A Chapter 7 discharge will generally produce the following results:
1. GET RID OF MOST DEBTS
A. CREDIT CARD DEBT – Bill collectors and collection agencies are strictly prohibited from calling or having any other contact with you once a Chapter 7 is filed. The credit card debt will be completely wiped out once a discharge order is entered. Many consumers do not even know how much interest they are paying on their credit card balance. In our role as New Jersey Bankruptcy Attorneys, we have seen cases where people were paying interest rates of anywhere up to 29% to 33%. Our clients breathe a lot easier when they are relieved of the obligation of paying those exorbitant rates.
B. MEDICAL BILLS — Getting sick and not being able to work is how many of our clients got into financial trouble. It’s easy to rack up huge medical bills in this day and age especially if you did not have insurance. Through a Chapter 7, your medical bills including money owed to dentists, doctors and hospitals will be erased.
C. UTILITY BILLS – You can wipe out debts owed to the gas, electric, telephone and cable companies. By law, a public utility must continue to provide you with service even after you have discharged prior debts through bankruptcy. Cell phone bills are a little trickier. While they can be wiped out, the companies are not legally bound to keep you as a customer.
D. MONEY OWED TO THE IRS – If you are liable for income taxes owed to the IRS or New Jersey’s Department of Taxation that are more than 3 years old and the tax return was filed more than 3 years ago, it is possible that you will be relieved of responsibility for payment. Each situation must be reviewed carefully by a Bankruptcy attorney to determine whether discharge is available.
E. UNSECURED LOANS – Debts owed to financial companies such as American General, Beneficial, Household Finance and CitiFinancial can normally be discharged through a Chapter 7 proceeding. However, if you have put up collateral for the loan, Chapter 7 relief may not be available.
F. ATTORNEY FEES – Legal fees may also be discharged through a Chapter 7.
2. PENALTIES AND RESTRICTIONS LIFTED
A. DRIVER’S LICENSE SURCHARGES – Many of our clients have been driving without a valid driver’s license because they owe surcharges to the New Jersey Department of Motor Vehicles. In most cases, the surcharges can be discharged through a Chapter 7. The state will then restore your driving privileges (unless they were suspended for another reason) and issue a new license.
B. WAGE EXECUTIONS ON SALARY STOPPED – Most wage executions are forbidden once Chapter 7 has been filed. It is even possible that we will be able to retrieve money garnished from your salary if it is more than $600 and was taken over the previous 90 days before the filing.
C. FROZEN ASSETS – If your bank account has been frozen, filing your bankruptcy case with the court will force the bank to release the funds to you. You must remember that if the funds have already been taken out of your bank account then filing for bankruptcy will not get the money back for you, but will re-open the account. You will be able to resume direct deposit of your salary into the account without fear that the funds will disappear. We will of course examine the matter to make sure that the creditor followed appropriate legal procedures with respect to the freezing of the account.
D. PROPERTY BEING SOLD AT SHERIFF’S SALE – If a Sheriff’s Sale of some of your assets (such as a car, household items or other personal property) has been scheduled, we can stop the sale by filing Chapter 7.
Get a Fresh Start, Get Debt Relief and Stress Relief
Remember that one of the main purposes of Chapter 7 is to help you get a fresh financial start, put the past behind you, and wipe out your bills so that you are free of burdensome debt. Chapter 7 stops creditors from calling you constantly and putting the lives of you and your family into turmoil.
In the United States, approximately 1.5 million individuals or families file for Bankruptcy each year. They do it because they are under such serious financial pressure that there is nowhere else to turn. (By the way, if we feel that Bankruptcy is not right for you, we will encourage you to explore other options.) Many people come into our office feeling ashamed of their financial situation. We find that most who have got to this point got here through no fault of their own. You may have had medical problems, got divorced or lost your job. Even if you made some unwise moves in the past such as co-signing a loan for someone who defaults or simply running up your credit cards, that is no reason to beat yourself up. We encourage you to take a positive step forward to address your debt situation. You will feel relieved after your first appointment with one of our New Jersey Bankruptcy Attorneys.
We are often asked how much debt you need to have to qualify to file for a Chapter Seven Bankruptcy. Everybody’s circumstance is different. For example, it may be appropriate for a senior citizen with fixed income to file with as little as $5,000 in debt. Others who have other income potential may have $30,000 in unsecured debt or much more. We will analyze your situation at our first meeting.
Do not delay. Call Rothamel Bratton today to set up a FREE INITIAL CONSULTATION! Imagine what it would feel like to be debt free and to start your financial life all over again!
COSTS
Our legal fee for Chapter 7 is normally $1350. The Bankruptcy Court charges a $299 filing fee. There are also two counseling sessions that you must complete in order to receive your discharge. Each session costs approximately $50. You must do the first counseling session before you file for Bankruptcy, and you must do the second counseling session shortly after you have your Bankruptcy meeting with the Trustee. We arrange the sessions for you and give you complete instructions regarding the process. If you don’t complete the second session you won’t get a discharge and you are back to square one. The only other cost is the cost of obtaining a credit report which is Thirty-five dollars ($35.00).
The first counseling session can be done by telephone or on the internet. It usually takes between 30 to 60 minutes. The second counseling session is done by phone and generally takes a little over an hour.
The following section sets forth the straightforward steps that are involved in preparing, processing, and completing a successful Chapter 7 case. The object is to get a discharge and wipe out all of your unsecured debts. Let us help you accomplish
your goal.
EXPLANATION OF THE CHAPTER 7 PROCESS
FIRST STEP – FILING PETITION – INSTANT RELIEF
We start the Chapter 7 bankruptcy by filing a legal document called a petition. Either before or during our free initial consultation, we will provide you with a form that will help you know what information that we need to properly complete the petition. We then meet with you to review the petition (which is quite lengthy) to make sure that all of the information is accurate. Rothamel Bratton has the capability to file the Chapter 7 petition electronically which makes the case official. This means that the “automatic stay” will come into place immediately.
We can notify any creditors that need to be notified of the filing by calling them and mailing, faxing, or hand delivering a stamped copy of your petition to that creditor. It is likely that some of your creditors have been calling your home incessantly, threatening to file a lawsuit or even to levy on your bank account. We can stop these actions in a manner of minutes after filing the petition. The types of situations that may require immediate notification and action by us are:
(1) If your mortgage is in foreclosure or subject to sheriff sale, we can usually stop those proceedings.
(2) If you are behind in your car payments, we can stop a vehicle repossession in most cases. If your car has already been repossessed, the finance company usually must return it to you once you submit proof of full coverage automobile insurance.
(3) If you are behind on your rent at your apartment or home, Sharp Bratton may be able to stop eviction proceedings.
(4) If you are delinquent in your utility bills, the arrearage can be wiped out in most situations. If you have received a “shut off” notice, we notify the utility company of the bankruptcy proceedings which prevents them from shutting off your utility service. If they have already been shut off, the utility companies will be required to turn your service back on upon receipt of the notice of the bankruptcy filing.
(5) The IRS is prohibited from taking immediate action against you once the bankruptcy petition is filed.
(6) Creditors or anyone else will generally be stopped from attaching your wages. It is critical that you notify us when you retain us if a wage garnishment is already in place. It is likely that we can get the garnishment lifted. Funds garnished from your paycheck after the bankruptcy petition has been filed will normally have to be returned to you. The general rule is that if $600 or more has been garnished from your wages within the 60 day period before your case is filed, the money should be returned to you.
(7) If your bank account has been frozen, we may be able to retrieve funds that were seized before the filing of the bankruptcy.
(8) Some people lose their driver’s license because they don’t have the ability to pay surcharges. Let us know if this applies to you and we will try to help you get your
license back.
(9) Most lawsuit proceedings can be stopped IMMEDIATELY. It is possible, however, that the Bankruptcy Court will allow the person or company with the suit against you to proceed with the claim. We will talk to you about the specifics of your case and keep you posted as to any such court rulings.
A notice to all of your creditors is also sent out by the Clerk’s Office of the Bankruptcy Court sent a few days after we file your case. A copy of these notices will be forwarded to you. If a creditor takes action against you (which includes calling you at home) after being informed that you have started your bankruptcy, that creditor is subject to sanctions by the Bankruptcy Court. Let us know IMMEDIATELY if any creditor contacts you after you receive notice that the petition has been filed. As your personal New Jersey Bankruptcy Attorneys, we are here to help!!!
SECOND STEP – CASE NUMBER AND NOTIFICATION OF CREDITORS
Once we file the case electronically, a case number will be immediately assigned. You will receive the case number in the mail; but if you need it right away particularly if a creditor has requested it, just give us a call.
It is imperative that you open and read any correspondence that you receive from us or the Bankruptcy Court immediately upon receipt. The first mail that you should receive from the Bankruptcy Court is the Notice of Chapter 7 Bankruptcy Case. The court sends it to your creditors as well and it serves as an official notice. There is a lot of essential information in the Notice such as date, time and place of the Meeting of Creditors (which you are required to attend). If you need directions, let us know. By the way, creditors rarely appear at this meeting.
THIRD STEP – HOW TO PREPARE FOR THE CREDITOR’S MEETING
The third step is the Creditor’s Meeting. You will be provided a list of what you need
to bring.
The types of items that you need to bring are copies of your income tax returns for the last two years, your two most recent paycheck stubs as well as a copy of your deed (if you own real estate) as well as a copy of all current mortgage payoffs showing the principal balance on any outstanding mortgages.
You will be required to show the current fair market value of each parcel of real estate that you own. You may need to provide to the trustee an appraisal or comparative market analysis. We will recommend to you what you need to produce and refer you to professionals who can perform a market analysis.
Please be prepared to produce a copy of the payoff statement showing what is owed on your vehicle if you have a vehicle that is financed.
The Trustee will absolutely and without a doubt require that you produce your social security card and a government approved photo identification at the meeting. If you have questions about what qualifies, let us know and we will guide you.
FOURTH STEP – THE CREDITOR’S MEETING – WHAT YOU CAN EXPECT
The trustee will first ask you to be sworn in or to affirm that you will tell the trust. A New Jersey Bankruptcy Attorney from Rothamel Bratton will be by your side. DO NOT BE NERVOUS. The meeting is usually informal and takes less than 10 minutes.
Once again, DO NOT FORGET to bring your social security card and a valid government approved photo ID. (By the way, an expired driver’s license doesn’t count.)
It is our firm’s policy to review in detail every line of the bankruptcy petition with you before you sign it. At the creditor’s meeting, the trustee will ask you to confirm your signature on the petition and to verify that you reviewed the petition before you signed it and that all the information is true and correct. If you discover that information disclosed on the petition is inaccurate or additional facts need to be brought to light, please contact Rothamel Bratton IMMEDIATELY (before the creditor’s meeting) so that we can make any necessary amendments to the petition. You still have the option to make any changes or additional disclosures when you meet with the Trustee; however, the meeting will be smoother if the amendment has been made prior to that date. The types of amendments that we have made in the past include: change in address or employment or adding a new creditor that you forgot to include in the original petition..
After you have been sworn in (or affirmed your testimony), the following questions will be asked by the Trustee:
A. If you own a house or real estate, you will be asked these questions:
a)When did you purchase the house or real estate?
b) What was the entire purchase price?
c) What is the current fair market value of the property?
d) What is the payoff on any mortgages you owe? Once again, don’t forget to bring off the current payoff statement as well as copies of deeds for each property that you own.
e) You may be asked to produce (1) the current payoff statement for each vehicle that is financed; (2) your two recent paystubs which reflects your average weekly or biweekly income. (If you have had an unusual amount of overtime or didn’t get all of your normal hours, you want to bring other paystubs as well that show what you normally make. We will review them with you before you show them to the trustee; (3) your income tax returns (1040s) for the last two years.
After you have answered the trustee’s questions and given him or her the required documentation, the hearing will normally end and then the next phase begins.
FIFTH STEP – WHAT HAPPENS AFTER THE CREDITOR’S MEETING
Our work is over for now and we simply have to wait for the trustee to submit a report to the bankruptcy court with his or her opinion that you qualify for bankruptcy and that your debts should be discharged. There is a remote possibility that the trustee will recommend that your debts should not be discharged; however, this rarely happens. If so, he or she will inform your New Jersey Bankruptcy attorney (Rothamel Bratton) of the issues and we will work with you to attempt to remedy the situation.
You will soon be receiving several documents from the bankruptcy court. Again, you must open them and read them carefully. Approximately three months after the creditor’s meeting, you will receive a Bankruptcy Discharge which is the most important document. Please file this away in a safe place because this is proof that your dischargeable debts have been legally forgiven. If any creditor ever tries to collect in the future and you have listed that creditor on your bankruptcy petition, you simply need to produce the discharge.
If you own real estate, you will most likely be sent a Notice of Proposed Abandonment of Property. This means that you may keep your property since the trustee has decided to abandon any creditor’s claims of creditors against your property. IN THE PAST, SOME OF OUR CLIENTS HAVE FRANTICALLY CALLED US BECAUE THEY INTERPRETED THE DOCUMENT TO MEAN THAT THEY MUST GIVE UP THEIR PROPERTY. This is not the case at all!!!! Please note that creditors are given the opportunity to object and a court date is set so that creditors can appear to object. YOUR APPEARANCE AT COURT ON THAT DATE IS UNNECESSARY UNLESS WE ADVISE YOU TO THE CONTRARY!!! Once that date has come and gone, your debts are discharged you can stop worrying!
SIXTH STEP – YOUR FINANCIAL FUTURE
One of the most popular questions asked by our clients considering a bankruptcy proceeding is how a discharge will affect their credit rating for the future. Simply put, before making the final decision to file a bankruptcy petition, we encourage you to consider other alternatives such as mortgage or loan modifications or other negotiations with your creditors. However, the fact of the matter is that the credit rating of many of those who consult with us has already suffered and will only get worse as time goes on. It is our understanding that while credit may not be easy to obtain in the first few years, if you work and pay your bills on a consistent basis after your bankruptcy discharge, you will be on the road to building back your favorable credit rating. We will be pleased to make referrals if you are interested in obtaining financing for homes and cars in the future. You can also look into a secured credit card.
The most important two little words in the bankruptcy world are “FRESH START”!!! After your bankruptcy discharge, you get to start all over again financially!!!!
Once you obtaining your discharge, your bankruptcy case is officially concluded in most cases. However, if you are expecting to receive a substantial asset in the future, such as an award or settlement on a personal injury case, the bankruptcy court may keep your case open until you are able to disclose the amount of the funds that you will receive. You are under an affirmative obligation to notify the bankruptcy court if you inherit any property within six months of filing your bankruptcy petition.
Our clients report to us that they have a sense of relief after the proceedings are complete. They now have significantly less financial stress and feel less tense.
CHAPTER 7 – FREQUENTLY ASKED QUESTIONS
- Question: Am I allowed to keep any assets?
Answer: You are allowed to own a home, vehicles, jewelry and have bank accounts. However, the law restricts the amount of assets that you are permitted to keep if you wish to wipe out all of your unsecured debts. A married couple can have $40,400 equity in their home and still wipe out the unsecured debts while a single person has an equity limit of $20,200. If the equity is higher, we will need to consider a Chapter 13 Bankruptcy under which unsecured creditors will be paid a portion of the debt owed over a period of time.
- Question: What effect does my income and expenses have on my Chapter 7 Bankruptcy case?
Answer: The trustee in every case reviews your income and expenses. The amount of income you earn per month compared to the amount of reasonable expenses you have per month can be a factor in determining whether you can wipe out all of your unsecured debt.
- Question: What is the Chapter 7 means test?
Answer: The Chapter 7 means test is a formula applied to determine whether or not the consumer should have enough money available to make some minimal payment to creditors in a Chapter 13 plan. The goal is to reserve Chapter 7 bankruptcy for those who really have no means to pay and to push those who have available income into Chapter 13 bankruptcy plans, so that their creditors will receive at least partial payment.
- Question: How does the Chapter 7 means test work?
Answer: The Means Test is a Two-Step process.
The First Step is is referred to as “Median Income Comparison” which compares your income to the median income in your state for a family the same size as yours. We will perform that calculation for you as part of our service as your New Jersey Bankruptcy Attorney and determine if you are above or below the median income. If your income is higher than the median income, it doesn’t necessarily mean that you can’t file for Chapter 7 bankruptcy; it just triggers the second step in the test.
The Second Step involves Calculation of Your Disposable Income and Unsecured Debts. Certain allowable expenses (determined by IRS guidelines) are subtracted from your income to find your “disposable income.”
If your projected disposable income over the next five years totals less than $6,000 ($100/month), you likely “pass” and can file under Chapter 7.
If your disposable income is greater than $10,000 over the next five years, a presumption arises that you don’t really need to file for Chapter 7 bankruptcy and you may only be allowed to do so if you can demonstrate special circumstances.
In the gray area between $6,000 and $10,000, yet another calculation is often required.
This one compares your disposable income over the next five years to a percentage of your unsecured debt to determine whether any significant repayment to your creditors
is possible.
If your disposable income over five years is greater than 25 percent of your unsecured, non-priority debts, you’ll probably find yourself in the same circumstances as if you’d had more than $10,000 in disposable income.
If your disposable income over a five year period is less than 25 percent of your unsecured, non-priority debts, you will likely “pass” the means test.
A Rothamel Bratton bankruptcy attorney will crunch the numbers for you and tell you whether or not you qualify for Chapter 7 bankruptcy under the means test. The calculation can be complex, not only because of the numerous steps that may be involved, but because it requires an understanding of the rules concerning how your income is calculated for means test purposes and which debts are classified as unsecured and non-priority.
Most people who want to file for Chapter 7 bankruptcy find that they are still eligible to do so even under the new law. We will help you determine how the means test may affect your options.
We are a debt relief agency. We help people file for bankruptcy relief under the
Bankruptcy Code.
Contact Rothamel Bratton for a free consultation with an experienced Chapter 7 Bankruptcy lawyer in New Jersey.
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