Monmouth County Bankruptcy Attorney Answers Frequently Asked Questions
Will I get to keep my home if I file bankruptcy?
For most people, the answer is “Yes”, although there are certain circumstances where keeping your home may not be possible. Whether you are able to keep your home depends on whether you have equity in your home. Equity is the value of your home, after you deduct the balance of the mortgages and other liens. You can even deduct the cost of selling your home (usually 10% of the value of your home), when calculating the equity. If the equity in your home is equal to or less than $23,675.00, your house will not be at risk in a bankruptcy filing. If the equity in your home is more than $23,675.00, then you will have to deal with repaying that excess equity in the bankruptcy case, if you want to keep your home. A bankruptcy attorney can review options that are appropriate for your set of circumstances.
Will I get to keep my car if I file bankruptcy?
Again, for most people, the answer is “Yes”, although there are certain circumstances where keeping your car may not be possible. In most cases, bankruptcy filers are able to keep their primary car. Just as in the analysis above, whether you are able to keep your car depends on whether you have equity in your car. Equity is the value of your car, after you deduct the balance of any liens on the car. If the equity in your car is less than $3775.00, your car will not be at risk in a bankruptcy filing. If the equity in your car is more than $3775.00, then you will have to deal with repaying that excess equity in the bankruptcy case, if you want to keep your car. Depending on your particular circumstances, the amount of equity you can protect in a car can increase by another $1010.00, with a special law (called a “wild card” exemption).
Will I get to keep my retirement plan if I file bankruptcy?
Yes. Generally, retirement accounts, whether 401k’s, IRA’s, pension plans or other similar types of retirement vehicles are protected in bankruptcy. Although when you file a bankruptcy petition you are required to disclose the existence of such accounts, they are not at risk and are not considered part of your “Debtor Estate” (the assets that you own that are under the control of the bankruptcy proceedings).
I have a creditor garnishing my wages, will filing bankruptcy stop the garnishment?
Yes. A bankruptcy filing immediately stops all creditor activity against you, including wage garnishments. The moment that you file a bankruptcy petition, an “automatic stay” is put into effect. That means that there is an immediate freeze on all of your creditors. Your creditors must cease and discontinue any action that they are taking against you. They cannot telephone you, write you letters, send your account to collection, or begin a lawsuit. If a lawsuit has already been started by a creditor, it cannot continue. The court in which the case is pending must be notified and no further action will be taken on the case.
My house is in foreclosure, will filing bankruptcy stop the foreclosure?
Yes, at least temporarily. As explained in the answer about wage garnishments, a bankruptcy filing immediately stops all creditor activity against you, including foreclosure. The moment that you file a bankruptcy petition, an “automatic stay” is put into effect. That means that there is an immediate freeze on all of your creditors. Your creditors, including the mortgage company that is foreclosing on your home, must cease and discontinue any action that they are taking against you. As such, the mortgage company must put a hold on the pending foreclosure case (at least temporarily) and wait to see what your intention is with regard to the property that is being foreclosed. This applies even if your home has already been scheduled for a Sheriff Sale.
My husband and I both own our home which is in foreclosure. Do we both have to file bankruptcy to stop the foreclosure?
No. Only one of you needs to file a bankruptcy petition to stop foreclosure proceedings. As long as both of you are the owners of the home, it does not matter which one of you files the bankruptcy petition. As in any bankruptcy case, upon the filing of the petition, the foreclosure proceedings must immediately be stopped (at least temporarily).
How will I know which bankruptcy chapter is right for me?
Most people file either a Chapter 7 or Chapter 13 bankruptcy petition. On a rare occasion, a person might file a Chapter 11 case, although usually Chapter 11 is used for businesses who need to reorganize. To determine which chapter is right for you, a bankruptcy attorney will review your specific set of circumstances, starting with your annual household income, as well as what goals you are trying to achieve. A determination is ordinarily first made as to whether you qualify for a Chapter 7 case. For those who qualify, Chapter 7 is often the best chapter under which to file bankruptcy because it is generally the quickest, simplest and least expensive. The average Chapter 7 case lasts between 4-5 months and the attorney’s fees involved are generally less than those in a Chapter 13.
If you do not qualify for Chapter 7, your next option may be to file Chapter 13. Under certain circumstances, even if you do qualify for Chapter 7, it may be in your best interest to file a Chapter 13 anyway. This is often the case when you are trying to save your home or need to repay debts that you cannot get rid of in a bankruptcy filing (such as certain taxes or debts to secured creditors). In the event that Chapter 13 is your best or only option, you will have to make sure that you qualify and that you do not exceed certain debt limitations. Assuming that you qualify, you will have to propose a plan explaining how you intend to deal with your creditors and that plan will have to be approved by the Bankruptcy Court. Chapter 13 cases last between 3-5 years. If you do not qualify for either Chapter 7 or Chapter 13 or cannot accomplish your goals under those chapters, the filing of a Chapter 11 case might be your only option.
Will I be able to get rid of all of my debts if I file for bankruptcy?
The answer depends on the types of debts that you have. Regular unsecured debts (debts that are not secured by any collateral – where a creditor does not have a lien on something) are normally “dischargeable” (meaning that you can get rid of them in bankruptcy). Such unsecured debts ordinarily include credit card accounts, medical bills, personal loans, deficiency balances on repossessed vehicles, and past due utility bills. On the other hand, secured debts (debts where the creditor has a lien on something, like your house or car) have to be dealt with if you intend to keep the collateral. For example, if you would like to keep your home, you must pay the obligation to the mortgage company and if you want to keep your car, you must pay the car financing company. If, however, you do not intend to keep your home or car, you may get rid of that debt in bankruptcy. It is important to note, that while the debt to a secured creditor may be discharged in bankruptcy, the lien on the collateral will remain. This means that the creditor, such as the mortgage company, can still foreclose on the property, although it cannot seek any further payment from you.
There are certain other debts that are not dischargeable in bankruptcy at all, such as certain taxes, matrimonial or family support obligations, certain criminal obligations or restitution, debts to governmental agencies for fines or penalties, student loans and debts that are the result of fraud or the result of personal injury caused by operating a car while you were intoxicated.
Will a bankruptcy filing get rid of judgments that have been filed against me?
No. A bankruptcy filing, by itself, will not result in the removal of any judgments that may have been entered against you. However, it is a great first step in getting rid of judgments. When you file a bankruptcy case and include the judgment creditor in the petition, you will be getting rid of your personal liability for that obligation. That means that the judgment creditor cannot seek to collect payment from you on that obligation. The judgment lien of that creditor, however, remains intact, and any property you may own is still affected.
Yet, if your particular circumstances warrant it, there are certain actions that can be taken in and out of bankruptcy to get rid of the judgment. For example, in bankruptcy, if you have no equity in property that you own, you may be able to file a motion to void the judgment lien. Outside of bankruptcy, if your bankruptcy case has already been concluded and you received your discharge, NJ state law allows you to seek cancellation of the judgment in state court. Among other conditions, the law provides that you may file a motion to cancel a judgment one year after entry of the discharge order in your bankruptcy case.
What is a Discharge in Bankruptcy?
In most cases, the purpose of filing bankruptcy is to get rid of your debts. Getting rid of your debts is called “discharging” your debts under the bankruptcy laws. When the Bankruptcy Court has determined that you have fulfilled all of the requirements under the particular bankruptcy chapter you have filed, it will issue a “Discharge Order”, which is the Order from the Bankruptcy Court that you are no longer responsible to pay your debts – that they are “discharged”. Of course, a discharge order does not get rid of those particular debts that are not dischargeable to begin with, such as certain taxes, student loans and family support obligations.