As much as we like taking on and helping new bankruptcy clients, we will not take money from people that we cannot help. If you do not meet some basic requirements, then your Chapter 7 filing is likely to fail. For instance:
- You have not filed your last two year income tax returns with the government. Obviously this can be corrected it will slow down the process.
- You exceed the Chapter 7 income limit. The bankruptcy code was amended a while ago to prevent moderate income individuals from filing a Chapter 7 case. In New Jersey, the 2026 limit for a single individual is $82,632.00, while the limit for a 4 person household is $163,110.00. These figures are adjusted annually by the government.
- The income figure is based on the filer’s gross household income over the six months prior to filing, and must be documented by paystubs or other proof of income. If your household income exceeds the limit, then your other option is filing a Chapter 13, in which you pay all or part of your debt to a bankruptcy trustee for distribution to your creditors over a three to five year period. Some excluded Chapter 7 filers do file a Chapter 13, but it is not the simple process and cost of a Chapter 7. If you sold any real estate over the five years prior to the Chapter 7 filing, then the bankruptcy trustee will look into what the terms of the sale were and what proceeds were received. If the proceeds exceed the allowed exemption amount, then the trustee will trace the proceeds and seek to recover them for distribution to your creditors. In other words, you cannot sell your home, pocket the equity and then file Chapter 7 to discharge your debts.
- Similarly, if you presently own a home, it could be harmful to you to file a Chapter 7. First, you would want to be current on your home mortgage payments before filing. But if you have equity in your home, the bankruptcy trustee could seek to sell your home and pay your creditors. There is a specific analysis that we perform in order to advise our clients whether there is a risk of a forced sale of their home. If for example, the amount owed on the mortgage is more than the market value of the home (established by an appraisal or comparative market analysis), then there is no equity, and the trustee would have no incentive to sell the home. Alternatively, if you own a home with no mortgage, you will not be permitted to keep the house while discharging your debts, but rather, the house will be sold by the trustee to pay your creditors.
- There may be items of personal property which you are allowed to keep in Chapter 7 under specific exemptions. However, beyond the exemption amounts, the trustee will attempt to block your discharge unless you liquidate items and allow the trustee to distribute the proceeds to your creditors.
- If you file a second Chapter 7 within 8 years of filing a prior Chapter 7, then the second filing is barred and will be dismissed.
- If you file a Chapter 7 within 4 years of filing a prior Chapter 13, then the Chapter 7 is barred and will be dismissed.
As you can see, the bankruptcy rules are complex. We do not want people who are not qualified in some way to file a Chapter 7, only to have that case dismissed by the court. Therefore, as an experienced New Jersey bankruptcy attorney with 45 years of practice, I will personally review your situation and advise you whether or not Chapter 7 is right for you.
Please call today for a free consultation.
