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.
Whether you are from Pennsauken NJ or Cherry Hill New Jersey or Northeast Philadelphia Pennsylvania, individuals often come into my office and ask the same question. Am I eligible to file bankruptcy? Most times individuals are eligible to file bankruptcy. There are some limits. For example, section 109 of the bankruptcy code provides that to file a chapter 13 bankruptcy you cannot have more than $394,725.00 in unsecured debt or more than $1,184,200.00 in secured debt. If you do, you cannot file chapter 13, but you can file an individual chapter 11. Sometimes the real question is can they receive a discharge. For example, if an individual has filed a chapter 7 bankruptcy within the last 4 years, they are not eligible to receive a discharge in a chapter 13. However, that does not prevent the individual from filing a chapter 13. If they are behind with their mortgage, a chapter 13 can be used to pay mortgage arrears over 3 to 5 years even if they are not eligible for a discharge. Regarding chapter 7, a discharge will not be received if a chapter 7 is filed within 8 years of a prior chapter 7. In addition, the ability to file a chapter 7 and receive a discharge may be effected by other factors such as income compared to expenses. If an individual has too much disposable income, they could be forced to convert to chapter 7 or have their case dismissed. Equity in assets is also a factor in determining whether someone should file a chapter 7 or chapter 13 bankruptcy. Whether bankruptcy is an option and which type of bankruptcy are important issues that should be discussed with an experienced attorney before deciding how to proceed.
The bankruptcy code requires that a Trustee appointed by the US Trustee's office conduct a meeting of creditors. In a simple Chapter 7 or Chapter 13 meeting of creditors, typically no creditors appear. Business bankruptcies are more likely to have creditors appear. At the meeting, the trustee will ask the debtors questions under oath about their assets, liabilities, income and expenses. Your attorney will be there with you and generally will review your case with you prior to the meeting. A debtor may plead the fifth to avoid testifying about a pending criminal matter but the failure to testify could prevent the debtor from receiving a discharge. Section 344 of the Bankruptcy Code provides that a person required to testify can seek immunity, although whether it would be granted would be decided on a case by case basis.
Section 1301 of the Bankruptcy Code is entitled "Stay of Action Against Codebtor". If an individual files a bankruptcy while living in, say, Pennsauken, NJ and his ex-wife, living in Philadelphia, PA had cosigned for a credit card while they were married, can the creditor pursue the ex-wife since she is not in bankruptcy? Not when a Chapter 13 is filed. Section §1301 of the bankruptcy code provides a "Codebtor" Stay in Chapter 13 Bankruptcy. A "Codebtor" Stay protects a vehicle from being repossessed and protects a debtor's residence from a foreclosure sale when only one of the individuals responsible for the debt files Chapter 13. A "Codebtor" Stay does not apply to Chapter 7 bankruptcies or business debts. There are other exceptions. For example, although a liability on a personal tax return would seem to be a consumer debt a number of cases have held that the co-debtor stay does not prevent the IRS from pursuing the spouse that did not file a bankruptcy on a joint return.
An individual Chapter 11 bankruptcy is typically filed when an individual is not eligible to file a Chapter 13 bankruptcy because they exceed certain debt limits. You cannot file a Chapter 13 bankruptcy if you have more than $394,725.00 in unsecured debt or more than $1,184,200.00 in secured debt. Individuals trying to save their home may be prevented from filing Chapter 13 because, for example, they had a business that closed and now have significant debt beyond the debt limit. The good news is they can still save their home by filing a Chapter 11. While it is more expensive and there are more obstacles to overcome, such as voting, it is a good alternative when Chapter 13 is not possible.