The whole purpose of a Chapter 7 bankruptcy is to help honest people, who through circumstances outside of their control, got in debt.
Most clients who file Chapter 7 have minimal property and they have to be under the median income or beat the means test to qualify.
In New Jersey the median income is $68,349 for a family of one, $82,283 for a family of 2, $103,634 for a family of 3 and $125,465 for a family of 4 and $9000 for each additional person in excess of a family of 4. However, even if you are above the median income, you may qualify if you can beat the means test with all the deductions available.
The great majority of our clients who file Chapter 7 do not lose any property since all the property they own is exempt or protected.
One of the regular questions I receive is “will I lose my home if I file Chapter 7?” The answer depends on the equity in your home.
If you are current on your mortgage payment and your home is worth $150,000 and you owe $120,000, you will be able to keep your real estate that you live in since under the law, you are now allowed an exemption of $25,150.
The analysis is as follows: $150,000 – $15,000 (10% of cost of sale) – $120,000 = $15,000 equity that would be fully exempt.
However, Congress only provides so many exemptions for real estate, clothing, household goods, motor vehicles and many other property you own.
Thus, if you have too much property, it will not be exempt and a Chapter 7 trustee will sell non-exempt property to pay a portion to creditors. Thus, you have to be very careful before you file Chapter 7 since if you have too much property, a trustee can sell your property.
Thus, besides being under the median income and not having too much property, you want to make sure that you not only qualify for Chapter 7 bankruptcy but all your property would be exempt or protected.
Steven N. Taieb, Esq. has been a South Jersey Bankruptcy Attorney for over 34 years and is board certified in consumer bankruptcy law by The American Board of Certification which is accredited by The American Bar Association.