The increase in exemptions available in New Jersey to protect the equity in your home has made it easier to keep your home in a Chapter 7 Bankruptcy. As of April 1, 2019 the exemption a home owner is allowed under federal exemptions, which are used in New Jersey, increased to $25,150.00 per home owner. For example, if you and your spouse own a home in, say, Cherry Hill, NJ or Voorhees, NJ and the home is worth $200,000.00 and there is a mortgage of $130,000.00 you would be able to file a chapter 7 and keep your home as long as you are able to continue making your mortgage payments and as long as you meet the other chapter 7 eligibility requirements such as those relating to income. That is because there would be no reason for a trustee to sell your home since there would be no benefit to your creditors. If a trustee sold the home in this example, the trustee would have realtor and other fees of about $20,000.00, the mortgage of $130,000.00 and you and your spouse could protect from creditors a total of $50,300.00. Consequently, if you are in need of a bankruptcy but are concerned you will lose your home, you should immediately consult with an experienced bankruptcy attorney
When a bankruptcy is filed the individuals filing are allowed to protect a certain amount of equity in their assets and keep those exempt assets. In New Jersey and Pennsylvania debtors filing bankruptcy can protect assets using Federal or state exemptions. Except for certain types of assets, most bankruptcies in New Jersey or Pennsylvina rely on Federal Exemptions. Those Federal Exemptions increased as of April 1, 2019. For example, the amount of equity in your residence increased from $23,675.00 per owner to $25,150.00 per owner. Household goods and furnishing exemptions increased from $12,625 to $13,400.00. Other increases include motor vehicle from $3,775.00 to $4,000.00, jewelry from $1,600.00 to $1700.00 and proceeds from personal injury lawsuit from $23,675.00 to $25,150.00. As a result, even when filing a chapter 7 bankruptcy often the debtor will not lose any assets in the process.
When a chapter 13 bankruptcy is filed the court automatically schedules two hearings. The first is a meeting of creditors. The debtors are required to attend this meeting with the chapter 13 trustee and their attorney. Creditors are invited to come but they rarely do. The other hearing is the confirmation hearing. The debtors' do not have to attend this hearing but their attorney does. In New Jersey the hearing will take place at the Federal courthouse in Camden NJ, Trenton NJ or Newark NJ. The purpose of the hearing is to have the court approve the chapter 13 plan regarding repayment to creditors. Often the confirmation hearing will need to be adjourned to address the claims filed or other issues raised by the trustee. Except in unusual or complicated matters if the Chapter 13 trustee is satisfied with the plan and objections have been addressed the trustee will recommend confirmation and the judge will enter an order approving the chapter 13 plan
The Wall Street journal reports that Gymboree is on the verge of filing a bankruptcy with the likely closure of their stores. Locally there are several stores including at the Cherry Hill Mall in Cherry Hill New Jersey, The Promenade at Sagemore in Marlton NJ and the Deptford Mall in Deptford NJ. In Philadelphia Pennsylvania the store at the Philadelphia Mills Mall would be impacted. The bankruptcy will be just another reminder of the difficulties retail chains face today.
The New Jersey Bankruptcy Court, which is part of the Federal Court System has addressed the impact of the federal government shutdown on its official website. Specially the site notes "the Judiciary has continued to operate by using court fee balances and other "no-year" funds. The Administrative Office of the U.S. Courts has revised its original estimate and now is working toward the goal of sustaining paid operations through Jan. 18, 2019." If the shutdown is not resolved by then, the bankruptcy court will not have funds to operate. This applies to the bankruptcy courts in Camden, Trenton and Newark NJ.
When a creditor agrees to settle a claim for a reduced amount, the amount of debt foregiven can result in taxable income. For example, if you owe $20,000 on a credit card and a settlement is reached where they agree to accept $11,000 as payment in full, the creditor is foregiving $9,000.00 of the claim. In that circumstance, the creditor will issue a 1099c to you for the foregiveness of debt. That $9,000.00 will count as income to you. There are some exceptions. If you can show you are insolvent you can avoid liability. Bankruptcy is also an exception. For example, if you filed a chapter 7 to eliminate that $20,000.00 credit card, there would not be any tax liability even though the entire $20,000.00 was eliminated. Depending on circumstances debt negotiations may be an option, but be sure to take into account the tax consequences when deciding between bankruptcy and debt negotiation. And since both the IRS laws and the Bankruptcy laws are Federal Laws, the result would be the same whether you lived in New Jersey or Pennsylvania.
Sears filed bankruptcy on October 15, 2016. According to Wikipedia, Sears was the largest retailer in the US until 1989 when it was passed by Walmart and was now 23rd largest. Recent financial changes led to the closing of the Sears at the Hamilton Mall in Atlantic County. With the filing of the Chapter 11 Bankruptcy, three more New Jersey locations are being closed: The Sears at the Deptford Mall in Deptford New Jersey, the Sears in Middletown NJ and the KMart in Glassboro NJ on Delsea Drive. The closure of the stores is a major blow for those areas because of the loss of so many jobs.
You can build your credit after bankruptcy. Sometimes clients will come into my office in Cherry Hill, NJ and express concern that if they file bankruptcy they will not have credit again for 10 years. That is not accurate. In fact many times credit scores of clients are already low from missed payments and filing will actually lead to improvement in credit score. If a Chapter 7 Bankruptcy is filed, approximately three months later the individual receives their discharge. If they own a vehicle with payments and they have reaffirmed the debt, they are already on their way to reestablishing credit since their credit report will show the vehicle payments. After the bankruptcy is completed, often in less than one year an opportunity to obtain a credit card will arise. While avoiding credit cards is a good policy, it may be helpful to get a credit card with a low limit, use it for a small purchase like gasoline or groceries, and pay it off each month. At that point, your defaulted unsecured debt will have been eliminated and the current status on car payments and a credit card will have you well on your way to reestablishing credit.
Lil Kim filed for Bankruptcy in Newark New Jersey and now has the same options that anyone filing would have. According to the bankruptcy filing she stopped a foreclosure sale on her house by filing. Generally the bankruptcy will allow a debtor to resume regular mortgage payments and pay missed payments over time. According to papers filed by Rushmore Loan Management she missed a mortgage payment of approximately $10,000.00 due after she filed. They want to foreclose. Because of her circumstances she is going to attempt to do a loan modification which is another option debtors have. Typically the debtor resumes payments but rather than paying the arrears through a separate payment the debtor attempts to restructure the loan so the arrears are added back into the mortgage. Although Lil Kim's assets and income and expenses are more than the typical person, the rights under the bankruptcy law are the same.