It can be easy to get ahead of ourselves when we begin making money, and we see what it has to offer. Though you may not be concerned about things like car insurance and bankruptcies, large purchases such as homes, expensive vehicles, and extracurricular activities can quickly place someone in more debt than they thought.

On the other hand, there may sometimes be unforeseen circumstances, such as expensive and unexpected medical bills, which cause us to fall into a place where our payments become too much.

So what should you do if you find yourself in a position where your bills have become overwhelming or too much to handle? Your answer may lie in filing for chapter 13 bankruptcy.

What is chapter 13 bankruptcy?

Chapter 13 bankruptcy is the answer for people who make a steady income but have gotten ahead of themselves in terms of bills. You have funds available, but the cost of your debts has gotten to a point where immediate payments are difficult to make.

When you file for chapter 13 bankruptcy, you are essentially creating a payment plan to repay the debts you owe. You will not lose your major assets when choosing this option. For example, if you are in the process of a foreclosure on your home, chapter 13 will stop the foreclosure process rather than the liquidation of your assets to pay off debt which happens in the case of chapter 7 bankruptcy.

How do I qualify for Chapter 13 bankruptcy?

There are a few requirements in order to be eligible for chapter 13 bankruptcy such as:

• Your tax filings must be up to date
• You must have a steady and regular income
• Your unsecured debt cannot exceed $394,725
• Your secured debt cannot exceed $1,184,200
• You cannot have filed for chapter 7 bankruptcy in the last four years
• You cannot have filed for chapter 13 bankruptcy in the last two years
• You cannot have filed a bankruptcy petition that was dismissed in the last 180 days

How do I apply for chapter 13 bankruptcy?

The first step you should take when considering bankruptcy is meeting with a bankruptcy attorney and credit counselor. A credit counselor will provide you with pre-bankruptcy counseling services as well as possible assistance when drafting your repayment plan. 

Making an appointment with a bankruptcy attorney is a crucial step in the process. Filing for bankruptcy is no easy task. Without the assistance of an attorney, you may fill something out incorrectly or even miss a step in the process, which can cause your case to simply be thrown out.

Both meetings will allow you to understand your situation and decide if bankruptcy is truly the best option for you.

After you have determined bankruptcy is the right choice, you will file a petition with the bankruptcy court serving your area. You will need to provide information when filing such as:

• The sources and amounts of your income
• A list of creditors and what they are owed
• A breakdown of your monthly living expenses
• A list of property in your name
• Your most recent tax information

After you have filed, you will need to propose a repayment plan. The plan must be submitted within 14 days of your filing. 

Once this happens, you will have a hearing with a bankruptcy judge or administrator who will determine if your repayment plan meets requirements and is fair. They will have the final say in your payment plan.

What happens after I file?

Typically, most payment plans made under chapter 13 bankruptcy will extend over a period of 3 to 5 years. After you have filed your petition, you are expected to begin making your payments within 30 days. 

An important point to keep in mind for this part of the process — your 30 days to begin making payments starts from your filing date, despite whether your petition has been approved or not.

Your payments will be made to a chapter 13 trustee, who will then distribute them to the appropriate creditors to ensure your debts are being paid down. Some trustees may require your payments to be made through a payroll deduction, which means a form will be sent to your employer so the appropriate funds can be redirected for payments.

You will have no contact with your creditors under chapter 13 protection. 

While you are making your payments through the course of your agreed upon period you will also be expected to take a debtor education course, which is typically provided by a non-profit counseling company. The counseling must begin within 180 days after the petition has been filed.

If you fail to make your payments or do not have the funds, this will cause your case to fall back under review. If this happens, the result could be selling off your property in order to pay debts.

Bankruptcy is not a Life Sentence

Sometimes there is a lot of fear and embarrassment that surrounds the idea of filing for bankruptcy. Though it is understandable to have strong negative feelings about the process, sometimes it is the best choice to make depending on your circumstances.

Once you have completed your agreed upon payment plan period and met your requirements, your remaining dischargeable debt will be wiped out, leaving you back in a place where you are comfortable financially.

The bankruptcy will stay on your credit report for a total of seven years, after which it will be wiped clean and you are able to start over. 

Don’t look at bankruptcy as a life sentence. Sometimes it is a necessary process given our circumstances. Chapter 13 gives you an opportunity to keep your assets and pay down your debt, leaving you in a much better place after you have finished your payments.

Alexandra Arcand writes and researches about the laws regarding insurance for the car insurance comparison site, CarInsuranceComparison.com. She enjoys guiding people to the financial help they need.

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This issue deals with unexempt New Jersey bankruptcy assets. The determination as to whether an asset is exempt is always analyzed prior to a chapter 13 filing, with the assets the debtor owns at such time.  A debtor must pay to the unsecured creditors (such as credit card debt), at least the amount of the unexempt equity of any and all of his assets. I have explained how to analyze asset exemptions in numerous blogs within this website.
The bankruptcy code lists the federal exemptions in U.S.C. 11 section 522(d).  If the amount of the allowable exemption, is more than the value of any  such property, minus the secured interest, or lien, of the property, the debtor need not pay any funds toward the unsecured debt, as a result of owning such property. An example of a secured lien is a mortgage on a house, or financing on an auto. However, if the exemption amount that is applied to such property is less than the equity in a particular property, the debtor must pay the portion of the value of each asset that is unexempt, towards the total unsecured debt. This analysis must be performed for each and every asset and it’s relevant allowable exemption amount.
The following is an example of a person filing for chapter 13 bankruptcy protection in New Jersey. Based on the equity in the house, alone, the debtor must pay at least the unexempt amount of $9,325.00 towards the total amount of unsecured debt. Please note that the debtor may be required to pay more, based on the value of other property and the amount of the monthly household disposable income.
Value of House is                                                                                                                   $370,000.00
minus mortgage payoff balance                                                                                        -$300,000.00
equals                                                                                                                                        $70,000
minus allowable 10% cost of sale which may be deducted for real estate                -$37,000.00
balance                                                                                                                                     $33,000.00
minus allowable exemption for each person who owns a house                                -$23,675.00
balance                                                                                                                                     $9,325.00
The following code section deals with property that the debtor acquires after the chapter 13 bankruptcy case is filed.
Ҥ 1306. Property of the estate

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A chapter 13 case is different than a chapter 7, in that a New Jersey chapter 7 trustee would sell a debtor’s personal property or real estate that is not fully exempt. A chapter 13 trustee will not sell a debtor’s property no matter the value. However, the value of the property may effect the amount that the debtor must pay through the bankruptcy plan. As a result, an individual may consider filing for a chapter 13, if he owns property with a substantial value.
If any value of property is not fully exempt, the amount that is “unexempt“, must be paid to towards the unsecured debt, pro-rata. I explained how NJ. bankruptcy exemptions are applied in both chapter 7 and chapter 13 cases. For example, if a house, owned by one person, has a value of $400,000.00, with a mortgage payoff of $330,000.00. $400,000.00 minus $330,000.00 is $70,000.00. $70,000.00 minus $40,000.00 (10% cost of sale of $400,000.0) is $30,000.00. $30,000.00 minus the bankruptcy homestead exemption of $23,675.00, is $6,325.00.
The debtor in connection with the above referenced example would be required to pay at least $6,325.00 toward his unsecured (ie. credit card debt, personal loans, medical bills, etc.). The debtor would be required to pay the $6,325.00 and the New Jersey chapter 13 trustee would not sell the debtor’s property. Please note that based on various other financial issues, the debtor may be required to pay additional funds towards the unsecured debt.
Suppose the debtor’s house is worth $10,000.000.00, with no mortgage or liens? Would the NJ. chapter 13 trustee sell the debtor’s house under such circumstances? The answer is still no. However, the debtor would be required to pay all of his debt, in full, after deduction of his $1,000,000.00 cost of sale expenses and his $23,675.00 exemption. If the debtor is unable to pay the total amount of his debt by any means, including monthly trustee payments, his case would be dismissed, due to the lack of feasibility. Dismissed means the case would be thrown out. If the case is thrown out of court, the chapter 13 trustee would still  not be able to sell his house.
Contact Robert Manchel at 866 503 5644 to discuss your NJ. bankruptcy law questions.

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Based on the fact that each debtor’s circumstances are different, please note that the following information is based on my opinions of the “typical” debtor’s circumstances regarding how and when payments should be made in  a New Jersey chapter 13 bankruptcy case. The following may not comply with your specific circumstances.  Each debtor must ensure that certain creditors are paid on a monthly basis.
Unsecured creditors, such as credit card debt and personal loans are not paid directly. Secured loans, such as mortgages and auto loans, in connection with real estate and autos, that the debtor wishes to keep, must be paid, in some fashion. Also, typically, utilities, in connection with a house that will be kept, must be paid directly, on a timely basis. Specific services, that one wishes to maintain, such as a cell phone and cable, must be paid on a timely basis, as well.
Each month a debtor must make a chapter 13 payment to the trustee. The bankruptcy hearing date, has no effect or relation to when and how a trustee payment is made. Although the first trustee payment is actually due thirty (30) days after the bankruptcy filing, the trustees request that the plan reflect that the first payment is due on the first of the month after the filing. Also, the plan must reflect that all subsequent payments be made on the first of the month thereafter. Based on my experience, it is acceptable to make the first payment within thirty (30) days of the filing, and to make all future payments, within thirty (30) day increments, thereafter. My other blogs explain where and how the payments should be made.
The other payments that must be paid are based on the specific circumstances of the debtor. If the debtor has a mortgage, than the mortgage payments must be paid, each month, on a timely basis. After the bankruptcy filing, the first mortgage payment is due to the mortgage company, when the payment initially comes due after the bankruptcy filing. In other words, if a debtor files his bankruptcy case on the 20th of the month and his regular mortgage payment is due on the first of each month, than the initial post filing mortgage payment must be paid by the first of the month after the filing date.
If a debtor is required to make a regular payment directly to an auto finance or lease company, than the payment must be paid to such company, each month, until the debt is satisfied. Similar to the mortgage payment, the initial post filing auto finance (lease) payment must be paid when the payment initially comes due after the filing.  An auto finance or lease payment may come due on any day of the month, unlike a mortgage payment, which is typically due on the first of each month. A particular debtor’s plan may require that the auto finance or lease payments be paid through the trustee payments, Under this scenario, the debtor need not make the monthly auto payments directly to the creditor.
Robert Manchel may be contacted at 866 503 5644 to discuss your questions concerning bankruptcy in NJ.

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If a New Jersey bankruptcy debtor is not discharging or eliminating any of his debt and has sufficient disposable income to pay all creditors that must be paid, under the bankruptcy code, the debtor may keep any motorcycle. However, if a debtor is attempting to eliminate debt, such, as credit card debt, a debtor may or may not be permitted to keep his motorcycle. The balance of this blog pertains to a New Jersey chapter 13 debtor who owns a motorcycle and intends to eliminate certain debt.
There are two issues related to whether a debtor may keep a motorcycle in a chapter 13 case.
First issue:
A chapter 13 debtor must pay to the trustee, all of their household disposable income on a monthly basis. The  allowable expenses that are used to obtain the disposable income, must be necessary and reasonable to live. The allowable disposable income, typically, does not include a payment on motorcycle financing, unless the motorcycle is necessary for work. In other words, a trustee or judge will likely not permit a debtor to use a $500 motorcycle finance payment as an expense and not use the $500.00 to pay back creditors. The debtor will not likely be permitted to keep a motorcycle, under this scenario. However, depending on the circumstances, the trustee may possibly work out a settlement or the issue may possibly be resolved by the debtor’s attorney.
Second issue:
A debtor must pay to their unsecured creditors (ie. credit card debt), pro rata, no less than the amount of their unexempt assets. The exemption analysis has been explained, numerous times, in other blogs within this website. The exemption analysis is the same in a chapter 7 and chapter 13.
The bankruptcy code has a list of exemptions that may be applied against the equity in assets. If the amount of the exemption that is applied to any asset is less than the asset’s equity, than the difference is the unexempt equity. Depending on the specific asset, the equity and the unexempt amount may be reduced by the estimated cost of sale of the asset.
The bankruptcy code provides a list of exemptions that may be applied toward specific assets. The bankruptcy code allows an exemption of $3,675.00 in any motor vehicle. This exemption is typically applied to a car, but may possibly be applied towards a motorcycle, in certain circumstances. Additionally, another code section permits a person to apply the amount of $11,500.00 in a motorcycle, that is not used or needed for their residence. Additionally, the debtor may apply $1,225.00 in any property. The following is an exemption analysis:
Motorcycle Value       $10,000.00
Financing Payoff         $2,000.00
Balance                         $8,000.00
Exemption                   $5,000.00  (Assume that $5,000.00 is the maximum exemption that may be applied. In other words, assume that the auto                                                                         exemption is needed and applied to another automobile and cannot be applied towards the                                                                                                             motorcycle. Also, assume that this debtor can only use $4,775.00 of the unused portion of the residential                                                                                   exemption and the additional $1,225.00 amount.)
Balance                       $3,000.00
The above example results in a motorcycle with unexempt equity of $3,000.00. This means that the debtor must pay at least $3,000.00 towards their total unsecured debt. The amount of any other unexempt equity in any other property must be added to this $3,000.00. The debtor must pay at least the total amount of all unexempt equity toward their total unsecured debt, through their bankruptcy plan. If the debtor does not maintain sufficient disposable income to pay this amount through his bankruptcy plan, he will not be permitted to continue with his chapter 13 case. Therefore, if the debtor does not have sufficient income to pay the total amount of his unexempt motorcycle equity, to his unsucred creditors, he must sell the motorcycle, if he wishes to file a chapter 13 bankruptcy case.
Robert Manchel, the NJ. bankruptcy lawyer, may be contacted at 866 503 5644.

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The explanation below relates to the handling of certain debt related to a New Jersey chapter 13 modified bankruptcy plan. The specific type of debt effected by the new law is connected to collateral, which includes auto financing, auto lease, house mortgage, and residential lease.  The explanation below refers to all types of the above listed debt as “certain debt”. Also, the explanation below works the same for all types of collateral related to “certain debt”.
A  chapter 13 plan may surrender an auto or house and eliminate the mortgage and/or auto finance and/or lease debt.  Also, a chapter 13 plan can reject a residential lease and eliminate the lease debt. All of the above may be accomplished by way of an original plan that has never been modified.  Until recently, a debtor could file a modified plan and eliminate “certain debt” by filing a modified plan, without issue. However, recently, a New Jersey bankruptcy judge determined that if a prior confirmed plan reflected that a debtor is keeping property associated with “certain debt”, and then files a modified plan to surrender the collateral, the debtor may be required to pay some money to the creditor.
For example, a debtor filed a plan which reflects that he is keeping his auto by paying the regular monthly payments to the auto lease company. The plan is confirmed by a bankruptcy court order. Thereafter, he wishes to surrender the auto through a modified plan. Previously, any auto payment arrears after the confirmed plan would not affect the debtor’s ability to file a modified plan and eliminate all of the debt.
However, recently, a New Jersey bankruptcy judge determined that, under certain circumstances, the subsequent modified plan would require the debtor to pay the total amount of the default to the creditor though the subsequent modified plan. The total amount that must be paid is the amount of the payment default after the confirmation of the first plan, through the date of the vehicle return /repossession,  or confirmation date of the subsequent plan. Also, the above explained amount must be paid through the modified plan only if the creditor files the appropriate documents with the court after the debtor provides the proper notice to the creditor. Although this law, in theory, applies to mortgages, it is very unlikely that the law will apply to mortgages, as the mortgage company will be unable to file the proper documents with the court.
The analysis below explains why a determination of one New Jersey bankruptcy judge may not apply to any other bankruptcy judges. A New Jersey bankruptcy court published or non published decision is not binding on any other bankruptcy court judge. This means that if a bankruptcy court judge makes a determination based on his interpretation of the bankruptcy code, no other bankruptcy judge is required to comply with such a determination. Each bankruptcy judge  is permitted to interpret the bankruptcy code differently, with a different result, unless the same law and legal application had been decided by  a higher court. An example is when the same situation had been decided by an appellate court in the same federal circuit.
Robert Manchel, the bankruptcy attorney in New Jersey, may be contacted at (866) 503-5655.

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The chapter 7 process in New Jersey lasts about 4 months. After approximately 4 months, the debtor is completely out of the bankruptcy case with an order eliminating certain debt. No payments are required like a chapter 13 case. Typically, there is no need to make any changes in a chapter 7, other than correcting information or the bankruptcy schedules.
A chapter 13 is very flexible and may be modified for numerous reasons. A chapter 13 requires monthly payments to the trustee for 36 to 60 months. The number of months of the plan depends on numerous factors. The amount of the monthly payment depends on: the type of debt; the plan’s goal; the debtor’s disposable income; and the debtor’s assets. A plan may be modified by filing a modified plan with the court. The debtor is required to pay no less than the debtor’s disposable income. In limited circumstances, the monthly payment may be modified, if the debtor’s household income is reduced. At the filing of a modified plan, the trustee requires updated proof of income.
A list of possible chapter 13 plan modifications are listed below. A debtor may wish to modify their plan to surrender a house, or auto, and eliminate the mortgage or auto finance debt. A debtor may wish to purchase a car or house, during the plan. Someone could modify their plan to remove the mortgage payments arrears, after a loan modification is consummated. The plan could be modified to reject any type of lease, including a rental or auto lease. There are numerous reasons for modifying a bankruptcy plan in New Jersey.
Robert Manchel, may be contacted at (866) 503-5655, to discuss your New Jersey bankruptcy options.

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1. The arrears through the bankruptcy plan, in addition to making direct monthly payments to the finance company; or,
2. pay the entire balance due, plus the contract rate of interest, through the bankruptcy plain.

Please note that a chapter 13 trustee may not permit a person to make a substantial payment towards a luxury item, such as expensive furniture and reduce the monthly disposable income that would otherwise be paid to their unsecured creditors.
Robert Manchel, a bankruptcy attorney serving NJ, can be reached at 1 (866) 503-5655 if you would like to discuss how a chapter 13 bankruptcy might be able to benefit you.

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