New Jersey residents are required to complete court-approved credit counseling prior to filing a bankruptcy petition. This must be done in the six months prior to filing unless you can prove to the court that you're filing under emergency circumstances. The court does not require you to have an attorney to file, although it is recommended. Chapter 7 and Chapter 13 petitions may be filed with the offices of the district bankruptcy court, located in Trenton, Camden and Newark. When you file, you must pay all appropriate filing fees. As of 2010, these fees were $299 for Chapter 7 and $274 for Chapter 13.
Chapter 13 Repayment
If you're filing Chapter 13 bankruptcy, you must furnish the court with a copy of your repayment plan. Under state law, certain debts must be repaid first and in full. These include back child support, alimony and tax debts. If you have a mortgage, vehicle or other secured loans, these must also be repaid in full. Unsecured debts like credit cards or medical bills receive last priority in terms of repayment. If your income exceeds the median income for your family size, you will have to make payments for five years. If it's less, you only have to pay for three. You cannot receive a discharge of your case until all plan payments are made in full.
Chapter 7 Exemptions
In Chapter 7 bankruptcy, you agree to turn over some of your assets to the bankruptcy court in exchange for erasing your debts. New Jersey state law allows you to claim some of your property as exempt. As of 2010, Chapter 7 debtors may claim up to $1,000 in clothing, goods and personal property. You may also claim up to $1,000 in household goods and furniture and a burial plot of unlimited value. New Jersey does not allow exemptions for home equity value, motor vehicles or tools of the trade.
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