Chapter 7 Bankruptcy New Jersey: 3 Things You Need to Know

You may have experienced a financial hardship and are considering filing bankruptcy in New Jersey, specifically Chapter 7 bankruptcy. 

There are 3 important things to consider when pursuing Chapter 7 bankruptcy in New Jersey:

1. Do you qualify for a Chapter 7 bankruptcy and how much does it cost to file bankruptcy in New Jersey?
2. What are the alternatives to Chapter 7 bankruptcy?
3. What is specific need-to-know Chapter 7 bankruptcy information for New Jersey?

Chapter 7 bankruptcy is the most common bankruptcy in the United States (Source).

Let’s get started to understand why Chapter 7 is a popular choice in New Jersey.

1) How Chapter 7 Bankruptcy Works in New Jersey

Many people we speak with care about two things:

1. How fast they can get relief from their debt burden.
2. How much is costs to get out of their debt burden?

When comparing debt-relief options, Chapter 7 bankruptcy often wins in both categories over alternatives such a Chapter 13 bankruptcy, debt negotiation, debt management, and debt payoff planning. Let’s explore those variables in greater detail.

How Fast Do You Get Relief in A Chapter 7 Bankruptcy in New Jersey

You can often get a Chapter 7 bankruptcy discharge in as little as 120 days in New Jersey. That is the typical time it takes to complete a no-asset Chapter 7 case in New Jersey. No-asset generally means that you do not own a home or other assets that may be above the New Jersey bankruptcy exemptions.  

How Much Does It Cost To File Chapter 7 bankruptcy in New Jersey

The Chapter 7 bankruptcy cost nationwide tends to be between $500 and $3000. That said, Chapter 7 bankruptcy cost in New Jersey is different. 

The Chapter 7 bankruptcy cost may even be different if you are filing in Paterson vs. Jersey City. For example, you may pay a Chapter 7 bankruptcy attorney fee of $1,375 in Paterson, but pay a bankruptcy attorney fee of $1,170 in Newark.

Also, there are instances where the cost to file bankruptcy can be reduced based on a filing fee waiver. You should consider seeing the information related to New Jersey filing fee waiver.

So, How Do I Qualify For Chapter 7 Bankruptcy in New Jersey?

Chapter 7 bankruptcies are intended for people who cannot afford to pay any portion of their debts. However, you must first pass an income evaluation to qualify for a bankruptcy discharge (forgiveness of debt) in Chapter 7.

If you pass the New Jersey bankruptcy means test (which you can estimate below), you can erase most unsecured debts through Chapter 7. Unsecured debts discharged in Chapter 7 include medical bills, personal loans, some old income tax debt, old utility bills, credit card debts, and most personal judgments. Unsecured creditors hold debts that are not secured by collateral. 

What about secured debts in Chapter 7?

If, however, you want to get rid of secured debts, like car loans and mortgages in Chapter 7, you need to surrender the asset to the creditor. The creditor must accept the asset as full payment of the amount owed. 

Let’s go into how you qualify for Chapter 7 bankruptcy.

IMPORTANT: Chapter 7 Qualification via New Jersey Means Test

An important element in filing for bankruptcy relief is the means test. The means test is a bankruptcy form that calculates your average monthly and annual income. The test compares your income against the median income of other households in New Jersey.

If your average annual income or median income is below the New Jersey median income, you may qualify for a bankruptcy discharge under Chapter 7. You can estimate whether you qualify for a Chapter 7 bankruptcy using the free New Jersey Chapter 7 Bankruptcy Means Test Calculator below. 

Help! My Income Exceeded The Chapter 7 Means Test Allowable in New Jersey

If your median income is above the state median income, you may need to look at part 2 of the means test or at an alternative. 

The Means Test is a two-part test, so it is not a simple pass-fail test. If you “fail” the first section, you can “pass” the second section and still qualify under Chapter 7.  

You can learn more about passing the Chapter 7 means test when income exceeds the median.

Chapter 7 Bankruptcy New Jersey Income Limits

The New Jersey median income figures for the Means Test are adjusted periodically, based on IRS and Census Bureau data. New Jersey median income for bankruptcy cases filed on or after April 1, 2024 is:

For New Jersey households with more than 9 members, add $9,000 for each additional family member. You should always double-check the US Trustees website for the most current figures when calculating the Means Test.

Will I lose my belongings if I file Chapter 7 bankruptcy? Understand New Jersey bankruptcy exemptions

Bankruptcy exemptions protect the equity in your property in a bankruptcy case. Likewise, property not protected by bankruptcy exemptions may be sold in a Chapter 7 liquidation case. Note also that for Chapter 13 cases, non-exempt equity in the property can increase the bankruptcy plan payment. 

The most important asset most people like to protect is their home. See the New Jersey bankruptcy homestead exemption below.

The homestead exemption is often broken down by age and whether you are married. 

• Single and under 65: $0
• Single is 65 or older: $0
• Married and under 65: $0
• Married is 65 or older: $0

New Jersey specific homestead bankruptcy exemption text: “Survivorship interest of a spouse in property held as tenancy by the entirety is exempt from creditors of a single spouse” (Source)

It is important to review additional New Jersey bankruptcy exemptions and choose those exemptions that best protect your assets.

The federal bankruptcy exemptions are detailed in 11 U.S. Code §522. The National Consumer Law Center maintains a list of federal bankruptcy exemptions on its website. New Jersey is a state that allows you to use federal bankruptcy exemptions

Always check that you use the most current information available when analyzing bankruptcy exemptions. 

Chapter 7 Bankruptcy New Jersey Pros and Cons

Pros

1. Often the least expensive debt relief options
2. Receive discharge in about 120 days
3. Potentially keep your home and belongings
4. Stop debt collection lawsuits
5. No more deficiency
6. It can relieve an unaffordable unsecured debt

Cons

1. Income requirements for qualification
2. Potentially lose your home and other belongings when above the exemption
3. Negative credit report impact for 10 years
4. Negative credit score impact (in some situations)
5. Non-dischargeable debt
6. Difficult to prevent foreclosure

2) Alternatives to Chapter 7 Bankruptcy in New Jersey

Let’s cover the Chapter 7 bankruptcy alternatives in New Jersey in case you do not qualify for Chapter 7 bankruptcy, have too many assets, or do not wish to pursue Chapter 7 bankruptcy.

a) Chapter 13 Bankruptcy in New Jersey

For those who make above the income limit for Chapter 7, debt relief can still come through a filing a Chapter 13 bankruptcy. A Chapter 13 Bankruptcy in New Jersey case allows you to restructure your debts into an affordable monthly plan. By restructuring debts, many people can afford to keep their homes and vehicles under Chapter 13.

Chapter 13 stops foreclosures in New Jersey, repossessions, and potentially stops New Jersey wage garnishments. Chapter 13 bankruptcy also allows you to pay back mortgage payments, past-due car payments, and tax debt over three to five years through a bankruptcy plan. In addition, New Jersey may also allow you to reduce unpaid child support and alimony. However, you must resume your normal domestic support payments to remain in Chapter 13.

In a Chapter 13 plan, some debtors (the person filing the bankruptcy case) can lower their car loan payments and erase second mortgages, if they meet certain requirements. 

Can you afford Chapter 13 bankruptcy?

Let’s say you do not qualify for a New Jersey Chapter 7 bankruptcy and are wondering whether you should pursue a Chapter 13 bankruptcy. Can you afford it? It may be odd to ask whether you can afford bankruptcy, but it’s an important question to ask.

To understand whether you can potentially afford a Chapter 13 bankruptcy, you may want to take the Chapter 13 calculator below to estimate whether you can afford the monthly payment. 

b) Debt Relief

NJ debt relief can be less expensive than both Debt Management and Debt Payoff Planning because the debt management company is negotiating a lower amount on your total debt. We covered the pricing estimate differences in our article covering debt management vs debt settlement.

You should consider the following if you are pursuing debt settlement: Credit score impact, debt settlement pros and cons, and avoiding Debt Settlement companies with red flags.

c) New Jersey Debt Management

Debt settlement companies negotiate lower amounts. Debt management companies negotiate lower interest rates. This is the key distinction. Often these programs last 3 or 5 years. This option is often more expensive than debt settlement and some creditors such as personal loan lenders may not work with the debt management company. There may be debt management credit score implications as well.

Who may debt management in New Jersey best for? Debt management may be best for those that have all high-interest credit card debt, and a reduction from 22-30% interest rate to a 10% interest rate would continue to make the debt affordable.

d) New Jersey Debt Payoff Planning

You may be able to get out of debt through debt payoff planning, which is often a combination of trying to reduce expenses and putting extra cash into specific debts to avoid interest. You may not be able to do this because of the size of the financial hardship, but if you are interested, we build the Savvy debt payoff planner to help prioritize your debts. The app saves about $2,000 in interest on average by using the savvy debt payoff method instead of the snowball debt payoff method.

3) Specific New Jersey Chapter 7 Bankruptcy Information:

Let’s say you went through the 2 steps above and are now considering whether Chapter 7 bankruptcy is the right choice for you. Let’s go through some attributes about filing Chapter 7 bankruptcy in New Jersey that would be helpful to consider.

New Jersey Chapter 7 Bankruptcy Credit Counseling and Debtor Education Courses

When you file for bankruptcy relief under Chapter 7 bankruptcy, you must complete two bankruptcy courses to receive a bankruptcy discharge. This includes a credit counseling course prior to filing a bankruptcy case, and a debtor education course after filing. See below the approved courses for New Jersey

• Credit Counseling Approved Courses
• Debtor Education Approved Courses

The United States Trustee’s office has approved state-specific companies that offer bankruptcy courses. You can access a list of companies in New Jersey offering bankruptcy courses on the US Trustee's website. Both courses are available online for a small fee.

New Jersey Chapter 7 bankruptcy Court Locations

Many 341 meetings of creditors have been over the phone or over Zoom due to the pandemic. That said, you may want to see where the courthouse is in New Jersey if there are any meetings that need to take place in person. Below are the court locations for filing bankruptcy based on the bankruptcy district.

District of New Jersey

• 4th & Cooper Streets
  Camden, NJ 08101
• 50 Walnut Street
  Newark, NJ 07102
• 402 East State Street
  Trenton, NJ 08608

Chapter 7 Bankruptcy Trustees New Jersey

Below are the Chapter 7 bankruptcy trustees in New Jersey broken out by bankruptcy district. You can also find the list here. 

In addition to the above, review New Jersey local bankruptcy rules before filing a bankruptcy case. Some local rules may differ slightly from the Federal Bankruptcy Rules.

Conclusion

Hopefully, now you know much more about Chapter 7 bankruptcy in New Jersey. You can take the Chapter 7 bankruptcy means test calculator below if you’re interested to estimate qualification and cos

For more information about Chapter 7 bankruptcy, check out our Chapter 7 bankruptcy process. 

Most people work with a bankruptcy attorney in both Chapter 7 and Chapter 13, but there is the option to file without a bankruptcy attorney. Read filing bankruptcy without an attorney to learn how.