Chapter 7 Bankruptcy

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.

The chapter 7 trustee’s preparation for the Meeting of Creditors Hearing 341(a) Hearing
Please note that it is unusual for a chapter 7 trustee to sell a debtor’s asset.
A chapter 7 trustee’s job is to review and investigate the debtor’s total financial picture to determine if the debtor is entitled to a discharge and/or whether the debtor owns substantial assets that may be liquidated, with the funds to be paid to the creditors. If the trustee believes that the debtor is entitled to a discharge, the trustee will recommend to the judge that an order of discharge be entered. If the trustee believes that the debtor should not be entitled to a discharge, the trustee should advise the court accordingly. However, under this scenario, the debtor may contest the trustee’s objection.
The issue of selling property is not mutually exclusive to an entry of discharge. In other words, a debtor may be entitled to a discharge and the trustee may sell the debtor’s assets if possible. Typically, if the trustee sells an asset and the debtor is entitled to a discharge, the discharge will be entered in the normal time period with the sale of the asset at a much later date.
Prior to the Meeting of Creditors, the debtor’s attorney forwards all of their financial documents to the trustee for his review. This includes: six months of the debtor’s and household members’ paystubs; six months of all bank statements; all relevant income tax returns; professional valuations for real estate and other property; estimated mortgage and auto finance payoff statements; alimony and support orders, etc. Typically, if their expenses are reasonable, the trustee will not require proof of the reasonable and necessary expenses, such as food and clothing. In the event that a debtor operates a business, the debtor must provide proof of the business’ income and expenses, such as a profit and loss statement, receipts, business bank statements, etc.
Prior to the meeting, the trustee will prepare for the bankruptcy hearing by reviewing all of these documents. If the documents appear to the trustee to be contradictory to each other or the bankruptcy petition information, the trustee will make a note of these issues.
You may call NJ bankruptcy attorney Robert Manchel at (866) 503-5655 to discuss your chapter 7 bankruptcy questions and the potential for receiving bankruptcy protection.

A New Jersey chapter 7 bankruptcy case requires only one hearing, which is called the Meeting of Creditors (MOC) or the 341(a) hearing.
The MOC is never held in a courtroom and the judge is never present. If your case is filed In Trenton, your MOC hearing is held in the courthouse, but not in a courtroom. If your case is filed in Newark, the MOC hearing is typically held in an office building in Newark. If your case is filed in Camden, your hearing is either held in an office building in Camden or Northfield.
The hearing is conducted by the trustee that is assigned to oversee your bankruptcy case. Typically, the trustee sits at a desk facing all of the debtors. When the trustee calls the debtors’ name, the debtor must approach the desk and sit down facing the trustee. There is a recording device on the table that records all testimony. The debtors must show the trustee a photo driver’s license and a social security card to provide proof of identity. There are alternative forms of identification that are acceptable. The debtor’s attorney should put the original signed bankruptcy petition on the table.
The hearing lasts about five to ten minutes depending on the complexity. Although the hearing is called a Meeting of Creditors, it is unusual for a creditor to appear and ask questions. The trustee is mainly interested in eliciting testimony regarding the debtor’s assets, income, expenses, and reason for the bankruptcy filing. The trustee must determine if the debtor has assets with a substantial value that he may sell. Also, the trustee must ensure that the debtor’s household income is less than their monthly expenses. Furthermore, the trustee must ensure that the debtor’s financial hardship is legitimate.
Some of the questions that are asked at the Meeting of Creditors are as follows: Did you review your petition for accuracy prior to signing? Is the information in your petition correct? Do you need to change any information in your petition? Does your petition include all of your assets? When did you buy your house? How much did you pay for your house? How much is your house worth now, if you were to sell your house? Do you own stocks or bonds? Do you have a savings account? Can you sue someone for money, for any reason? What is the reason for filing bankruptcy? Are you working? Has your income changed from the time of the bankruptcy filing?
Please contact NJ Chapter 7 Bankruptcy Lawyer Robert Manchel at 1 (866) 503-5655 to discuss the process for chapter 7 bankruptcy protection.

In a New Jersey chapter 7 bankruptcy case, the trustee may only sell the debtor’s property if the house has substantial equity in excess of the mortgage payoff. Therefore, if the debtor’s house has substantial equity, he would avoid this issue by not filing a chapter 7 bankruptcy case.
Upon the filing of a chapter 7, the mortgage company cannot commence or continue a foreclosure action against the debtor’s house. However, by court motion, the mortgage will likely be granted permission from the bankruptcy court to commence or proceed with a mortgage foreclosure action if the debtor is in default with the mortgage payments.
The mortgage company’s request to the court for permission to proceed with the foreclosure action is called a Motion for Relief from the Automatic Stay. Typically, the mortgage company would file such a motion about one to two months after the bankruptcy filing. The motion would be granted about 30 days after the filing of the motion.
The bankruptcy filing has absolutely nothing to do with the mortgage company’s right to commence or pursue a foreclosure action. The mortgage company may only commence or proceed with a foreclosure action if the mortgage is in default. A foreclosure action is a state court action, not a federal or bankruptcy type action.
In the event that the mortgage company is permitted to proceed with the foreclosure action, the action commences or continues at the point of the procedure where the action ceased at the time of the bankruptcy filing. After the mortgage company is granted permission to proceed, the bankruptcy case has no impact on the mortgage company’s foreclosure proceedings or the debtor’s your rights regarding the mortgage and possession of the house. This means that the debtor may continue to reside in the property until the completion of the foreclosure action. Additionally, the debtor has the right to work out a loan modification as well.
Please contact New Jersey Chapter 7 Bankruptcy Lawyer Robert Manchel at 1 (866) 503-5655 to discuss the effects of a bankruptcy filing on a mortgage foreclosure. Call to discuss your personal situation and the potential for bankruptcy protection.

Filing for bankruptcy under Chapter 7 of the bankruptcy laws is a good option for some people, if their assets and debts fit the requirements for a Chapter 7 filing. One of the ways the bankruptcy courts determine whether a person is eligible for a Chapter 7 bankruptcy is through means testing. Means testing looks at the filer’s financial situation and determines whether they fit the requirements for Chapter 7.
There are many bankruptcy court forms that will need attention during the filing process. Means testing usually begins when the filer, often with help from their attorney, files bankruptcy form 22A, titled “Statement of Current Monthly Income and Means Test Calculation”. The form asks for several different items of information, including the filer’s monthly income, the size of the family and its needs, the median income where the filer lives, and various other pieces of tax information. The person filing the form will have some of this information in their own records, but other items must be obtained from the Census Bureau or the Internal Revenue Service (IRS).
Since means testing paperwork helps determine whether an individual can file under Chapter 7 or not, it is important to ensure that all the information on the form is as complete and accurate as possible. Experienced NJ bankruptcy attorney Robert Manchel has helped other clients complete these forms and help them navigate through the process and filing for personal bankruptcy protection. To learn more about how Robert Manchel’s skills and experience can help you, call 866-503-5655 today.