Personal Bankruptcy FAQ’s II

Most people choose to file Chapter 7 because their debts will be wiped out and they will receive a “fresh start” with a “clean slate.”  Unlike Chapter 13, in a Chapter 7 bankruptcy debts are eliminated as “discharged.” However, not everyone is eligible to file for Chapter 7.  For example, if your family income is higher than the median income a similar-sized family in New Jersey, you may not be eligible for Chapter 7 (this is called the “means test”).   Likewise, if your unsecured debts are too high, you may not be eligible to file Chapter 7.

Additionally, there may be reasons you would want to file for Chapter 13 instead of Chapter 7.  For instance, if you want to keep your home but are behind on your mortgage, Chapter 13 may allow you to keep your home.

Bankruptcy can stay on your credit report for as long as seven to ten years. However, there are steps you can take to rebuild your credit.  Indeed, some institutions actually seek to move loans to people who have filed for bankruptcy and have rebuilt their credit because of the waiting period before they are able to file for bankruptcy again.  Indeed, after receiving a “clean slate” through bankruptcy, financial institutions may see you as more creditworthy because you have less other debt to prevent you from repaying your loans. The first thing to remember is that if you are in a position to seek bankruptcy protection you may already have bad credit; if you need protection from your creditors, there is a good chance that bankruptcy may not put your credit in a worse light than it is already in.

While you cannot discharge your old student loans, federal bankruptcy law  prevents discrimination in student loan programs because you previously filed for bankruptcy protection.

You must wait 8 years after a Chapter 7 bankruptcy to file another Chapter 7.  You must wait 4 years after a Chapter 7 bankruptcy before you can file a Chapter 13 bankruptcy.  The timelines for filing after a Chapter 13 bankruptcy are not as severe.   You must wait 6 years to file a chapter 7 bankruptcy after a chapter 13, and 4 years to file Chapter 13 after a previous Chapter 13.

The “means test” determines whether you will be allowed to file for Chapter 7 bankruptcy protection.  If your average gross income is more than the state median income, then you often cannot file for Chapter 7, and would have to file  Chapter 13.  For example, in 2013 this would mean that if you were single, you could not file Chapter 7 if you made over $61,146 per year.  For a family of 4 in 2013, you would not be able to file Chapter 7 if your family income was more than $103,786.  These levels are adjusted annually for inflation.  The means test takes many, but not all, living expenses into account.  The means test is a complicated formula.  Our experienced bankruptcy attorneys can help you through its complexities.

In any bankruptcy, the automatic stay will temporarily stop foreclosure proceedings.  What happens then depends on a variety factors.  In a chapter 7 bankruptcy, the stay will give you breathing room.  Then you can surrender your home  in an orderly, planned fashion and be discharged from your mortgage payments.  Conversely, if you want to keep the home and there is little or no equity, and you are up to date on your payments, you may be able to keep the home (and the mortgage), and discharge your other debts, such as delinquent credit card balances. In a Chapter 13, you may be able to keep your home and spread out the repayment of arrears over a time plan from three to five years long. There are alternatives to bankruptcy in order to save your home. Our attorneys have significant experience in negotiating mortgage modifications and other negotiation strategies.

No, you cannot be fired for filing bankruptcy.  This is prohibited by federal law.

If you are in financial distress, e-mail us or call (973) 890-0004 for a confidential consultation.  We have significant experience helping hard-working people who have encountered financial difficulty.  We are located in Totowa, in Passaic County, New Jersey.  Our offices are conveniently located near Clifton, Wayne, Paterson, Little Falls and Fairfield, New Jersey, with easy access to Routes 3, 46, 23, 80 and the Garden State Parkway.  

Call us.  We can help.