How to File Bankruptcy
Tasks involved in filing for Chapter 7 bankruptcy
To file for bankruptcy, first you need to learn enough to know where to start.
This site helps you do that. It will give you an overview of the bankruptcy process and connect you with a wide variety of resources (information, products, services, and lawyers) that can help you through the bankruptcy maze.
This site is free. Unlike other bankruptcy sites, you don't need to register or provide any identifying information to use the means test calculator. If you want to contact an advertiser, that's up to you, but this website isn't after your name or email address.
Do you need to file for bankruptcy?
You may not need to file for bankruptcy.
Chapter 7 bankruptcy is the neutron bomb of debt management and asset protection. A Chapter 7 is quick (a few months), and quite complete when it comes to wiping out unsecured debt like credit card and medical debts. You may want to save it for when you really need it--you can use Chapter 7 bankruptcy only once every seven years.
On the other hand, your particular combination of debt, income, and property may be a perfect fit for bankruptcy protection. The vast majority of people who end up filing for bankruptcy really do need it.
A lot has been written lately about whether bankruptcy makes sense for people, in light of the economic downturn, including these articles:
- NPR/Talk of the Nation: Sometimes, Filing For Bankruptcy is Best - (April 20, 2009. Jane Bryant Quinn explains why it makes sense to go bankruptcy to preserve your retirement accounts and other exempt assets. Know your rights!)
- The New York Times: Debt Settlers Offer Promises but Little Help (April 19, 2009)
- The Chicago Tribune: In this economy, bankruptcy may be an answer for many (March 15, 2009)
- The New York Times: Bankruptcy as a Step to Solvency (Jan 23, 2009)
- Jane Bryant Quinn in Newsweek: When Bankruptcy Makes Sense (Jan 3, 2009)
- MSN MoneyCentral: Liz Pullman Weston: When bankruptcy is best (no posted date)
- Credit Slips Blog on "Should I File for Bankruptcy" (Jan 23, 2009) ('rules of thumb' about when it's appropriate to file).
- More news...
Info is not advice
However, this website cannot answer whether you, specifically, should or should not file for bankruptcy.
If you have questions about whether bankruptcy is right for you, you may want to seek credit counseling from a reputable agency or consult a lawyer. A free or low cost consultation with an experienced credit counsellor or attorney can help you identify the relevant factors of your specific financial situation that ultimately determine whether bankruptcy is an appropriate, financially prudent option at this point in your life.
The typical bankruptcy filer is a person already in fragile economic circumstances, often with large amounts of credit card debt, who then suddenly faces a spate of hard luck (loss of job, injury, divorce, uninsured medical expenses), resulting in mounting penalties and an unpayable amount of debt.
Bankruptcy law is designed to help people just like this, who need assistance in making a clean break -- a "fresh start" on life, rather than spend the rest of their lives being crushed by the burden of unpayable debt.
Even if you're facing unpayable debt, you still may not need bankruptcy to protect your assets. Under the Exemption Laws of New Jersey, you may already be "judgment-proof." If so, you need not fear credit card companies simply because you owe them. Unsecured creditors (like credit card companies) can't take your stuff if it's exempt. If there are harassing phone calls, you can stop them with a simple phone call or letter. (However, interest and penalties on your debt will continue to accumulate and bankruptcy will put a stop to that.)
But exemption laws do not protect property from all types of debts or all types of creditors. For example, exemption laws typically do not protect you against collection of child support or tax debts. And if you bought property and pledged it as collateral for the purchase-money loan (for example, a car loan or mortgage), the lender can take the property regardless of any exemption law.
Finally, there are some kinds of debts that bankruptcy simply cant get rid of. These are called "nondischargeable" debts. This generally includes child support, most student loans, and most tax debts.
Where to Find More Information
There's much more to be said about this topic than can be said on a Web page. Any decision to file for bankruptcy versus other alternatives requires a thorough, systematic review (by you or someone you hire) of your income, debts, and property.
For less than $30, you can purchase and/or download Nolo's book, How to File for Chapter 7 Bankruptcy, which I wrote with attorney Steve Elias and Robin Leonard. Chapter 1 will walk you through a self-analysis of your situation and explain your options in plain English. The rest of the book offers step-by-step discussions of exempt property, keeping your home, and how to prepare and file your bankruptcy forms. The book includes line-by-line instructions for the official bankruptcy forms, complete with filled-in examples. Throughout the book, you are alerted to situations that are particularly troublesome and should not be handled without an attorney. (See Amazon.com reviews [here] and press reviews [here].)
This website supplements the information in the book by providing quick access to local (county-by-county) information and services.
For more money, there are other types of help available:
If you just need help with preparing the forms, you can hire a bankruptcy petition preparer.
If you want legal advice and analysis of the details of your specific situation, you can hire a New Jersey bankruptcy lawyer to advise you. You'll find listings in the Lawyers section of this site. These listings are not endorsements. They are simply designed to help you quickly connect with service providers in your area.
Whether you decide to do it yourself or hire professional help, this site will help you become a smarter, better-informed consumer and help you steer clear of shoddy services.
What kind of bankruptcy do you qualify for?
New Jersey Median
|Persons in Household|
Source: U.S. Trustee, U.S. Department of Justice (for bankruptcy cases filed on or after April 1, 2014)
Note. The means test is but one of several hoops you must jump through. Even if your income is low, a judge can prevent you from filing Chapter 7 if it appears that you have enough income to repay a substantial portion of your debts in a 3-year Chapter 13 plan.
There are two main types of bankruptcies for consumers:
Chapter 7 allows you to eliminate most unsecured debts in a matter of months in return for giving up all "non-exempt" property -- if you have any.
Most people who file for Chapter 7, have no available non-exempt property or equity. Whatever they still own by the time they file is either protected by exemption laws, or pledged to a secured creditor as collateral for a debt, and therefore not available to pay off unsecured creditors.
These are known as "no asset" bankruptcies, and most Chapter 7s are of this type.
Chapter 13 takes 3 to 5 years. Instead of giving up property, you repay a portion of your debts and live within a strict budget that is monitored closely by the bankruptcy court trustee. If you can't make the required monthly payments, your Chapter 13 bankruptcy fails and your debts will remain (unless you convert to a Chapter 7 bankruptcy).
Chapter 13 is commonly used by people who are behind on secured debt payments (e.g., mortgages) and want to propose a Chapter 13 plan to catch up on these payments over time.
Under the new bankruptcy law, which took effect in October 2005, a mathematical formula called the "means test" establishes an initial determination of the kind of bankruptcy you qualify for: Chapter 7, Chapter 13, or either. This formula takes into account:
- your monthly income
- the amount and kind of your debts, and
- other aspects of your financial situation.
If your annual income is less than the New Jersey median income for your household size, then you can file for Chapter 7 or Chapter 13, (assuming you meet other qualifications). If your income is higher than the state median, you must first complete a long list of expense deductions to estimate what your 'disposable income' will be over the next five years. The result of this calculation determines whether you can file for Chapter 7, or are left with Chapter 13 as your only option.
Although this form is rather long and complicated, the free, online Bankruptcy Means Test Calculator on this website can do the math for you and tell you how you would fare under the means test. This calculator is free and anonymous; you do not need to disclose your name, your email address, or any other identifiable personal information.
More info & resources...
- Means Test Calculator for Union County (based on Official Form 22A; helps determine whether you meet the threshold requirements for Chapter 7? (most people do..) and incorporates official spending allowances used in the bankruptcy means test for Union County)
Where to file for bankruptcy
If you have lived in New Jersey for at least 91 of the past 180 days (six months), you may file at the court described below. If you've moved recently, you may have to file at the court that served your old zip code.
The 07083 zip code and all of Union County are in the jurisdiction of the
New Jersey District Bankruptcy Court
Most of your interactions (including the filing of your forms) can be done by mail. However, you will need to go the courthouse, in person, at least once for a meeting with the bankruptcy trustee. (There's more about that meeting in Chapter 7 of How to File for Chapter 7 Bankruptcy.)
See the list below for more information about your court, including addresses and maps to the courthouse(s).
Check the court website for updates to this information before relying on it.
401 Market Street Camden, NJ 08101
Martin Luther King, Jr. Federal Building 50 Walnut Street Newark, NJ 07102
Clarkson S. Fisher US Courthouse 402 East State Street Trenton, NJ 08608
Official Website for the New Jersey District Bankruptcy Court:
What to look for there:
Here are a few basic things to look for on any court website:
- The local rules
- Local forms
- Some kind of web page, or downloadable plain English information about bankruptcy in its most general terms.
- Some kind of plain English information about court filing requirements.
- Specific instructions on how the court wants you to prepare and format a "mailing matrix" of creditor addresses.
Is your court willing to help someone without a lawyer?
Most bankruptcy court websites make little or no effort to help non-lawyers or provide important information in plain English. However, a few stellar courts do an outstanding job of providing practical, relevant information in plain English. There is no reason all courts can't do this; taxpayers should demand it.
Steps 2 & 3. Buy What You Need & Get Help If You Need It
What bankruptcy costs
The cost of filing for bankruptcy is more than just the filing fee. There are fees for:
- mandatory pre-filing credit counseling
- mandatory debt management 'education'
- advice and information to help you decide whether to file
- preparing your forms for filing, making the required number of copies, and assembling them in the proper order
- other court procedures that may be required or beneficial.
Here's a rundown of the costs you're likely to incur:
Where to Find These Resources
To simplify your search for the bankruptcy resources you need, whatever they might be, this website offers of a wide range of free information, tools, and links to useful bankruptcy products and services.
Listings of required forms and links to free downloadable files all federal bankruptcy forms.
Links to local rules and information from your court specifically designed for non-lawyers. Free downloadable files all federal bankruptcy forms.
Based on Official Form 22A, this calculator will give you a sense of whether you qualify for bankruptcy based on the official formula stated in federal law (11 U.S.C. 707(b)). The calculator applies local expense standards published by the U.S. government.
When you fill out your bankruptcy forms, you are asked what property you claim as exempt -- and the citation for it. This page gives you those citations and exemptions in summary fashion.
Step 4. Get on With Your Life
Congress changed the bankruptcy laws to make it harder for people to file. I created this website to make it easier.
The "Bankruptcy Reform and Consumer Protection Act of 2005" (BAPCPA) is a bad law. Some lawyers and law professors have taken to calling it the "Bankruptcy Abuse Reform Fiasco" (BARF). It's based on false assumptions about why people get into financial trouble and imposes additional rules and paperwork on people already overwhelmed by bad luck and unpayable debt.
Despite these new obstacles, bankruptcy law still provides valuable benefits to those who need it. It helps you get on with your life. Indeed, "getting on with your life" is the whole point of bankruptcy -- to put your debts behind you and go forward with a "fresh start." This website helps you learn about the benefits of bankruptcy and how to obtain them. It lists relevant and affordable products and services that can help you file for bankruptcy with a minimum of expense and hassle.
Information is not advice. Although this website will give you a lot of information about bankruptcy law and procedure, it does not -- and cannot -- tell you, specifically, how this information applies to your exact situation. Nor can it advise you which course of action is right for you.
Likewise, the listings of bankruptcy products and services are not endorsements. They are intended to expose you to the full range of tools and services that can help you file for bankruptcy. Think of these listings as a phone book, not a referral. It is up to you to evaluate the quality of those products or services and make your own purchasing decisions. If there are third-party reviews of products or services, I attempt to quote or link to them.
Remember to bookmark this website if you have found it helpful so far. You won't find a more comprehensive collection of bankruptcy resources and information anywhere on the Web. Make it your starting point for your bankruptcy research. And tell your friends.
Best of luck to you as you traverse your financial troubles,
co-author of How to File for Chapter 7 Bankruptcy, (Elias, Renauer & Leonard :: Nolo, 2013)