Do I need an attorney to file bankruptcy?

There are many to things to consider when filing bankruptcy. Therefore, it is important that you have competent legal counsel guide you when filing. Our firm can help you decide which chapter to file under the Bankruptcy Code. Which exemptions should be used to help you maintain protected assets. These are a just a few among many other important financial decisions which must be made when filing for bankruptcy.

WATCH VIDEO ABOUT SEEKING/HIRING AN ATTORNEY TO FILE CHAPTER 7 BANKRUPTCY

Common Bankruptcy Myths Dispelled.

1. MY BILLS MUST BE DELINQUENT, THE CREDITORS MUST BE CALLING, AND I MUST BE BROKE TO FILE BANKRUPTCY.

This is FALSE. If your bills are beginning to create anxiety and you see that you will not have the ability to pay them in the future, you do not have to wait until it is you are seriously delinquent and the creditors are chomping at your ankles. With a proper consultation with a bankruptcy attorney and good planning, you can avoid the stress of the lawsuits, judgments and wage garnishments that creditors will use to collect. You will also be able to protect your assets and avoid liquidating them trying to pay your bills.

2. I WILL LOSE MY HOME IF I FILE BANKRUPTCY.

This is FALSE. If you have a mortgage in place and can afford to pay that mortgage, there is no reason the bank will try to take your home. If you have equity in your home in excess of the mortgage, each state has different levels of protection for homes. New Jersey doesn't have a state exemption but you can elect the federal exemption which is $20,200 of equity per homeowner ($40,400 of equity for married couples).

3. MY CREDIT WILL BE RUINED IF I FILE FOR BANKRUPTCY AND MY CREDIT SCORE WILL PLUMMET.

This is FALSE. If you are in a late on your bills or have your credit cards maxed out, your credit score probably has already been dragged down significantly. The exact measure of a credit score is unknown, but just having too much credit outstanding (your debt to credit ratio) even if current can reduce your credit score.

In fact, after a bankruptcy discharge you are a much better credit risk than just about anyone else, creditors will consider the following:

• You have a clean financial slate.
• You most likely have little or no remaining unsecured debt
• You have just completed two course --one on credit counseling and the second on financial management
• You have just put together a household budget and have used the bankruptcy process to strip the unaffordable debt from your budget
• You understand clearly the implications of poor credit management
• You can't file another Chapter 7 for 8 years

4. EMPLOYERS WON'T HIRE ME AND I WON'TBE ABLE TO RENT AN APARTMENT IF I FILE BANKRUPTCY.

This is FALSE. Employers do not like to have employees that will be distracted by creditors and their collection tactics at the workplace or at home, because then the employee is unfocused and anxious about their financial situation. Neither does the employer want to deal with the extra accounting caused by wage executions. Furthermore, landlords prefer tenants who can use their salary to pay rent, not those paying creditors instead.

5. IF I KNOW I AM GOING TO FILE BANKRUPTCY, I MIGHT AS WELL MAX OUT MY CREDIT CARDS.

This is FALSE. Recent large purchases of more than $550 for luxury goods bought within 90 days of filing and cash advances of $825 within 70 days of filing will stick with you and won't be discharged. This type of activity could result in criminal charges against you. Maxing out those cards will only create more problems in your bankruptcy filing and may lead to a dismissal of your case. Bankruptcy is not meant as a way to deceive the creditors and instead for the debtor who is trying to get a fresh start.

6. I SHOULD DO EVERYTHING I CAN TO AVOID BANKRUPTCY; INCLUDING LIQUIDATING ASSETS AND CASHING IN MY 401K OR OTHER RETIREMENT FUNDS.

This is FALSE. Retirement funds are one of the untouchables, meaning they are protected in bankruptcy. If you decide to draw upon your retirement funds prematurely to pay creditors you will face taxes and penalties on those retirement withdrawals, by the IRS, if not repaid. You should consult with a bankruptcy attorney for a consultation to see what assets of yours will and can be protected in a bankruptcy filing.

7. MY IMMIGRATION STATUS WILL BE AFFECTED AND I WILL NOT BE CONSIDERED FOR CITIZENSHIP.

This is FALSE. Filing bankruptcy is NOT a crime and will NOT affect your Green Card or application for citizenship.

8. MY FAMILY, NEIGHBORS AND EVERYONE WILL KNOW THAT I FILED FOR BANKRUPTCY, THERE IS NO PRIVACY!

This is FALSE. Although the U.S. Bankruptcy Court records are public aside from someone really looking for your records, people are not concerned enough to uncover your bankruptcy. Over 2 million people filed for bankruptcy in 2005 and 2009 is looking to be close. In these tough economic times you probably know someone who has filed for bankruptcy and just don't know it.

Here are some people that filed bankruptcy in the past and you probably never knew

• Abraham Lincoln (16th President of the United States)
• Walt Disney (Oscar - winning film producer, animation & theme park pioneer (1923))
• Donald Trump (Billionaire entrepreneur)

9. THOSE DEBT MANAGEMENT PLANS ADVERTISED ON TV AND RADIO REALLY WORK!

This is FALSE. Remember that these companies are only middlemen and even though you pay the credit counseling agency, your relationship is still with your creditors. These companies rely on employees to get payments in on time; they make mistakes, prompting more fees and penalties by the creditors. Most people are vulnerable to a positive outlook by these debt counselors about their finances. Unfortunately there are not always truthful and things don't always get better. Check out this post about Debt Management Plans

10. I WILL HAVE TO PAY ALL MY CREDITORS BACK SOME DAY, SO WHY FILE BANKRUPTCY?

This is FALSE. In A Chapter 7 case, debts are discharged (wiped-out) except certain taxes, child support/alimony and student loans, for example. In Chapter 13, you pay according to what you can afford over a period of time. If you are saving house, most of your payments will be going to that arrearage.

11. I HAVE FAILED IF I FILE FOR BANKRUPTCY.

This is FALSE. There's more than meets the eye with bankruptcy. Empirical evidence shows that bankruptcies are generally caused BY HEALTH PROBLEMS (excessive medical bills), INCOME LOSS (loss of employment) and FAMILY PROBLEMS. These are nearly the same things that cause foreclosures, divorce and many other of the problems we face in life.

12. I CAN'T AFFORD TO FILE BANKRUPTCY.

This is FALSE. You can't afford not to file bankruptcy in some cases. As previously mentioned, even Donald Trump has been involved with corporations that have filed bankruptcy. Smart and business savvy people file to save themselves from a TOTAL loss. Spending what may seem like a lot of money today can save you much more in the future. Most bankruptcy attorneys have payment plans. A consumer bankruptcy attorney will show you how to free up money in your budget to allow you to pay the fees to file the case. In Chapter 13 part of the fees can be paid through the budget plan.

There is no magic formula for deciding when bankruptcy is the right choice. It is an option you might consider if you:

• Are paying only minimum amounts on your bills
• Can't budget yourself out of debt within five years
• Are getting notices that your mortgage or loans are being foreclosed
• Have had a severe financial setback, such as losing your job or a major client, a divorce or a costly illness

Bankruptcy does not get rid of all debts. You are still responsible for:

• Alimony
• Child support
• Most recent back taxes
• Most student loans
• Recent large purchases of more than $550 for luxury goods bought
  within 90 days of filing
• Fines or penalties of government agencies
• Fraudulent debts
• Cash advances of $825 within 70 days of filing

WATCH VIDEO ABOUT WHAT CANT BE DISCHARGED WITH MY PERSONAL BANKRUPTCY FILING

As a consumer, you can file for bankruptcy in New Jersey under either:

• Chapter 7 (Straight Bankruptcy) to wipe out all debts except those listed and get an immediate fresh start or
• Chapter 13 (Wage Earner Bankruptcy) to set up a repayment plan to pay back your debts over several years' time.

WATCH GENERAL INFORMATION CHAPTER 7 BANKRUPTCY VIDEO

I've filed Bankruptcy in the past; can I file now?

There is no limit on the number of bankruptcy cases that a petitioner may file. In fact, there is no limit in between time frames to file bankruptcy. You must however have sufficient time between filings in order to be eligible for a "discharge."

So if a bankruptcy case is filed prematurely, although it will not be dismissed, a discharge will most likely not be an option. So why file with no discharge avialable? Here are a few situations where the creditor can still use bankruptcy as a shield:

• Where a debtor wants to eliminate their debt in a subsequent chapter 7 and has sufficient assets to do so, filing again could provide this result.
• Where a debtor has an unliquidated asset(s) (lawsuit, insurance claim, etc) and wants to use that to pay creditors, filing another chapter 7, the debtor can then let the trustee liquidate the asset(s) into dollars, who will then pay the debtors with the converted cash.
• Where a debtor recently filed a chapter 7 and has remaining non-dischargeable debts. The debtor could then file a subsequent chapter 13 and be protected for the next 5 years against wage garnishment, lawsuits, foreclosure, etc. Although, after 5 years there will be no discharge, at this time the debtor might be eligible to eliminate the debt in another chapter 7 or 13.

The time frames between discharge eligibility are as follows:

• 8 years between chapter 7's. US BANKRUPTCY CODE 727(a)(8)
• 2 years between chapter 13's. US BANKRUPTCY CODE 1328(f)(2)
• 4 years between a chapter 7 and chapter 13 US BANKRUPTCY CODE 1328(f)(1)
• 6 years between a chapter 13 and chapter 7(if under 70% plan). US BANKRUPTCY CODE 727(a)(9)

The time is counted from filing to filing not from first discharge to second filing.

As you can see a discharge is not always an option due to time provisions but bankruptcy may still be good debt relief and management. Creative filing techniques and good knowledge of the bankruptcy code will allow an attorney to get the debt relief you need.

Navigate to the website below for more information about Bankruptcy in New Jersey:

http://www.njb.uscourts.gov/

Bankruptcy Important Dates to Consider

8 Years Before debtor files for bankruptcy

Prior bankruptcy prevents Chapter 7 discharge

A debtor cannot receiving a discharge under Chapter 7 if he or she received a discharge in a Chapter 7 or Chapter 11 bankruptcy which was filed within 8 years before the present case is filed. [11 U.S.C. § 727(a)(8)]

6 Years Before debtor files for bankruptcy

Prior bankruptcy prevents Chapter 7 discharge

A debtor cannot receive a discharge under Chapter 7 if he or she received a discharge in a Chapter 12 or Chapter 13 bankruptcy which was filed within 6 years before the present case is filed. [11 U.S.C. § 727(a)(9)]

4 Years Before debtor files for bankruptcy

Prior bankruptcy prevents Chapter 13 discharge

A debtor cannot receive a discharge under Chapter 13 if he or she received a discharge in a Chapter 7, Chapter 11 or Chapter 12 bankruptcy which was filed within 4 years before the present case is filed. [11 U.S.C. § 1328(f)(1)]

Note: In some circumstances a Chapter 13 may be of significant benefit even if a discharge will not be received.

3 Years Before debtor files for bankruptcy

Taxes on returns due not discharged in Chapter 7

Taxes based on income or gross receipts for which a return (if required) was due within 3 years prior to the filing of the petition are not discharged in Chapter 7. [11 USC §523(a)(1)(A)] The date due includes any extensions, i.e., if the April 15 due date for income tax is extended to October 15 the later date will be used determining if the 3 year period has been passed. [11 USC §507(a)(8)(A)(i)] The 3 year period may be extended by any time in a bankruptcy plus an additional 6 months. [11 USC §108(c), 26 USC 6503(h), IRC 6503(h)]

Penalties for taxes not discharged (above), tax penalties regarding a transaction within 3 years of filing, and government fines and forfeitures are not discharged. [11 USC §727(b)] [11 USC §523(a)(7)]

Debt incurred to pay taxes not discharged (above) are not discharged. [11 USC §727(b)] [11 USC §523(a)(14), (14A))]

2 Years Before debtor files for bankruptcy

Prior bankruptcy prevents Chapter 13 discharge

A debtor cannot receive a discharge under Chapter 13 if he or she received a discharge in a Chapter 13 which was filed within 2 years before the present case is filed. [11 U.S.C. § 1328(f)(2)]

Note: In some circumstances a Chapter 13 may be of significant benefit even if a discharge will not be received.

Taxes on returns filed late not discharged in Chapter 7

Taxes for which returns (if required) were not filed or were filed within 2 years of the filing of the petition. [11 USC §727(b), 11 USC §523(a)(1)(B)(2)]

Penalties for taxes not discharged (above), are not discharged. [11 USC §727(b)] [11 USC §523(a)(7)]

Debt incurred to pay taxes not discharged (above) are not discharged. [11 USC §727(b)] [11 USC §523(a)(14), (14A)]

Transfers & obligations to hinder, delay, or defraud or done when insolvent set aside

The Trustee may recover property the debtor transferred and avoid obligations the debtor incurred which were done within 2 years before the bankruptcy, if the transfer or obligation were undertaken with the intent to hinder, delay, or defraud any entity, or when the debtor was insolvent. [11 U.S.C. §548(a)(1)]

1 Year Before debtor files for bankruptcy

Transfer, concealment or destruction of property prevents discharge in Chapter 7

The court may deny a discharge of all debt if the debtor attempted to hinder, delay or defraud a creditor through the transfer, removal, destruction, mutilation, or concealment property within one year prior to the Chapter 7 bankruptcy. [11 USC §727(a)(2)]

Payment to relative or insider is a Preference

A total of $600 or more in money or property which is paid to a creditor that is a relative or insider (certain business associates) within a year prior to filing is a preference. The Trustee may recover preferences and divide the money between all creditors. (In Chapter 13, the debtor may be able to prevent the Trustee from going after the relative by increasing the amount paid into the plan.) [11 USC §547(b)(4)(B), 11 USC §547(c)(8), 11 USC §101(31)]

240 Days Before debtor files for bankruptcy

Taxes assessed not discharged in Chapter 7

Taxes assessed within 240 days prior to the filing of the petition are not discharged in Chapter 7. [11 USC §523(a)(1)(A)] If an offer in compromise was pending, the 240 days will be extended by the days that it was pending, plus 30 days. If a stay against collections was in effect under a prior bankruptcy, the 240 days will be extended for the time collection was stayed plus 90 days. [11 USC §507(a)(8)(A)(ii)]

Penalties for taxes not discharged (above), are not discharged. [11 USC §727(b)] [11 USC §523(a)(7)]

Debt incurred to pay taxes not discharged (above) are not discharged. [11 USC §727(b)] [11 USC §523(a)(14), (14A)]

180 Days Before debtor files for bankruptcy

Dismissal of prior bankruptcy prevents filing Chapter 7 or 13.

The debtor may not file any bankruptcy if he or she filed a previous bankruptcy which was dismissed in the preceding 180 days either (1) on the court's order because of your willful failure to obey orders of the court or to appear in court when required; or (2) at the debtor's request after the filing of a request for relief from the automatic stay. [11 U.S.C. § 109(g)]

90 Days Before debtor files for bankruptcy

Minimum state residency requirement

The debtor must have resided in the state where the bankrupctcy is filed for the 90 days preceding the filing. If the debtor has not resided in the state that long, the debtor must file in the state where he or she has resided, or has had his or her principal place of business or which has been the location of his or her principal assets for the majority of the last 180 days. [28 USC §1408]

Payment to creditor is a preference

A total of $600 or more in money or property which is paid to a creditor within 90 days prior to filing is a preference. The Trustee may recover preferences and divide the money between all creditors. (In Chapter 13, the debtor may be able to prevent the trustee from going after the creditor by increasing the amount paid into the plan.) [11 USC §547(b)(4)(B), 11 USC §547(c)(8), 11 USC §101(31)]

Consumer debt presumed to be nondischargeable

Consumer debts owed to a single creditor and aggregating more than $550 for luxury goods or services incurred by an individual debtor on or within 90 days before the bankruptcy is filed are presumed to be nondischargeable in Chapter 7. [11 USC §523(a)(2)(C)(i)(I), 11 USC §1328(b)]

Communication by creditor requires specific case notice to specific address

Communication from creditor to the debtor within the 90 days before the bankruptcy, requires use of specific address creditor has given in bankruptcy notices. [11 USC §523(a)(2)(C)(i)(I)]

70 Days Before debtor files for bankruptcy

Debt presumed to be nondischargeable

Cash advances aggregating more than $750 (added by BAPCPA 10-17-05) that are extensions of consumer credit under an open end credit plan obtained by an individual debtor on or within 70 days before the bankruptcy are presumed to be nondischargeable. [11 USC §523(a)(2)(C)(i)(II), 11 USC §1328(b)]

Bankruptcy Filed

Commencement of Case

A voluntary bankruptcy is commenced when you file a petition with the Bankruptcy Court requesting protection from your creditors under Chapter 7 or Chapter 13. A husband and wife may file one petition together and commence a joint case. [11 USC §301, 11 USC §302, 11 USC §101(42)]

The filing also puts a stay under 11 USC §362 into effect prohibiting collection actions.

Within 15 Days After debtor files for bankruptcy

Chapter 13: Plan must be filed

In Chapter 13, the Plan must also be filed within 15 days after the Bankruptcy was filed. The plan provides for submission of future income and the treatment of creditors, specifying when and how much each kind of creditor will receive. [Rule 3015(b) FRBP]

Schedules must be filed

In both Chapter 7 and Chapter 13, schedules of assets and liabilities, a schedule of current income and expenditures, a schedule of executory contracts and unexpired leases, and a statement of financial affairs must be filed within 15 days after the bankruptcy was filed. [11 USC §521(a)(1), Rule 1007(b), (c) FRBP]

About 18 Days After debtor files for bankruptcy

Court Mails Notice of Commencement of Case

Approximately 18 days after the bankruptcy is filed, the court mails a Notice of Commencement of Case to the debtor and to the creditors included in the list of creditors. The notice contains meeting date, deadlines for objections to discharge and for filing Proofs of Claims.

The court's Automated Information Line provides much of this information almost immediately after the bankruptcy is filed.

30 Days After debtor files for bankruptcy

Chapter 7: Statement of Intention regarding secured debt must be filed

Within 30 days after a Chapter 7 has been filed (or before the § 341 meeting if that is earlier), the debtor must file a Statement of Intention regarding property secured by consumer debt. That statement shall indicate whether the debtor intend to: (1) reaffirm the debt and continue to make the payments remaining obligated for the balance of the debt, (2) redeem the property by immediately paying the value of the property, or (3) surrender the property. [11 U.S.C. § 521(2)(A); Rule 1007(b)(2) FRBP]

A copy of the Statement of Intention must be served on the trustee and the creditors named in the statement on or before the filing of the statement. [Rule 1007(b)(2) FRBP

Chapter 13: Plan payment due.

Depending on local rules, the debtor or his attorney must mail a copy of the Chapter 13 Plan to all creditors within a specified time.

7 Days Before Meeting of Creditors "341A Meeting"

Provide copies of tax returns

Not later than 7 days before the date first set for the first meeting of creditors, the debtor shall provide a copy of the debtor's most recent Federal income tax return to the trustee and to any creditors that have requested it. [11 U.S.C. § 521(e)(2)]

About 6 Weeks After debtor files for bankruptcy

§ 341 Meeting (Creditor's Meeting)

Section 341 (the symbol "§" means section) of the Bankruptcy code requires the Trustee to preside at a meeting of creditors within a "reasonable time" after the filing of the bankruptcy. [11 USC §341]

This meeting is usually held approximately six weeks after Bankruptcy is filed. The meeting time and date is included in the Notice of Commencement of Case mailed by the court, and is available on the court's Automated Information Line shortly after the case is filed.

Each debtor is required to attend this meeting and testify under oath, but most creditors do not come to the meeting. The failure of creditors to attend the meeting does not affect their right to challenge the discharge in a Chapter 7 or to object to the plan in a Chapter 13. If the debtor does not attend, the case will be dismissed.

30 Days After Meeting of Creditors "341A Meeting"

Deadline to file objection to claim of exemption

If the Trustee or other party of interest objects to the debtor's claim of exempt property, they must their objection within 30 days after the 341 meeting. [Rule 4003(b) FRBP]

Chapter 7: Debtor must perform under the Statement of Intention

In Chapter 7, the debtor must perform under the Statement of Intention, and (1) reaffirm the secured debt and continue to make the payments remaining obligated for the balance of the debt, (2) redeem the property by immediately paying the value of the property, or (3) surrendering the property. [11 U.S.C. § 521(a)(2)(B); but 11 U.S.C. § 521(a)(6)appears to specify a time of 45 days after the meeting for the same action]

60 Days After Meeting of Creditors "341A Meeting"

Chapter 7: Deadline for objection to discharge of a particular debt under §523(c)

Creditors have until 60 days after the first date set for 341 meeting to file a complaint under 11 U.S.C. § 523(c). That section allows creditors to object to the discharge of debts which were obtained by false pretenses, a false representation, or actual fraud; debt from fraud or defalcation while acting in a fiduciary capacity, embezzlement or larceny; and debt for willful and malicious injury. [Rule 4007(c) FRBP]

This deadline applies to objections to discharge of:

Consumer debts owed to a single creditor and aggregating more than $500 (added by BAPCPA 10-17-05) for luxury goods or services incurred by an individual debtor on or within 90 days before a Chapter 7 bankruptcy [11 USC §523(a)(2)(C)(i)(I), 11 USC §1328(b)], and

Consumer debts owed to a single creditor and aggregating more than $500 (added by BAPCPA 10-17-05) for luxury goods or services incurred by an individual debtor on or within 90 days before the bankruptcy is filed are presumed to be nondischargeable in Chapter 7. [11 USC §523(a)(2)(C)(i)(I), 11 USC §1328(b)]

Chapter 7: Deadline for objection to discharge of all debt under §727(a)

Creditors have until 60 days after the first date set for 341 meeting to file a complaint under 11 U.S.C. § 727(a). That section allows object to the discharge of all debts because of misconduct including transfer, destruction or concealment of property; concealment, destruction, falsification or failure to keep financial records; making false statements; withholding information; failing to explain losses; failure to respond to material questions; having received a discharge in a prior case filed within the last 6 years. [Rule 4004(a) FRBP]

Chapter 7: Deadline for U.S. Trustee or court to move to dismiss case for "substantial abuse" under §707(b)

Until 60 days after the first date set for the 341 meeting, the U.S. Trustee or the court may move to dismiss a case in which debts are primarily consumer debts if it finds that the granting of relief would be a "substantial abuse" of the provisions of Chapter 7. [Rule 1017(e) FRBP]

"Substantial abuse" was expanded by the Bankruptcy Reform Act, which went into effect on October 17, 2005, to include a Means Test which allows Chapter 7 only if a debtor has less income than the median for the state of residence, or can pay less than 25% of his or her unsecured debt from income remaining after meeting expenses over a 5 year period. [11 USC §707(b)]

More than 60 Days After Meeting of Creditors "341A Meeting"

Discharge entered in Chapter 7 case

Court rules require that the discharge be entered "forthwith" after the expiration of the time for objecting to discharge or moving to dismiss the case. The time for those objections expires 60 days after the first date set for creditor's meeting. [Rule 4004(c)(1) FRBP, Rule 4004(a) FRBP, Rule 1017(e) FRBP]

The discharge is not absolute or final. The Trustee can ask that the discharge be set aside if the debtor does not turn over non-exempt property, if the debtor fails to perform other duties, or if there were other matters pending which would result in the denial of the discharge.

90 Days After Meeting of Creditors "341A Meeting"

Deadline for non-government creditors to file their Proofs of Claim

A creditor, other than a governmental unit, must file its Proof of Claim within 90 days after the first date set for creditor's 341 meeting in order to share in payments from the estate. [Rule 3002(c) FRBP]

120 Days After debtor files for bankruptcy

Final payment on filing fees due

If the Court allowed the debtor to pay the filing fees for a Chapter 7 or Chapter 13 in payments, the final payment must be made within 120 days after the filing of the bankruptcy. [Rule 1002(b) FRBP]

180 Days After debtor files for bankruptcy

Deadline for governmental unit to file Proof of Claim

A governmental unit, such as the Internal Revenue Service, must file its Proof of Claim within 180 days after the commencement of the case in order to share in payments from the estate. [Rule 3002(c)(1) FRBP]

3 to 5 Years After First Plan Payment

Length of payments under Chapter 13 Plan

Unless all allowed claims are paid sooner, plan payments must continue for a minimum of the three-year period beginning on the date that the first payment is due under the plan, or a maximum of a five year period. [11 USC §1325(b)(1), 11 USC §1322(d)]

Discharge entered in Chapter 13

Upon completion of plan payments the discharge in Chapter 13 is entered. [11 USC §1328]