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Bankruptcy Information and Bankruptcy FAQs for New Jersey

If you are considering filing for bankruptcy protection, whether Chapter 7, Chapter 11 or Chapter 13, you owe it to yourself to speak with a knowledgeable New Jersey bankruptcy lawyer. At McDowell Posternock Apell & Detrick, PC we will explain your rights and protect your interests as you go through the bankruptcy process.

Will I lose my house if I file a bankruptcy?

A Chapter 13 bankruptcy is designed to allow you to keep your home as long as you maintain your monthly mortgage payments, so debtors who file this type of bankruptcy do not have to worry about losing their homes as long as they can keep up with their monthly bills. In a Chapter 7, the trustee will only try to sell your home if there is equity over and above anticipated costs of sale and your exemption ($22,975 for a single debtor and $45,950 for a married couple filing a joint bankruptcy). A comparative market analysis from a Realtor is required to determine the value of your home.

Will my credit be ruined forever if I file a bankruptcy?

There is no question that filing a bankruptcy reflects negatively on your credit score. However, many people facing bankruptcy already have financial problems that have caused their credit scores to suffer. Additionally, there are ways to restore your credit score after you file bankruptcy. Our experienced attorneys can help you plan to rebuild your credit after your bankruptcy filing.

Will my friends and neighbors find out that I filed a bankruptcy?

Bankruptcy filings are public documents, but they are not published in the newspaper and generally are not considered news unless they involve businesses. Therefore, the only people who typically find out about our clients’ bankruptcy filings are the people they owe money, as creditors receive notices about the case from the Bankruptcy Court.

I have money in a 401(k) or IRA. Will I have to give this to the Bankruptcy Trustee?

In New Jersey and Pennsylvania, retirement funds that are recognized by the Internal Revenue Code as protected, such as IRA’s and 401(k)’s, are exempt from your creditors, so the Trustee may not liquidate these funds. This is a benefit to people filing bankruptcy, because these savings can be retained for your future, helping you to rebuild your life.

Should I try to negotiate with my creditors to reduce my payments?

Some people considering bankruptcy want to try to negotiate with their creditors and see if they can get them to take lower payments in exchange for being paid in full (by using retirement funds or borrowing from family). Unfortunately, these people sometimes get an unwelcome surprise at the end of the year when they do this, because debt that is “forgiven” in exchange for payment at a reduced price can be reported to the Internal
Revenue Service as taxable income. For example, if your creditor accepts payment of $10,000 on a $30,000 credit card balance, you might be forced to pay taxes on the $20,000 debt that is forgiven. People who wish to negotiate with their creditors should be aware of this unwelcome and little known consequence of debt work-outs.

What happens to my student loans if I file for bankruptcy?

Government backed student loans, like other debts payable to a governmental unit, such as most taxes, are generally not dischargeable, although there are some limited exceptions. Ask your bankruptcy professional about your circumstances.

How does the court decide whether to accept my bankruptcy filing?

Under the Bankruptcy Code, your bankruptcy is considered filed the moment your attorney submits it to the Bankruptcy Court. There is no review by the Court to determine whether it is accepted, provided that your attorney has included all of the information required. Consequently, as soon as your petition is filed, you are under the protection of the Bankruptcy Court and all collection activity against you, including lawsuits, must immediately stop.

How long does the bankruptcy process take?

A typical Chapter 7 bankruptcy takes around four months to complete, although some cases take longer, such as those that involve litigation over a debtor’s right to a discharge or those that involve non-exempt property. A Chapter 13 bankruptcy lasts as long as the debtor’s plan, anywhere from three to five years.

How many times will I have to go to court if I file a bankruptcy?

Most people who file bankruptcy do not have to appear in court, but just about all debtors, with very limited exceptions, must attend a meeting of creditors, also known as a “341 meeting.” This is where a debtor, accompanied by his or her lawyer, meets with the trustee and testifies under oath as to his or her assets and debts. Creditors have the right to attend 341 meetings and ask questions, but few creditors exercise this right.

Still have questions? Contact our offices today for a consultation about your personal financial situation today.

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Our Awards

McDowell Posternock Apell & Detrick attorneys have received recognition from various groups and publications. Specific awards are noted on our attorney bios. More information about each of these awards and the methodology used for selection can be found on the following links. Super Lawyers, Awesome Attorneys, South Jersey Biz Best Attorneys in Business. No aspect of these accolades has been approved by the Supreme Court of New Jersey.

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