What Disqualifies You from Filing Bankruptcies?

Filing for bankruptcy can be a lifeline for individuals and businesses drowning in unmanageable debt, providing a fresh financial start. However, not everyone qualifies for this form of relief. Understanding what disqualifies you from filing for bankruptcy is crucial to avoid the pitfalls that could lead to the dismissal of your case or legal complications. Knowing these factors can help you make informed decisions and prepare adequately before you file.

If you’re considering filing for bankruptcy in New Jersey and want to ensure that you face the process correctly, it’s essential to consult with an experienced bankruptcy attorney. At Straffi & Straffi Attorneys at Law, our team of skilled New Jersey bankruptcy lawyers can provide personalized advice tailored to your unique financial situation, helping you understand your eligibility and the steps necessary to achieve a successful outcome. Contact us today at (732) 341-3800 for a free consultation and take the first step toward financial stability and peace of mind.

Income Requirements for Filing Bankruptcy in New Jersey

Bankruptcy can offer a fresh financial start for individuals overwhelmed by debt, but it’s crucial to understand the specific requirements and regulations that apply. In New Jersey, the eligibility for filing Chapter 7 bankruptcy is partly determined by the means test, which assesses your income against the state’s median income levels. The means test is designed to prevent individuals with higher incomes from wiping out their debts under Chapter 7 when they could potentially repay them under Chapter 13.

In 2024, the updated median income figures for New Jersey are as follows:

• 1 Person: $83,102.00
• 2 People: $100,763.00
• 3 People: $130,239.00
• 4 People: $157,404.00
• Each Additional Person Above 4 Persons: +$9,900.00

If your household income is below the median for your family size, you may qualify for Chapter 7 bankruptcy. However, if it exceeds these amounts, you must pass the means test’s second part, which involves a complex calculation of your disposable income after allowable expenses. Failing the means test means you might need to consider Chapter 13 bankruptcy, which allows for debt repayment over a three to five-year period, provided you have a stable source of regular income from employment, self-employment, rental income, or family contributions.

Asset Exemptions in New Jersey Bankruptcy

When filing for bankruptcy, certain assets can be protected from creditors through exemptions. New Jersey offers a choice between federal and state exemptions, allowing debtors to select the set that best protects their assets. However, residents can only select either the state’s exemptions or the federal exemptions and not mix individual exemptions from each list. Here are some of the key exemptions under New Jersey law:

• Homestead Exemption: New Jersey does not have a state-specific homestead exemption, but debtors can use the federal exemption, which as of 2024, protects up to $27,900 of equity in a primary residence.
• Motor Vehicle Exemption: Up to $4,450 of equity in a vehicle can be exempted under federal law.
• Personal Property Exemptions: Federal exemptions include up to $700 in household goods per item, with a total limit of $14,875, and up to $1,875 in jewelry. The state limit exempts up to $1,000 of personal property or possessions of any kind, including stocks or interests in corporations and an additional $1,000 for furniture and household goods.
• Wildcard Exemption: Up to $1,475 in any property, plus unused portions of the homestead exemption up to $13,950. State exemptions include up to $1,000.
• Wages: Generally, 90% of wages earned within 60 days before filing. Federal wage exemptions cover up to 75% of wages.
• Retirement Accounts: Most tax-exempt retirement accounts are fully protected.

Understanding these requirements and exemptions is crucial for anyone considering bankruptcy in New Jersey. By meeting the income criteria and properly utilizing asset exemptions, you can handle the bankruptcy process more smoothly and work towards a more stable financial future. Consulting with a knowledgeable bankruptcy attorney can help you consider these options effectively, ensuring that your most valuable assets are preserved while you seek debt relief.

Type of Exemption	Federal Exemption
Homestead Exemption	Protects up to $27,900 of equity in a primary residence.
Motor Vehicle Exemption	Up to $4,450 of equity in a vehicle.
Personal Property Exemptions	Up to $700 in household goods per item, total limit of $14,875; up to $1,875 in jewelry.
Wildcard Exemption	Up to $1,475 in any property, plus unused portions of the homestead exemption up to $13,950.
Wages	90% of wages earned within 60 days before filing.
Retirement Accounts	Most tax-exempt retirement accounts are fully protected.

Disqualifying Factors for Bankruptcy in New Jersey

When considering filing for bankruptcy in New Jersey, it’s essential to be aware of specific disqualifying factors beyond the basic requirements of Chapter 7 or 13. These factors can prevent you from being eligible to file for bankruptcy or from receiving a discharge of your debts.

Recently Dismissed Bankruptcy Case

If your previous bankruptcy case was dismissed, you might face a waiting period before you can file again. According to the United States Courts, you cannot file for any type of bankruptcy protection within 180 days of having a previous bankruptcy case dismissed if the dismissal occurred under certain circumstances. These circumstances include failure to comply with court orders or rules, or voluntary dismissal after a creditor requested relief from the automatic stay. This waiting period is intended to prevent abuse of the bankruptcy system and to ensure that debtors are serious about reorganizing their finances.

Fraud

Fraud is a serious offense in the context of bankruptcy and can lead to disqualification. If the court believes you attempted to defraud your creditors or hide assets, you might be barred from the bankruptcy process. Common forms of fraud include selling assets for less than their true value before filing, misrepresenting or lying about assets or debts on the bankruptcy petition, concealing assets from the court, or incurring avoidable debts for luxury items shortly before filing. Fraud investigations typically begin with the bankruptcy trustee but can also be initiated by creditors. If fraud is detected, it can result in the dismissal of your case and potential legal consequences.

Previous Bankruptcy Discharge

There are time restrictions related to how soon you can receive another discharge after a previous bankruptcy. For instance, you cannot receive a Chapter 7 discharge if you have received a previous Chapter 7 discharge within the last eight years. Similarly, you cannot receive a Chapter 7 discharge if you have received a Chapter 13 discharge within the previous six years. Likewise, there are limitations for filing under Chapter 13 if you have previously had a bankruptcy discharge. 

Understanding these disqualifying factors is crucial for anyone considering bankruptcy in New Jersey. By being aware of the restrictions and requirements, you can better handle the process and avoid common pitfalls that could jeopardize your eligibility for bankruptcy relief. Consulting with an experienced bankruptcy attorney can provide further guidance tailored to your specific situation.

What Debts Cannot Be Discharged in Bankruptcy?

Even if you qualify for bankruptcy, certain types of debts cannot be discharged. Understanding these non-dischargeable debts is crucial.

Alimony and Child Support

Debts related to alimony and child support cannot be discharged in bankruptcy. In New Jersey, these debts are classified as “Domestic Support Obligations” (DSOs) under the bankruptcy code and are automatically non-dischargeable in both Chapter 7 and Chapter 13 cases. This means that filing for bankruptcy will not terminate your obligation to pay alimony or child support, nor will it eliminate any arrears you owe.

While bankruptcy does not discharge these debts, it can sometimes provide a framework for managing them. For instance, a Chapter 13 filing allows you to create a repayment plan to address arrears over three to five years, potentially preventing aggressive collection actions by your ex-spouse. Additionally, although bankruptcy itself won’t modify alimony payments, it may enable you to petition for a modification based on your changed financial circumstances post-bankruptcy.

Tax Debts

Tax debts are among the types of debts that are generally not dischargeable in bankruptcy. However, under certain conditions, personal income taxes owed to the IRS or the state of New Jersey can be discharged. To qualify, the tax debt must be more than three years old, the tax return must have been filed at least two years before your bankruptcy filing, and the tax must have been assessed more than 240 days prior to filing. Additionally, there must have been no willful attempt to evade paying these taxes.

If your tax debt does not meet these criteria and cannot be discharged, filing for Chapter 13 bankruptcy might still offer some relief. In a Chapter 13 case, you can include your tax debt in a repayment plan, allowing you to pay it off over three to five years. This approach stops the IRS from levying your wages and halts tax penalties, although interest on the debt may continue to accrue. After completing the repayment plan, any remaining interest may still be subject to collection by the IRS, but the structured repayment can provide significant financial breathing room.

Student Loan Debt

Student loan debt may not be dischargeable in bankruptcy, but there are exceptions. Generally, to have student loan debt discharged, you must prove “undue hardship,” which is a challenging standard to meet. This requires demonstrating to the court that repaying these loans would cause severe financial strain on you and your family, with little chance of improvement in your financial situation. Recent legal developments have slightly increased the possibility of student loan discharge, but the threshold remains high.

Certain student loans might be discharged if they do not meet specific criteria, such as not being insured or guaranteed by a governmental unit or not being made under a government or nonprofit-funded program. Even if you cannot discharge your student loans, bankruptcy can still help by eliminating other debts, thereby freeing up income to better manage student loan repayments.

Alternatives to Bankruptcy in New Jersey

While bankruptcy can provide a fresh financial start, it is not the only option available for managing overwhelming debt. In New Jersey, several alternatives to bankruptcy can help you regain control over your finances without filing for bankruptcy.

Debt Repayment Plans as an Alternative to Bankruptcy

Debt repayment plans allow you to reorganize your debts and pay them off over a specified period, typically three to five years. This approach can be particularly beneficial if you have a steady income but are struggling to keep up with multiple debt payments. Working with a debt consolidation agency, you can combine your debts into a single monthly payment, often with reduced interest rates. These plans can simplify your financial obligations and make it easier to manage your debt without the need for bankruptcy.

Negotiating with Creditors for Debt Settlement

Negotiating directly with your creditors for a debt settlement is another viable alternative to bankruptcy. In a debt settlement, you work with your creditors to agree on a reduced lump-sum payment that will be considered a full payment of the debt. This can significantly lower the total amount you owe. Creditors may be willing to negotiate if they believe it increases their chances of recovering more money than they would through bankruptcy proceedings. It’s essential to approach these negotiations carefully, possibly with the assistance of a debt settlement attorney or a reputable debt settlement company, to ensure the best possible outcome.

Credit Counseling and Financial Education Programs

Credit counseling and financial education programs offer another pathway to managing debt without resorting to bankruptcy. Credit counseling agencies provide personalized financial advice and can help you develop a budget to manage your expenses and debts more effectively. These agencies often offer debt management plans (DMPs), where they negotiate with your creditors to reduce interest rates and waive fees, allowing you to pay off your debt over time. Additionally, financial education programs can equip you with the knowledge and skills to make informed financial decisions, helping you avoid future debt problems.

Considering these alternatives can be a prudent step before deciding to file for bankruptcy. Each option has its benefits and can provide a route to financial stability tailored to your specific situation. Consulting with a bankruptcy attorney in New Jersey can help you determine the best course of action based on your circumstances.

Common Mistakes to Avoid When Filing Bankruptcy

Filing for bankruptcy is a significant decision that requires careful planning and adherence to specific legal requirements, especially in New Jersey. Avoiding common mistakes can ensure a smoother process and increase your chances of a successful discharge.

• Failure to Complete Credit Counseling Requirements: Before filing for bankruptcy, New Jersey law mandates that you complete a credit counseling course from an approved agency. This course must be taken within 180 days before filing. Failing to complete this requirement can result in your case being dismissed, delaying your bankruptcy and prolonging financial stress.
• Failure to Disclose Assets or Income: Full disclosure of all assets and income is critical in a bankruptcy filing. Omitting any assets or sources of income, whether intentionally or accidentally, can lead to severe consequences, including the denial of your discharge or allegations of fraud. Ensuring complete transparency with your bankruptcy attorney can help you avoid this mistake.
• Engaging in Preferential Transfers: Preferential transfers involve paying off certain creditors over others shortly before filing for bankruptcy. In New Jersey, making such payments within 90 days before filing (or within one year if the payment is to an insider, like a family member) can be reversed by the bankruptcy trustee. This can complicate your case and delay the resolution of your financial obligations.
• Incurring New Debts with Fraudulent Intent: Running up new debts with no intention of repaying them, especially just before filing for bankruptcy, is considered fraud. Creditors may challenge the dischargeability of these debts, leading to prolonged legal battles and potential denial of your bankruptcy discharge.
• Engaging in Dishonesty or Misrepresentation: Honesty is crucial in bankruptcy proceedings. Providing false information or omitting important details can lead to accusations of perjury and fraud, resulting in severe legal consequences, including fines and imprisonment, as well as the dismissal of your bankruptcy case.
• Failure to Comply with Court Orders or Appearances: Failing to comply with court orders or not attending required hearings can lead to the dismissal of your bankruptcy case. It’s essential to follow all procedural requirements, attend all scheduled meetings, and provide requested documentation to ensure your case proceeds smoothly.

Making mistakes in your bankruptcy filing can have serious repercussions, including the dismissal of your case, loss of assets, and potential legal penalties for fraud. An experienced bankruptcy attorney can assist you with the process, ensuring that you comply with all legal requirements and avoid common pitfalls. 

Getting the Experienced Legal Help of Straffi & Straffi Attorneys at Law 

Filing for bankruptcy can be daunting, especially when numerous factors could potentially disqualify you from filing. By understanding these disqualifications and taking proactive steps to address any issues, you can better position yourself for a successful bankruptcy filing. Remember, the goal of bankruptcy is to provide a fresh start, but reaching that point requires careful planning and adherence to legal requirements.

If you find yourself overwhelmed or uncertain about your eligibility for bankruptcy, seeking professional guidance is crucial. A knowledgeable New Jersey bankruptcy attorney can help you assess your situation, ensure you meet all necessary criteria, and guide you through the process with confidence. Don’t let the fear of disqualification keep you from pursuing the financial relief you need. Contact Straffi & Straffi Attorneys at Law today at (732)341-3800 to schedule a consultation and take the first step toward reclaiming your financial future.

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