Bankruptcy Qualifications in New Jersey
New Jersey imposes a specific set of requirements on individuals who wish to file for Chapter 7 bankruptcy, as opposed to Chapter 13 bankruptcy. Because a Chapter 7 bankruptcy can allow you to completely wipe out your debts even if a judgment has already been entered, the bankruptcy qualifications in New Jersey are applied strictly.
Importantly, you must be able to satisfy a means test that measures your past and current income levels to determine whether you will be required to repay a portion of the debts you are seeking to discharge in bankruptcy. A skilled attorney can help you understand bankruptcy qualifications in New Jersey to determine whether you may qualify.
New Jersey Means Test
New Jersey generally requires that debtors pass a means test to file for Chapter 7 bankruptcy in order to prevent abuse of the bankruptcy system. However, if the person’s monthly income is less than the New Jersey median income for their household size they may be exempt. The means test is one of the more important bankruptcy qualifications in New Jersey because it is designed to differentiate individuals who may be able to repay a portion of their debts pursuant to a schedule over time from those who truly require the clean slate of complete debt relief.
An individual seeking Chapter 7 bankruptcy relief must first establish their average monthly income from all sources including income from wages, retirement plans, rental income, and unemployment income. Certain expenses may be deductible in determining whether someone’s income allows them to pass the New Jersey means test:
- Child care expenses
- Child support and alimony
- Certain secured debts
- Insurance costs
- Caregiving expenses incurred to care for an elderly, disabled or terminally ill individual
- Certain charitable donations
The person is responsible for gathering the relevant information necessary to establish their income level and the average monthly income level for the prior six months is used. Individuals who satisfy the means test are generally permitted to file for Chapter 7 bankruptcy.
Additional Chapter 13 Bankruptcy Qualifications
The means test discussed above will also apply in Chapter 13 bankruptcy cases and is one of the bankruptcy qualifications in New Jersey that will determine the length of a repayment plan and the amount that must be repaid. Certain assets may be exempt in calculating the repayment amount.
Individuals who file for Chapter 13 bankruptcy must submit a repayment plan that:
- Is determined and delivered in good faith
- Provides unsecured creditors with at least as much repayment as would be the case in Chapter 7 bankruptcy
- Encompasses all disposable income of the debtor for at least three years
Filing for Bankruptcy in New Jersey With the Help of an Attorney
Once you establish that you meet the bankruptcy qualifications in New Jersey, you or your attorney must file a petition with the bankruptcy court. This petition details your financial status including all financial transactions you have been involved in over the previous two years.
A well-versed attorney can explain the bankruptcy qualifications in New Jersey in greater depth to give you a better understanding of whether you are eligible. They can further serve as your guide as you move through the process to help you take a thorough approach.