Many people misunderstand bankruptcy. They think they must surrender all their possessions and properties. We have had many clients tell us that had they known all the things bankruptcy could do for them, they would have come to us six months earlier.

A Chapter 7 Personal Bankruptcy, often called a “straight Bankruptcy” involves an individual or married couple seeking the protection of the Bankruptcy Laws where they are hopelessly burdened with debt and offers a fresh start by eliminating that debt through a Discharge. A Chapter 7 Bankruptcy proceeding may take as little as four to five (4-5) months to complete after it is filed.

While a Chapter 7 Bankruptcy is known as a “liquidation proceeding”, in most cases individuals have no assets that would be sold as there are significant protections offered under New Jersey State and Federal Law against most clients valuable property such as their home, personal assets, retirement funds and automobiles. Once a Chapter 7 Bankruptcy is filed, creditors must immediately cease all efforts to collect a debt including continuation of any law suits, wage garnishments, bank levy or harassing telephone calls and letters.

Once a Chapter 7 Bankruptcy is filed, creditors must immediately cease all efforts to collect a debt including continuation of any law suits, wage garnishments, bank levy or harassing telephone calls and letters. Bankruptcy law forces creditors to stop all collection efforts against you as soon as you file your petition. This mechanism is called the “automatic stay” and it’s one of the main benefits of bankruptcy. Everything is put on hold, and you get much-needed breathing room. 

The number one comment we hear after meeting with clients is that they are finally going to be able to sleep at night. The most pressing concern for most people is to stop creditors from hounding them, which bankruptcy can accomplish. But that’s not the only relief. Once you realize that you’re not going to lose everything, you gain peace of mind. And that means you’re well on your way to restoring everything that matters to you.

Eligibility and requirements for a Chapter 7 bankruptcy

You must be eligible to file for bankruptcy and the rules vary depending on the type of case you want to file. Bankruptcy laws changed in 2005.  There is a means test for individuals to qualify for Chapter 7 Bankruptcy. Your income and expenses are examined to see how they compare to the standard for your state.

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For example, if you earn less than the median income for a family of your size in your state, you can file for Chapter 7 bankruptcy. If you earn more, a Chapter 13 case may be your option, where you pay a portion of your debts over time with your disposable income.

Eligibility also includes mandatory credit counseling and budget analysis. This will address the means testing calculations for you. While there are calculators available on the internet, an experienced bankruptcy attorney is the best resource to help analyze your situation and provide you with your options.

Bankruptcy starts with filing an official petition, schedules and Statement of Financial Affairs in bankruptcy court. You must provide:

  • A full list of creditors, along with their claim types and amounts
  • The source, amount and frequency of your income
  • A list of all your property
  • A detailed list of monthly living expenses

A business may also file a Business Chapter 7 Bankruptcy.  This should not be confused with an individual who owns or operates a business filing bankruptcy.  The application of the Bankruptcy Code to a business is often very different than an individual and should only be considered with the assistance of an experienced bankruptcy attorney.  You can Read More Here about a Business Chapter 7 Bankruptcy.

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Chapter 7 Bankruptcy Case Analysis
A recent case out of a Bankruptcy Court in Massachusetts highlights some important rights and restraints of a Chapter 7 Bankruptcy Trustee. In In re Deveau, (Bankr. E.D. Mass. 12/19/19), Case No. 15-13300, the Bankruptcy Judge, Hon. Frank J. Bailey, was faced with a complicated set of facts and a Chapter 7 Trustee who sought the Court's approval of a potential settlement of a claim. The Judge ultimately did not approve a settlement between the Trustee with an insurance carrier who had previously denied coverage to the debtor.