The New Jersey Bankruptcy Exemptions

When you want to liquidate debts in a bankruptcy proceeding—permanently discharge them so that you no longer owe anything—you must do so through a Chapter 7 petition. When you file, you’ll immediately get the benefit of the automatic stay, which prevents your creditors from calling, writing or taking any other action outside of the bankruptcy proceeding to collect the debt. You’ll be able to permanently discharge many debts—student loans, certain tax debts and family law arrearages are generally not subject to discharge. In exchange, you will be required to sell non-exempt property, with the proceeds used to pay your creditors, in part or in full.

The New Jersey Bankruptcy Exemptions

When you file a Chapter 7 bankruptcy petition in New Jersey, you have a choice—you can take the exemptions available under New Jersey law or under federal law. You can’t, however, pick and choose between the two. Here’s an overview of the New Jersey exemptions:

  • The Homestead Exemption — Most states allow you to exempt some equity in your home. New Jersey does not. If you want to claim a homestead exemption, you’ll have to use the federal exemption schedule.
  • Cemeteries and burial plots — Burial plots and cemetery property are fully exempt
  • Motor vehicles — You can claim up to $1,000 in equity (the difference between the fair market value and anything you owe on the vehicle) on a car, truck or motorcycle
  • Pension and retirement accounts — All public pension funds are fully exempt
  • Life insurance proceeds — These are exempt if there’s a clause in the insurance policy that prevents it from being used to pay the beneficiary’s creditors.
  • Personal property — There’s a $1,000 exemption for household goods and furnishings and all clothing is fully exempted

Contact Neuner & Ventura, LLP

We understand the stress, anxiety and confusion that can be associated with a potential bankruptcy filing. We offer a free initial consultation to every client. For an appointment, call Neuner & Ventura at 856-596-2828 or send us an e-mail. We do, however, reserve the right to charge a fee to review any work done by another attorney. Evening and weekend appointments are available upon request.

Representing Clients across South Jersey

The Homestead Exemption in a New Jersey Chapter 7 Bankruptcy

When you seek to permanently discharge debts in a Chapter 7 bankruptcy filing, part of the deal is that you get to claim some property as exempt, so that it can’t be taken by the bankruptcy trustee and sold to satisfy your creditors. The exemption customarily identifies how much equity can be protected in your home, as well as how much personal property can be kept. Each state has its own schedule of exemptions or you can choose the federal exemption.

The Homestead Exemption in New Jersey

Unlike many other states, New Jersey does not have a homestead exemption for people seeking bankruptcy protection under Chapter 7. Accordingly, if you want to protect any of the equity in your home during a Chapter 7 proceeding, you must choose the federal exemption.

That’s not to say, however, that a homeowner cannot protect any interest in a homestead in New Jersey, but it’s a fairly complicated legal process to do so. Under New Jersey law, a married debtor can claim an exemption for any survivorship interest in property, provided the property is held “by the entirety” with his or her spouse. “By the entirety” is a legal term that refers to a specific type of property ownership, where the parties are not allowed to sell or transfer their individual interest without permission from the other parties.

You can, of course, choose the federal exemptions, but you must use the federal exemptions for all your property (you can opt for the New Jersey exemption on some and the federal for other property). Currently, the federal homestead exemption amount is $22,975, but it is subject to change every three years. You can use the federal homestead exemption for a wide range of real property, including homes, co-ops, condominiums, mobile homes and even burial plots.

Contact Neuner & Ventura, LLP

At Neuner & Ventura, LLP, we provide a free initial consultation to every client. To set up a meeting, call Neuner & Ventura at 856-596-2828 or send us an e-mail. We do, however, reserve the right to charge a fee to review any work done by another attorney. Evening and weekend appointments are available upon request.

Representing Clients across South Jersey

The Federal Exemptions in a Chapter 7 Bankruptcy

If you’ve been struggling to meet your financial obligations, whether because of injury or illness, divorce or any other reason, one of the ways you can get a fresh start is by filing a Chapter 7 bankruptcy petition. With a Chapter 7, you can permanently rid yourself of certain debt (student loans, tax obligations and child support/family law arrearages usually don’t qualify) in exchange for the sale of some of your assets. Many states have their own schedule of exemptions and there’s also a federal schedule. In New Jersey, as in nearly half of all states, you can choose whether you want to claim the state or federal exemptions, but you can mix and match between the two.

The Federal Bankruptcy Exemptions

The federal exemptions are adjusted every three years and were last modified in 2016. Under current law, the following exemptions apply:

  • The homestead exemption — Under federal law, you can claim up to $23,675 in the equity in your home. The exemption covers many types of real estate, including condos, co-ops and even burial plots, but you must actually live in the dwelling to claim the homestead exemption.
  • Personal property exemption — There are a number of specific personal property exemptions under the federal schedule, including:
    • $1,600 for any jewelry
    • $2,375 for tools of your occupation or trade, including books
    • $3,775 for any equity in your motor vehicle
    • $12,625 for loan value, dividends or interest in a life insurance policy
    • $12,625 for household goods, including books, animals, appliances and musical instruments
  • Personal injury settlements or verdicts — You can keep up to $23,675 in the value of any settlement or verdict
  • Retirement accounts – All retirement accounts are typically exempt, though there’s a cap of $1,283,025 on IRAs.

Contact Neuner & Ventura, LLP

At Neuner & Ventura, LLP, we know that the bankruptcy process can be intimidating and confusing. We offer a free initial consultation to every client. For an appointment, call our office at 856-596-2828 or send us an e-mail. We do, however, reserve the right to charge a fee to review any work done by another attorney. Evening and weekend appointments are available upon request.

Representing Clients across South Jersey

Ways that You Can Minimize the Likelihood of Bankruptcy

The bankruptcy laws were established for a good reason—to give folks a new start after encountering unforeseen or unmanageable financial challenges. There are some things that you can do to minimize the risk that you’ll need to file for bankruptcy protection.

Make Certain You Have Health Insurance

In many instances, the principal reason a person files for bankruptcy protection is to discharge medical bills. Because those types of debts are unsecured, they can be permanently discharged in a Chapter 7 proceeding, but most of the anxiety, stress and headache that come with past due medical bills could be avoided if you carried a policy of health insurance. At least as the law stands now, you don’t have to be employed anywhere to obtain health insurance—it’s available through the Affordable Health Care Act. And when you are trying to determine how to allocate a limited amount of money to your needs, health insurance should be a priority. Though many providers will write off some percentage of the costs, if necessary, you may still wind up with medical bills that could take years to pay.

Don’t Borrow Out of Desperation

Often, when you are experiencing financial challenges, the first plan is to borrow you way out of difficulty. That almost never works! Unless you encountered problems because you were temporarily unemployed and you have secured a new and well-paying job, chances are you won’t be able to afford to make loan payments on top of your current obligations. And because you’ll likely have less than optimal credit, you will probably end up paying significantly higher interest rates, another way your dollars will be eaten up.

Don’t ever consider a payday loan or a title loan as a way to get through financial problems. Many of them have effective interests rates in excess of 100%, so you’ll end up paying double for the money you get. Typically, too, the money gets taken directly out of your account when you get paid, so you won’t have any opportunity to negotiate a new repayment date, if any unforeseen contingency arises.

Always Make Your Car Payment

Unless you work from home, walk or take public transportation, your car is your most valuable asset. If you don’t have wheels, you can’t get to work. If you can’t get to work, you can’t earn money to pay your bills.

Contact Neuner & Ventura, LLP

At Neuner & Ventura, LLP, we know that the bankruptcy process can be intimidating and confusing. We offer a free initial consultation to every client. For an appointment, call our office at 856-596-2828 or send us an e-mail. We do, however, reserve the right to charge a fee to review any work done by another attorney. Evening and weekend appointments are available upon request.

Representing Clients across South Jersey

Look before you leap into owning your own business! A cautionary tale.

Too often we have seen people who pursued the dream of owning their own business without careful thought and preparation. The result can be financial and personal heartache, and a personal bankruptcy.

Take the case of George (not his real name). After retiring from the military he thought starting up a food cart business would be a way to make money and stay engaged. He was able to get a substantial SBA loan, which was used to buy the food trailer and a truck to pull it. He leased new food preparation equipment and leased space for it. His wife co-signed. Within 6 months, the business was failing and he was behind on rent and struggling to make ends meet.

George’s wise move was to recognize the situation was out of control and not to turn a blind eye to it. We reviewed the business finances and both quickly agreed he should get out before more damage was done. The leased equipment, trailer and rental location were surrendered to the leasing company, business lender and landlord. Fortunately, George had not run up bills for unpaid payroll or sales taxes, and did not have unpaid bills for fresh produce or meat. These would have been major problems for which even a bankruptcy would not help him.

George’s mistakes?

  1. He did not have any experience running this business or indeed any business. Thus he did not know how to market and was not able accurately to predict his cash flow.
  2. He over-extended himself with debt, which he personally guaranteed. He got this because of his then-stellar credit and military credentials.
  3. He did not research the market. Who else is in the food truck business? How are they doing? What do they do that makes them successful? Is there a niche or a clientele that is not being served? Being the newcomer in a business with established players who know what they are doing is never good unless you have reliable customers lined up.

Fortunately, with our help George got out and has found a job using his training and skills. He and his wife now have the fresh start they need. Both are wiser and happier.

If you are having trouble with a business venture, getting the right financial and legal advice is critical. We have helped many many people like George sort things out.

Protecting Yourself from Mortgage Problems

Protecting yourself from mortgage problems

It’s been almost a decade and it seems like consumers and others have forgotten the substantial financial problems that were created when standards were loosened or ignored in the mortgage finance industry. There are indications that many of the measures put in place to prevent abuse in mortgage lending are going to be rolled back. If you are looking to buy a house, to upgrade your existing home, or to use the equity in your home for any purpose, you want to take a long hard look before you do anything.

Put Together a Budget

Regardless of the reason you’re thinking of getting a mortgage, the first thing you need to do is construct a thorough and honest budget. It doesn’t matter how easy it is to get the money, if you can’t afford to make the payments, you’ll only be digging the hole deeper.

Determine Whether a Bankruptcy Might Make More Sense

Are you afraid of filing for bankruptcy, worried about the stigma it attach to you, that you may not be able to get credit in the future. The reality is that, if you refinance and can’t afford the payments, you won’t have gained anything. Furthermore, filing for bankruptcy protection can often be viewed by potential lenders as a step in the right direction…they see that you are willing to take steps to resolve the problem. A caveat, though…if you do file for bankruptcy protection, you need to abide by the terms of the bankruptcy and you need to take steps not to get yourself back in the same situation again.
Also, consider that it might be better for you to file a bankruptcy petition and discharge credit card debts, instead of refinancing to simply pay off credit card debt. In that instance, you haven’t really reduced your obligations, just shifted them. If you do refinance to pay off debt, you are better served to pay off student loan debt, which generally cannot be discharged in bankruptcy.

Contact Neuner & Ventura, LLP

We understand the stress, anxiety and confusion that can be associated with a potential bankruptcy filing. We offer a free initial consultation to every client. For an appointment, call Neuner & Ventura at 856-596-2828 or send us an e-mail. We do, however, reserve the right to charge a fee to review any work done by another attorney. Evening and weekend appointments are available upon request.

Representing Clients across South Jersey

How Does the Means Test Work?

If you are thinking about filing for personal bankruptcy protection, one of your first decisions will be whether to seek to permanently discharge debt under Chapter 7 or to try to reorganize your debt under Chapter 13. Pursuant to the changes made to the bankruptcy laws more than a decade ago, much of that decision is taken out of your hands now, as you must submit to a “means test” in order to qualify for Chapter 7 bankruptcy protection. The purpose of the means test is to ascertain whether you will have the financial resources to repay your creditors over a three to five year period. If so, you won’t be able to pursue Chapter 7.

The means test is essentially a formula that ensures that anyone with sufficient income repay debts rather than having them wiped out. To make that determination, the means test looks at your “current monthly income,” i.e., your average income for the six months immediately prior to filing your petition. The test will also look at your expenses to determine how much “disposable” income you have. The more disposable income, the greater the likelihood that you’ll prohibited from filing Chapter 7. The income limits vary from state to state.

Before looking at your disposable income, though, the test compares your “current monthly income” with the median income for a household of your size in your state. If your current monthly income is below that median, you’ve passed the test and can file for Chapter 7 protection.

If, however, your currently monthly income is above the median, you must determine if you have enough disposable income to repay your debts. To make this calculation, you subtract any “allowed” monthly expenses to come to your disposable income.

Contact Neuner & Ventura, LLP

At Neuner & Ventura, LLP, we provide a free initial consultation to every client. To set up a meeting, call Neuner & Ventura at 856-596-2828 or send us an e-mail. We do, however, reserve the right to charge a fee to review any work done by another attorney. Evening and weekend appointments are available upon request.

Representing Clients across South Jersey

Using Chapter 13 to Address Mortgage and Property Tax Arrearages

Often, when you have financial challenges, it’s your mortgage and/or the property tax payments that you can’t make in a timely manner. If you are behind on your mortgage, haven’t paid your property taxes, and are facing either foreclosure proceedings or a tax lien / tax sale, you can use Chapter 13 of the bankruptcy laws to reorganize your debt and negotiate new payment arrangements. That can apply to both mortgage obligations and tax debt.

Under Chapter 13, you’ll have three to five years to satisfy your creditors. While that’s likely not a long enough period to pay your mortgage in full, you may be able to enter into an agreement whereby you pay off all penalties and arrearages by the end of the bankruptcy. While you are doing that, you’ll enjoy the benefits of the automatic stay, a provision of the bankruptcy law that prohibits your creditors from calling, writing or taking any legal action outside of the bankruptcy process to try to collect the debt. As long as you honor your commitment, you won’t have to worry about the harassing phone calls and letters, or of any impending legal action.

In addition, if you avoid incurring new debt, you should have significant disposable income when you emerge from bankruptcy, so it should be easier for you to make your mortgage payments.

A Chapter 7 filing can invoke the automatic stay, and you can exempt your home from the bankruptcy sale. However, you can’t get relief from property tax payments in a Chapter 7 bankruptcy.

Contact Neuner & Ventura, LLP

At Neuner & Ventura, LLP, we provide a free initial consultation to every client. To set up a meeting, call Neuner & Ventura at 856-596-2828 or send us an e-mail. We do, however, reserve the right to charge a fee to review any work done by another attorney. Evening and weekend appointments are available upon request.

Representing Clients across South Jersey

Meeting the Chapter 7 Means Test Requirements

It’s been the law of the land for more than a decade, but there’s still a significant amount of confusion surrounding the application of the “means test” when you file for a Chapter 7 bankruptcy. Under the 2005 amendments to the bankruptcy laws, Congress made it a bit more difficult for a personal debtor to qualify to permanently discharge certain debts. Anyone filing a Chapter 7 petition must now satisfy the “means test,” showing that he or she lacks the means to pay off the debt in a three-to-five-year period. If that cannot be shown, the only recourse is a Chapter 13 filing.

So how do you know if you meet the means test? There’s a simple way to determine your eligibity.

The Median Income Test

Pursuant to the bankruptcy code, if your “current monthly income” is less than the median family income level in your state, you qualify to file for protection under Chapter 7. If you meet that test, you don’t have to look at any other criteria. The U.S. Census annually determines and publishes the median family income on a state by state basis.

Identifying your “current monthly income,” though, can be far more complex that you think. You’ll need to put together a summary of all your income for the last six months, from any source, including employment, unemployment, child support, alimony, investments and insurance payments. You must then divide that number by six to get your current monthly income.

Contact Neuner & Ventura, LLP

At Neuner & Ventura, LLP, we know that the bankruptcy process can be intimidating and confusing. We offer a free initial consultation to every client. For an appointment, call our office at 856-596-2828 or send us an e-mail. We do, however, reserve the right to charge a fee to review any work done by another attorney. Evening and weekend appointments are available upon request.

Representing Clients across South Jersey

The Vehicle Cramdown Procedure in Bankruptcy

If you have come to the conclusion that a bankruptcy filing is the best way for you to get your finances under control, but you really need your vehicle to be able to work after the bankruptcy, you may want to consider what’s known as a “cramdown,” a procedure whereby you can keep your car, but significantly lower the amount you owe on it.

The bankruptcy laws allow cramdowns because of the distinction between secured and unsecured debt. Under bankruptcy laws, you typically cannot discharge secured debt—debt that is backed up by a lien on property—and still keep the property. Unsecured debt, though, can generally be discharged. When you have a car loan, it’s only the fair market value of the vehicle that’s secured by the lien. Anything you owe above that is unsecured debt and can be discharged.

There are specific criteria you must meet, though, to successfully go through the process:

  • You must owe more on your car than it is worth—This is known as being “under water” on your car loan. You will only be eligible for a cramdown if you are under water. Technically, the purpose of a cramdown is to reduce the principal balance on your auto loan to the fair market value. As part of the process, though, you may be able to negotiate a new, lower, interest rate, or extend the term of the loan, thereby lowering your monthly payments.
  • Cramdowns may only be done in Chapter 13 proceedings—You can only cramdown a car loan in Chapter 13. You can’t exempt your car from the bankruptcy sale in a Chapter 7 petition and simultaneously obtain a cramdown.
  • Cramdowns are generally not available for recent vehicle loans—Under the law, a vehicle loan may only eligible for cramdown if it was signed more than 910 days before your bankruptcy filing—about two and a half years.

Contact Neuner & Ventura, LLP

At Neuner & Ventura, LLP, we provide a free initial consultation to every client. To set up a meeting, call Neuner & Ventura at 856-596-2828 or send us an e-mail. We do, however, reserve the right to charge a fee to review any work done by another attorney. Evening and weekend appointments are available upon request.

Representing Clients across South Jersey

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