New Jersey Bankruptcy Blog

What happens if my income changes after I file a chapter 7 bankruptcy case?
The criteria of a chapter 7 must be met at the time of the filing. One of the criteria is that the debtor’s projected household monthly income must be less than the household’s necessary and reasonable monthly expenses. The expenses include necessities such as the mortgage, auto, food, clothing, transportation, and utilities. The expenses do not include payments on credit cards. In other words, whether or not the projected household income is not sufficient to pay all of the projected reasonable and necessary monthly expenses.
The projected income is based on the debtor’s household’s income at the time of the bankruptcy filing. If the debtor lost his income one month prior to the filing and is receiving unemployment, the unemployment income is included as part of the household’s income. If the debtor obtained employment two days prior to the filing, the new unemployment income is included in the projected household’s income. If the debtor is unemployed at the time of the filing and obtains employment two weeks after the filing, the new employment income is not part of the projected income, but rather the unemployment.
Also, the debtor’s household’s monthly income for the six months prior to the filing must be less than the average income of a household of the same size in New Jersey for the six month period. Or, alternatively, if the income is in excess of the New Jersey’s average, the criteria may still be met if the household income is less than their monthly expenses for said six months prior to the filing. The expenses are based on the IRS allowable standards based on the household size.
The income for the six month period is based on the amount earned during the six months prior to the filing. If the debtors’ income changed during the six month period, the changed amount must be averaged into the calculations. However, if the debtor loses his job or his income is substantially reduced prior to the filing, the debtor may be permitted to argue that due to the substantial change in circumstances of income, the court should not consider this criteria and look only to the projected income and expenses. If the debtor’s income is substantially reduced after the filing, the debtor may also argue substantial changes in circumstances. If the debtor’s income increases after the filing, the increased income will not affect the result of the criteria.
Robert Manchel, New Jersey chapter 7 bankruptcy lawyer, can be reached at (866) 503-5655, to answer your questions about bankruptcy protection.

How Much Income Will Permit a Person to File for Chapter 7 Bankruptcy?
The chapter 7 criteria does not only analyze income, but income, expenses, and monthly disposable household income.
There are two criteria regarding income that must be met to file a chapter 7.
The first criteria, called the Means Test or Current Monthly Income Test, focuses on the debtor’s household income as compared to the average income of a household of that size in New Jersey. If the household’s gross income is less than the New Jersey’s average household income, the debtor meets the criteria. The criteria is based on the household’s gross income for the six months prior to the bankruptcy filing. The average income of a household is based upon the U.S. Dept. of Justice’s figures, which are periodically modified. The present figures in New Jersey are as follows:
Average gross income of a household of 1 is $62,226.00
Average gross income of a household of 2 is $69,634.00
Average gross income of a household of 3 is $87,576.00
Average gross income of a household of 4 is $105,175.00
If the debtor’s income is more than the average, the debtors may still meet the criteria if their average household’s net income, for the six months prior to the filing, is less than their expenses for this same period. A portion of the expenses are dictated by the IRS standards and a portion is based upon actual expenses.
There is a second criteria related to income. This criteria is met if the projected future household average monthly net income is less than the household’s actual monthly expenses that are reasonable and necessary to maintain the household. In other words, the debtors must be insolvent, and unable to pay their reasonable and necessary expenses to maintain the household. The debtors must be in the red every month. The expenses cannot include the debtors’ monthly payments on unsecured debt such as credit card debt.
If either of the two aforementioned analyses reflects excess income, the debtors may not file for chapter 7 bankruptcy but may file a chapter 13 bankruptcy and pay the amount of the monthly disposable income toward the debt.
Chapter 7 debtors with higher incomes may still meet the criteria if they have larger households and/or substantial monthly expenses that are necessary to maintain the household. In certain scenarios, a high monthly mortgage and/or auto payment may allow debtors with larger incomes, meet the criteria.
NJ Chapter 7 Bankruptcy Lawyer Robert Manchel will discuss your bankruptcy questions at (866) 503-5655. Call to discuss your potential for bankruptcy protection and how the laws apply to your individual case.

Typically, a chapter 7 bankruptcy is designed for a person that wishes to discharge (eliminate) certain debt, such as unsecured debt (credit card debt). A person may also discharge secured debt. However, if a person wants to keep the property that is connected with the secured debt, such as a house or auto, the person must keep current with the secured debt payments. If a person is behind with their secured debt payments, such as a mortgage or auto financing, the chapter 7 will not help save them from foreclosure or repossession.
If the debtor meets the criteria of a chapter 7, the debtor is entitled to a discharge. However, a chapter 7 discharge does not discharge certain types of debt. The entire process takes about five months from the filing date to the entry of discharge. In the unusual situation that a trustee sells a debtor’s asset, the asset may be sold at any time after the discharge. No court payments are required to be made in a chapter 7 case.
Typically, a chapter 13 requires a monthly payment to a bankruptcy trustee. The amount of the monthly payment and the creditors that are paid, depends on numerous factors.
A person may file for chapter 13 for a number of reasons. The first reason may be based on the debtors’ inability to meet the criteria of a chapter 7, in that he has substantial monthly disposable income. Under this scenario, the debtor is not able to eliminate all unsecured debt or other type of debt, and must pay a portion of the debt to such creditors, over a certain time period.
A person may wish to file a chapter 13 to help save an auto from repossession or a house from foreclosure. Under this scenario, the debtor, in some fashion, must cure the mortgage and/or auto finance arrears over the life of the chapter 13 plan, through the monthly trustee payments.
A person may wish to file a chapter 13 for the purpose of discharging a type of debt that is not dischargeable in a chapter 7, such as certain debt that is due to an ex spouse. Also, certain debt may be reduced in a chapter 13, that cannot be reduced in a chapter 7.
Similar to a chapter 7, certain debt is not dischargeable in a chapter 13, even though the entire bankruptcy plan is successfully completed.
NJ bankruptcy practitioner, Robert Manchel, may be reached at (866) 503-5655 to discuss your specific circumstances.