Hackettstown New Jersey Legal Blog

If you’ve recently filed for chapter 7 bankruptcy in New Jersey, it may seem like there is no end in sight to the cycle of debt. However, it is possible to recover from chapter 7, provided you take the right steps. Forbes offer a few effective tips on how you can rebuild your credit and work towards a brighter financial future in the aftermath of a bankruptcy filing.

Create a Budget (and Stick to It)

Your New Jersey company has not done as well as you hoped, and now you are struggling to cover your debts and operating expenses each month. Efforts to find more funding have not been successful, but you are not ready to close your business. At The Law Offices of Jonathan Stone, we often explain the benefits of Chapter 11 bankruptcy to business owners who are struggling with debt.

While a Chapter 7 bankruptcy discharges debts and gives individuals a chance to start from scratch, you do not want to have to liquidate your assets. FindLaw explains that a Chapter 11 bankruptcy still gives you a fresh start, but without sinking your company. Rather than discharging all of your debts, you can restructure them through debt consolidation. Once this is done, your monthly payments are manageable, and your business can become profitable.

Many of the Hackettstown residents who come to us here at our offices here at Jonathan Stone Attorney at Law are initially only concerned about what form of personal bankruptcy they should file: Chapter 7 or 13? Yet we counsel them that before they start getting too deep into their plans, they should first seek credit counseling. Like them, you might assume that this is something that we recommend to clients. Yet again like them, you might be surprised to learn that this is not a recommendation; rather, it is a requirement under federal law. 

Per the U.S. Bankruptcy Code (as shared by the Cornell Law School), no debtor may file for bankruptcy without first having gone through credit counseling within the previous 180 days. You must meet with the credit counselor and create a budget that would allow you to pay off your current debts. Your income and the other assets available to you are secondary in this evaluation because its main purpose is to see if it feasible for you to pay off all your liabilities on your own. Once that budget has been established, you must include it in the paperwork you file with the court in your bankruptcy case. 

A common myth that many in Hackettstown may subscribe to is that bankruptcy laws are easy to exploit. They may hear stories about people accumulating significant assets and then simply filing for bankruptcy to get out of having to pay for them. In reality, the guidelines governing bankruptcy are much more strict than many know. Having any of one's assets and liabilities dismissed is a privilege not everyone qualifies for. While a Chapter 7 bankruptcy may be among the most common forms of personal bankruptcy (indeed, information shared by the American Bankruptcy Institute shows that of all non-business filings in 2017, over 61 percent were Chapter 7), those hoping to file for it must first pass the Chapter 7 means test. 

The means test was designed to keep consumers from abusing personal bankruptcy laws. It essentially identifies if one does not have enough income coming in to settle his or her debts. The means test looks at one's current monthly income for the six months prior to him or her filing for bankruptcy. If his or her income is above the state median for his or her demographic, then it must be determined whether his or her disposable income might be enough to pay his or her debts.