"How much will my Chapter 13 bankruptcy payment be?" is a question I am often asked. While it is a simple question, the answer is not simple since the amount is determined by a number of factors. First, is the Chapter 13 purpose to pay mortgage arrears? If so, the total amount of the arrears would need to be paid over three to five years. Do you owe any priority debt such as taxes. That also must be added to the amount that is to be paid. What if you could afford to pay even more. The court looks at you monthly income and expenses to determine not only if you can afford to pay the mortgage arrears, etc., but also to see if you can pay something to other creditors such as credit cards and medical bills. Another major consideration is the nonexempt equity in your assets. Normally having equity in your home or other assets is a good thing, but in a bankrutpcy it could result in you having to pay something to your creditors. You can protect some equity in assets, but if your equity is more than you can protect, that can also increase your monthly payment. There are a number of factors that your attorney must consider in putting together a confirmable plan.
"Am I eligible to file a Chapter 13?" is a question I am often asked. Bankruptcy code section 109, entitled "Who may be a debtor" provides many of the requirements. To file a Chapter 13 you cannot have more than $1,257,850.00 in secured debt nor more then $419,275.00 in unsecured debt. Since this is Federal law these rules apply regardless of whether you file bankruptcy in New Jersey, Pennsylvania or anywhere else. In addition you must have completed a credit counseling course within 180 prior to the filing. You must be an individual. Also, you are not eligible to file a Chapter 13 you had a Chapter 13 within the prior 180 days and your prior case was dismissed for willful failure to obey court order or to appear in proper prosecution of a case. In addition, if you dismiss a chapter 13 bankruptcy after the creditor has filed a motion for relief from the automatic stay, you cannot file another Chapter 13 for 180 days. However, if your prior bankruptcy was dismissed by the court, and not at your request, you can refile. There are other rules that come into play, such as good faith. It is best to consult with an experienced bankruptcy attorney to confirm eligibility
Under Bankruptcy Law, the Bankruptcy Court takes into account the debtors household income and compares it to the median family income of their state to help determine whether a chapter 13 or a chapter 7 should be filed. On April 1, 2019 the household income numbers increased. In New Jersey, there is a presumption that a Chapter 13 should be filed (although depending on expenses a Chapter 7 is still possible) if income exceeds $68,349.00 for a family of one, $82,263.00 for a family of two, $103,634.00 for a family of three and $125,465.00 for a family of four. In Pennsylvania those numbers are $55,117.00 for a family of one, $66,649.00 for a family of two, $82,518.00 for a family of three and $100,078.00 for a family of four. Note that even if you make less than the average similiar family, equity in assets and expenses will still also be used to determine whether chapter 7 is appropriate.
A Chapter 13 Bankruptcy can eliminate obligations from a Judgment of Divorce that cannot be eliminated in a Chapter 7 Bankruptcy. Neither will eliminate domestic support obligations such as child support or spousal support. However, if there are other obligations relating to a property settlement agreement or an allocation of liabilities, those obligations can be reduced or eliminated in a chapter 13 but not in a chapter 7. This is because the exception to discharge section that applies to chapter 7 basically makes all divorce related liabilities nondischargeable but the exception section for chapter 13 only applies to domestic support obligations. Because of these differences, if you are filing a bankruptcy after a divorce, it is imortant to discuss with your attorney all obligations under the Judgment for Divorce because it may make more sense to file a chapter 13 when at first blush the case may seem appropriate for a chapter 7.
When a Chapter 13 bankruptcy is filed in New Jersey a notice is sent by the court to schedule two hearings. The first is the meeting with the trustee that the debtors and their attorneys must attend. Creditors are also invited but rarely attend. The other hearing scheduled is the Confirmation Hearing. Typically only the attorney attends although occasionally the debtors will need to attend. In New Jersey the hearing will take place in Camden NJ, in Trenton NJ, or in Newark NJ. The hearing is to determine whether the court will approve the Chapter 13 plan that was filed. The trustee will consider the amount of the claims filed by the creditors, the income of the debtors, the equity in the assets of the debtors and the feasibility of the plan to determine whether or not to recommend confirmation to the judge. It is important that payments are made each month leading up to the confirmation so that the trustee can see you actually have the ability to make payments. Once the case is confirmed the creditors and the debtors are bound by the plan.
In order to proceed with a bankruptcy, federal, state and local tax returns that were required to be filed must be filed for the last four years in a Chapter 13 and for the last year in a Chapter 7. In other words, if you did not make enough income to file a tax return then you do not need to file that return just for the bankruptcy. If you are a Pennsylvania resident, you must file a PA tax return if you had income of more than $33.00. While this is a nominal amount, not all money received counts as income, such as social security. Pennsylvania law lists eight classes of income, including compensation, net profits from business, income from rents, dividends, interest and gambling losses among others. Consequently, if a bankruptcy is being considered, make sure tax returns are filed
The Law Office of Robert Braverman, LLC has recently opened a law office at 200 Campbell Drive, Willingboro New Jersey to better serve the individuals and businesses of Willingboro and nearby cities such as Westampton, Willingboro and Burlington City, NJ. Assisting clients with financial issues in bankruptcy, including Chapter 7, Chapter 13, Chapter 11 and Chapter 12 and debt negotiation will remain the primary focus of the law firm.
Chapter 13 is a type of bankruptcy often used by debtors to save their home by paying mortgage arrears over time. However, when filing Chapter 13, a debtor is obligated to pay priority claims in full through the bankruptcy as well. Priority claims include domestic support obligations such as child support, certain types of taxes, claims for personal injuries from a motor vehicle accident when driver was intoxicated, and other types of claims are priority claims. In certain circumstances, this obligation could make retaining the home more difficult since instead of paying just the mortgage arrears, these priority claims must be paid as well. However, it could also make keeping the home easier since it may be more affordable by stretching these payments out over five years.