5 Reasons a NJ Bankruptcy Discharge May be Denied

The desired ending to filing for bankruptcy in New Jersey, or in any state, is a discharge of most of your significant debts. To have your debts discharged means to have them “wiped out” or erased. All debts that are discharged via bankruptcy are no longer your responsibility.

A bankruptcy discharge gives struggling debtors a chance to start over with their finances by presenting them with a (completely or partially) clean slate. While it is usually not possible to eliminate all debts in a bankruptcy because some debts are nondischargeable, the discharge of some or many of your debts can be extremely helpful in getting back on the path toward financial stability.

If you have found yourself buried under a pile of debt that you cannot even imagine pulling yourself out of, filing for bankruptcy is probably the best option for you. Debtors who are struggling to even make minimum payments and sustain their lifestyle desperately need help turning things around.

By working with an experienced New Jersey bankruptcy attorney, you will have a much better chance of having your debts discharged at the end of your bankruptcy case. It is ill advised to attempt to file for bankruptcy without the help of a professional. NJ bankruptcy paperwork is copious, and it is easy to make an error in filing the proper documentation at the right time and to the proper institutions.

If the court denies your bankruptcy case in bad faith, your case will be dismissed. This means that you will not benefit from having any of your debts relieved. You are also prohibited from filing for another bankruptcy for at least 180 days. Because of this, it is crucial that you work closely with a bankruptcy attorney prior to filing and during your case. Your attorney will be able to advise you properly regarding situations and actions to avoid so that your case is not dismissed.

Working with an experienced New Jersey bankruptcy attorney will ensure that you avoid:

  1. Failure to meet the New Jersey bankruptcy eligibility requirements
    You can read about the NJ bankruptcy requirements here.
  2. Incorrectly submitting bankruptcy forms
    Although it may sound insignificant, failure on your part to properly complete any of the required forms within 14 days of your original filing date may lead the court to dismiss your case before it even gets started.
  3. Omitting important bankruptcy documentation and/or information
    This leads the bankruptcy court to suspect that you are being dishonest. You must be completely transparent in order to receive a bankruptcy discharge. If you fail to tell your attorney about property or assets that you own, your case may be dismissed on the grounds that you filed for bankruptcy in bad faith.
  4. Bankruptcy fraud
    This one almost goes without saying, but some people don’t realize exactly what bankruptcy fraud entails. There are many different ways to commit bankruptcy fraud, but in general, if you hide anything or lie on your bankruptcy petition (or in a hearing) – not only will your case be dismissed, but you will potentially face significant fines and even jail time.
  5. Failure to take credit counseling course
    Before your bankruptcy discharge, you will be required to take an approved credit counseling class. This must occur within the 180 days immediately prior to filing for bankruptcy. Failure to take this course will result in your bankruptcy case dismissed.

Because it bankruptcy discharge can positively impact your life so significantly, don’t waste the potential life-changing experience by making disastrous mistakes. Be sure that your bankruptcy paperwork is in order, that your behavior is up to snuff with the bankruptcy court, and that nothing is omitted from your petition. The only way to guarantee all of these things is by working with a successful New Jersey bankruptcy attorney.

 

Image: “Fraud Key” by Jake Rustenhoven – licensed under CC 2.0

 

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Is My Bankruptcy Trustee Entitled to My Upcoming Financial Windfall?

When you file for chapter 7 bankruptcy in New Jersey, your bankruptcy case will be assigned to a trustee. The bankruptcy trustee works independent of both your bankruptcy attorney and the NJ bankruptcy court. The trustee’s job is that of bankruptcy case “inspector,” if you will. Their duties are essentially: to review all paperwork, hold the 341 hearing (also called the Meeting of Creditors), liquidate any of your assets that are not exempt, and to prevent bankruptcy fraud from occurring.

Many people wonder how bankruptcy trustees get paid. After all, who would want to take on the intense responsibilities associated with the job if it were an unpaid position?

How does a bankruptcy trustee get paid?

Filing fees

Every bankruptcy petitioner must pay a filing fee to the court system. Your NJ bankruptcy trustee will receive $60 of that fee. That doesn’t sound like much money, does it? Keep reading to learn more.

Commission

Bankruptcy trustees are motivated to find as many assets to liquidate as possible in every bankruptcy case because they receive a percentage of all of the collected assets that are paid to your creditors. They’ll make:

  • 25% of the first $5,000 they collect and disburse to your creditors
  • 10% of the next $45,000
  • 5% of the $950,000 after that, and
  • 3% of any assets collected and disbursed that total over $1,000,000

Costs

If your bankruptcy trustee incurs costs relating to your case, they can request reimbursement for those costs via the NJ court system. You will be notified if this happens, but you will not pay them directly. They will be reimbursed from any money that is freed up in your estate, but for this to happen, it must be approved by the court first.

Financial windfalls

After you file for chapter 7 bankruptcy, let’s assume that you come into some money. This could be due to an inheritance, lawsuit or repayment of a personal debt, etc. You may wonder if you’ll be able to keep this financial windfall or if your trustee will have access to it first in order to pay off your debts.

When you filed for bankruptcy, you essentially handed over your estate (all of your assets and debts) to the trustee. It is the trustee’s duty to lawfully pay back as much of your debt as possible. Therefore, any financial settlements or inheritance monies received while your bankruptcy case is active must be paid to the trustee. There are exemptions, of course, and you should always check with your bankruptcy attorney to ensure that you have the correct and up-to-date information.

If you are interested in reading more about the ‘windfall provision’ section of bankruptcy code 541, you can do so here. Section 541 of the bankruptcy code will also help you can find out exactly which property and assets will be included in your bankruptcy estate.

As always, remember that even if you are entitled to receive a financial windfall during your chapter 7 bankruptcy case, you will almost certainly never receive it in full. This is because once you have filed for chapter 7 in New Jersey, anything outside of the income you earn at your job will be subject to disbursement to your creditors, your trustee’s commission, and your attorney’s fees.

Have a specific question about a NJ chapter 7 bankruptcy case? Call or write us today! We are happy to consult for one half hour with a new client free of charge.

 

 

Image: “bling bling” by Frankie Leon – licensed under CC by 2.0

 

Did I Spend Too Much to File for Bankruptcy?

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Like so many Americans, you’re realizing that you overdid it yet again this Christmas season. “Over-gifting” has become commonplace, and leaves us feeling like we have to outdo ourselves year after year after year. Common lines of thinking include:

“I bought three gifts for each of my nephews but only two for my niece. She needs another gift!”

“Last year, the pile under the tree was so impressive. I want to do that again so my kids aren’t let down.”

If you’ve caved in to the pressure of over-gifting, you’re not alone. Millions of Americans spend more money than they actually have around Christmastime, charging hefty sums to their credit cards. For some, paying off their excessive December expenditures in the new year will be doable.

However, if you were already struggling to make ends meet before this year’s holiday season rolled around, you had an error in judgement if you decided to go ahead and over-gift anyway. The Veitengruber Law mantra for all of our beloved clients is: “Do not spend more money than you have.” Keeping up with the Joneses is so….expensive.

Can I file for bankruptcy? I can’t possibly pay back what I charged to my credit cards this season!

December is often the tipping point for debtors. Once January blows in and those credit card bills materialize, panic emerges. Looking back and forth between your bank account and your credit card bill(s), you realize that you can’t even pay your new monthly minimum payments. THAT is a scary moment, and it is completely understandable that you’re now reaching out for help.

Here’s the deal. Bankruptcy laws have been put into place to prevent debtors from racking up a ton of credit card debt that they actually have no intention of paying. Therefore, if you’ve charged more than $500* on a single credit card within the past 90 days, a bankruptcy judge is going to assume that you’re trying to pull a fast one. Any large sums charged recently (within the 3 months leading up to your filing date) are likely to be considered nondischargeable. That means you can’t wipe them out in bankruptcy, and you will need to pay them back in full.

Even if you never seriously thought about filing for bankruptcy until after you finished your holiday shopping, the bankruptcy court has no way of reading your mind, so they have to make presumptions in order to prevent bankruptcy fraud.

If I charged too much and can’t file for bankruptcy, what can I do?

The best course of action is to wait to file for bankruptcy until the presumption period (ask your attorney how the presumption period applies to your unique case and debt amount)* passes. If you charged an excessively large amount to any one credit card, it’s possible that the credit card company may still object even beyond the presumption period, but the chances are much lower that they will do so.

If you consulted with a bankruptcy attorney prior to your shopping spree, the court will take that as a sign that you intended to file for bankruptcy before you made the charges. Therefore, it’s in your best interest to wait until the presumption period ends to consult with a bankruptcy attorney and attempt to make at least some kind of payment(s) toward the debt. Taking these steps will lower the chances that your credit card debt will be deemed fraudulent and nondischargeable.

Image credit: Alberto Cerriteño

 

What are Creditors Entitled to After my Bankruptcy Discharge?

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You received your bankruptcy discharge – congratulations on a fresh financial start! Ridding yourself of the debts that were weighing you down can be extremely liberating and is cause for a gigantic sigh of relief.

After your debts are discharged,  there are still certain protocols to follow so that you don’t make an expensive mistake. These rules were created to prevent bankruptcy fraud. For example, a debtor cannot give someone a large sum of money that they will then retrieve after the case is over. The reason for this would be to hide money from the trustee so that it cannot be used to pay creditors. That is a blatant example of bankruptcy fraud, and any debtor who attempts to outsmart the bankruptcy court in this manner has little chance of “getting away with it.” Punishment for bankruptcy fraud is harsh.

There are certainly situations that arise naturally, are totally unplanned, and involve a (former) debtor legally coming into money after their bankruptcy has been discharged. In this case, there are some time limits set to further prevent foul play:

  • Inheritance – If someone close to you passes away within 180 days of the date on your bankruptcy petition, you are obligated to alert the bankruptcy court and that money will then go to your creditors. This rule was instated to prevent people from filing for bankruptcy when they knew someone close to them was on their death bed. By filing for bankruptcy before their death, the inheritance money would be protected and the debtor would have essentially scammed the system. Creepy and illegal.
  • Insurance proceeds – The same rules apply to life insurance proceeds that you become entitled to within 180 days of filing for bankruptcy. It is imperative that you keep careful track of the specific dates of important events surrounding your case. The important date in this case is when your family member or loved one passed away and you became entitled to any life insurance proceeds. If the date of death is within 180 days of the date that you filed for bankruptcy, the life insurance money will go to paying off your debts.
  • Lawsuit settlements – All of your legal claims and lawsuits pending must be listed in your bankruptcy paperwork. If you receive a payout from a lawsuit you initiated before you filed for bankruptcy, that money will generally become part of your bankruptcy estate and will go towards paying your creditors. In New Jersey bankruptcy cases, you can choose to follow either NJ or federal exemption guidelines. NJ exemptions allow you to keep $1000 of any money received via lawsuit. Federal exemptions regarding lawsuit settlements during bankruptcy can be found here.
  • Divorce settlements – While child and marital support obligations will not be affected by a bankruptcy (filed by either spouse), part or all of the marital property settlement, if established within the 180 days following the initial bankruptcy petition, may be liquidated and used to pay your (or your spouse’s) creditors. Your divorce lawyer should discuss the specifics of this with your bankruptcy attorney to ensure that you and your ex-spouse are able to keep as much of your marital assets as possible.

Always consult with your bankruptcy lawyer if you have any questions about the rules following your bankruptcy discharge to ensure that you make wise decisions that won’t end up costing you a significant amount of money.

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Asset Protection in NJ: How We Can Help

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You may find yourself wondering, “What exactly is an asset and why does it need to be protected?” As always, we like to start with the basics when explaining a legal concept or idea so that all of our readers and clients accurately understand the topic at hand.

Assets are anything that you own that has a monetary value now and especially in the future. Typically, assets increase in value with time, and most people invest in (buy) assets expecting that they will be a form of income in the years to come.

Some examples of common tangible assets include: cash, inventory (related to your business), real estate property (buildings, houses or land), vehicles (business, personal and collectible), and equipment (technology, software, machinery, office devices).

Assets that are intangible can be just as valuable as the concrete assets mentioned above. Some intangible assets include: patents, trademarks, royalty agreements, copyrights, licenses, brand names, domains, permits, contracts and various types of investments (bonds, money markets, commercial, stock in other companies).

There are a number of assets not covered here, but for the most part, these are the kinds of assets that most of our clients are interested in protecting. Failure to adequately protect your assets will undoubtedly lead to a very unpleasant financial struggle in your future.

It can often be difficult to look far enough into the future to be able to effectively strategize regarding your valuable assets. The rising popularity of the practice of “mindfulness” encourages us to live in the moment. Terms like “YOLO” (You Only Live Once) are tossed around and used as excuses for poor money decisions.

Without a doubt, being present in all of the moments of your life is something to strive for, but it doesn’t mean you have to empty your bank account on a whim or cash in all of your investments to take an extravagant trip to Fiji.

Finding a comfortable balance between living mindfully, spending wisely and protecting assets for your future is the option that will allow you to fully enjoy life today and tomorrow as well as many years in the future.

When we talk about “asset protection” or “asset management,” we’re referring to ensuring that your investments (both tangible and intangible) won’t be lost as the years roll by. As you enter your later years and begin to look toward retirement, the planning and asset management you do now will allow you to continue providing for yourself and your family.

Foreclosure and bankruptcy are real issues faced by many seniors today. The bottom line is that we can help you avoid these pitfalls by creating an estate plan that incorporates unique asset protection strategies tailored specifically for your life and your goals.

We help our clients feel confident about their futures, and we do it because we care. Veitengruber Law provides reliable asset protection in New Jersey – both in our Wall and Cherry Hill offices and by appointment in Bordentown. As always, we do not charge a fee for initial consultations.

Get informed about your future by working with the legal team that will treat you like family from the minute we meet!

Image credit: Damian Morys

 

Chapter 7 Bankruptcy: The Schedule I Form

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Being granted a discharge of all (or even most) of your debts is a huge help for those who have fallen too deep into debt to get out on their own. Whether due to financial missteps, unforeseen medical bills or a significant life event (divorce, disability, etc) – getting in over your head does happen, and it doesn’t mean you’re a bad person. In fact, the simple act of reading this post means that you’re ready to climb back out of debt and start fresh.

With all of that being said, filing for bankruptcy is not a simple process, nor is it one that you should ever attempt to go alone. Regardless of your opinion of your ability to file for bankruptcy on your own, doing so is not advisable. It is surprisingly easy to make substantial mistakes on bankruptcy paperwork. This is due to the fact that the required forms, documentation, petitions, schedules, summaries and declarations are quite numerous and detailed.

One of the most important bankruptcy documents in both chapter 7 and chapter 13 bankruptcies is the Schedule I form. Schedule I is where you will list all of your income. You must include income from any and all sources, as well as your spouse’s income (if applicable).

Many people make critical errors when filling out Schedule I, which leads to dismissal of their bankruptcy case. This is only one of many reasons why you absolutely need to work with a New Jersey bankruptcy attorney if you plan to file for chapter 7 or chapter 13.

Although it may seem obvious, lying on any of your bankruptcy paperwork is strictly prohibited and may constitute bankruptcy fraud, which is a punishable crime. A public example of this playing out is Teresa and Joe Giudice, a married couple from NJ who were convicted of bankruptcy fraud and spent time in prison. Their crime? Falsifying documents.

Your NJ bankruptcy attorney will ensure that all of your paperwork is accurate, including the Schedule I form. You must be up front with your attorney when it comes to providing all sources of income. Do not attempt to cover up or hide any form of income from your attorney.

One of the very first documents you’ll file related to your bankruptcy is form 122A-1, the first in a series of 3 forms that will determine if you qualify to file for bankruptcy based on your income from the most recent 6 months. Sometimes confused with Schedule I, Form 122A-1 is filed first and is the initial portion of the Means Test. If your income is determined to fall below the state median income, you will qualify to file for chapter 7. If your income is above the state median income, you’ll move on to form 122A-1Supp and 122A-2 to look more closely at your funds and expenses in order to determine if you qualify for chapter 13.

If you’re approved to file for either chapter 7 or chapter 13 bankruptcy, your next step will be to sit down with your NJ bankruptcy lawyer to fill out the Schedule I form, where you will officially declare all of your current income. It’s likely that the numbers on your Schedule I form will differ slightly from the figures on form 122A-1 for the Means Test, because Schedule I asks for your current income.

Remember: you must include all forms of income on Schedule I, even sources of income you think “no one would ever know about” and your spouse’s income.

Your bankruptcy attorney will be able to assist you in filling out Schedule 1, along with all other paperwork throughout your bankruptcy case. For more information about filing for bankruptcy in New Jersey, visit our bankruptcy blog home page and search for answers to your specific questions.

Image credit: B. DeBrincat

Why did the Trustee Object to My Bankruptcy Discharge?

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At the time that your bankruptcy case is officially filed with the court, a trustee will be assigned to oversee the details of your case. The trustee is an impartial third party who will be selected by the court system. Your trustee is not working against you; however, he is not working for you, either. The job of the trustee is to ensure that your bankruptcy case proceeds smoothly and lawfully.

Trustees are typically attorneys themselves, but they will not be involved in your legal representation during your bankruptcy case. Chapter 7 trustees are paid a small administration fee as well as a percentage of the assets they are able to liquidate and disburse to your creditors.

In a chapter 13 bankruptcy, trustees are paid through your reorganized debt repayment plan at the end of your case. There are limits on how much money a chapter 13 trustee can receive per bankruptcy case.

In both chapter 7 and chapter 13 cases, it is the responsibility of the trustee to verify the validity of any and all financial information that you provide in your bankruptcy paperwork. The trustee checks all of your calculations and will certify their  accuracy to the bankruptcy court.

Chapter 7 trustees are also entrusted with holding the 341 hearing – the Meeting of the Creditors, which takes place approximately 30 days after your case was filed in court. During this hearing, the trustee may ask you some questions regarding any of the data included in your documents. You will be under oath and must answer truthfully. If there is any falsified data in your bankruptcy documentation or if you are determined to have lied under oath – your bankruptcy petition will most likely be thrown out due to charges of attempted bankruptcy fraud.

If you successfully make it past the Meeting of the Creditors and your trustee finds that all of your paperwork and testimony is accurate, it then becomes the trustee’s job to examine all of your assets to determine what can be sold in order to pay off as much of your debt as possible. Don’t panic: the trustee isn’t going to come in and sell everything you own, because that would defeat the purpose of filing for bankruptcy. The goal is to leave you in better financial condition than before you filed.

(New Jersey chapter 7 bankruptcy exemptions can be found here.)

Although your trustee most definitely isn’t working against you, it is within his job description to make sure you are being forthcoming in your bankruptcy. As long as you have nothing to hide, you can rest easy.

Your bankruptcy trustee also has the power to ultimately object to your discharge (elimination of your debts). A trustee may object if you:

  • Respond dishonestly to any information that is requested during your bankruptcy case or misrepresent any of your financial information in your bankruptcy documents
  • Hide, move (or attempt to hide) any of your assets or property with fraudulent intent
  • Repay some creditors above others (preferential payments)
  • Withhold evidence of pertinent financial information
  • Disobey a court order
  • In any other way attempt to defraud the bankruptcy court or your creditors

In the event that your trustee determines that you should not be granted a bankruptcy discharge, he will make his objection known via a lawsuit known as an adversary proceeding.

The trustee does not have the final say as to whether or not your discharge will be granted. You will be able to defend yourself against the trustee’s claims, and ultimately, the court will determine if your debts should be discharged or not.

If you are currently in the midst of a pro se bankruptcy case and your trustee has made an objection, be sure to connect with a bankruptcy attorney who has dealt with adversary proceedings in the past.

 

Image credit: Daniel O’Neil

Can Gambling Debts be Discharged in Bankruptcy?

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Debts come in all shapes and sizes. Because of our close proximity to Atlantic City, some of our clients have acquired a significant amount of gambling debts. Often, people with a lot of gambling debt feel ashamed and embarrassed, which prevents them from asking for help until their debts have mounted to unbelievable heights.

Like any addiction, gambling has the power to destroy lives and families. The typical indebted gambler is already in a financial bind before their gambling even begins. Hoping to catch up on late utility bills or a missed mortgage payment, gamblers put all of their hope into winning big at the casinos.

Unfortunately, statistics are not in any gambler’s favor. This means that there is a very low chance of winning big enough to pay down all of the money they already owe. However, even unsuccessful gamblers may find it difficult to quit because they believe that ‘next time will be their big win.’ They’ll take out loans with eye-popping interest rates (like pay day loans and credit card advances) just to get one more shot at winning.

As you can imagine, gambling is not a reliable way to make money! However, it is also not illegal in New Jersey, so it can be quite difficult to convince a gambling addict to change his/her behavior before they are up to their eyeballs in gambling debt.

Although it’s legal in New Jersey, gambling isn’t generally considered a smart way to earn a living. Granted, there are a small number of people who have the discipline to make money as professional gamblers, but there are far more people who are simply addicted to gambling, and these people end up losing a ton of money quickly.

Turning Your Life Around: Cleaning Up Your Gambling Debts

For those who truly are addicted, there are recovery centers that specifically treat gambling addictions. Getting help for the addiction is the most crucial step for any gambling addict. Just like a drug or alcohol addiction, the behavior isn’t likely to stop on its own, and therapy can help stop or at least lessen the urge to bet more money.

Getting treatment won’t erase the debts incurred because of the addiction, however. Many gambling addicts feel so much shame at the financial ruin they’ve caused that they don’t know where to go or how to manage the financial side of their actions.

It’s a falsely held belief that gambling debts cannot be discharged via chapter 7 bankruptcy. Why should debts incurred while gambling be treated any differently than debts acquired via extravagant shopping sprees charged to a credit card?

The only hurdle that may be experienced when attempting to discharge gambling debts in a bankruptcy is if a creditor can prove that the gambler obtained loans under false pretenses. This is extremely difficult to prove, and most likely will not hinder the gambler’s right to a bankruptcy discharge of both gambling and other debts.

It is important to note that the bankruptcy court will look suspiciously at a case that is filed immediately after acquiring a ton of gambling debt because it will appear that the debtor never had any intention of paying back the money borrowed. It is best to put several months between your last gambling binge and the filing date of your bankruptcy case.

 

Image credit: Alan Cleaver

Fines, Tickets & Bail Bonds: Can They be Discharged in Bankruptcy?

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If you are filing for bankruptcy, it’s important that you include all of your debt on your bankruptcy pleading. To omit any of your debts is considered bankruptcy fraud and can cause your entire case to be thrown out of court. Maybe you’d rather not include some debts on your bankruptcy paperwork because you’re embarrassed by them. Unfortunately, the bankruptcy court doesn’t take your feelings into consideration, and they want to know about all of your debts. Every. Single. One.

Regardless of whether you’re talking about criminal fines, tickets, penalties or bail bonds – they all must be included in your bankruptcy pleading. However, even though you must list all of your debts, there is no guarantee that they’ll all be 100% discharged (forgiven).

When it comes to government fines and penalties, it matters less what they’re called and more what their purpose was. Any fine or ticket that had the purpose of generating money for the government (even due to misconduct on your part) can be discharged in a chapter 7 bankruptcy.

On the other hand, if you participated in a criminal act and were fined as a result, you’ll likely be unable to discharge it. Any fine or ticket that has the goal of punishing law-breakers for their actions will not be dischargeable in a bankruptcy.

Many times it can be difficult to determine if your government fine, penalty or ticket will be able to be wiped out in bankruptcy. It can be tough to discern whether your fine was intended to compensate the government or punish you for the crime.

Some of the most common fines/penalties include:

Bridge tolls – Although sometimes controversial, most bankruptcy judges agree that unpaid bridge and road toll fines are dischargeable due to the fact that their main purpose is payment to the government for road or bridge use.

Bounced check fees – Writing bad checks is a fraudulent act; therefore, you will not be able to erase them in a bankruptcy.

Fees for violation of building codes – Violating building codes is considered to be a criminal act; therefore, these fees aren’t dischargeable either.

Tax penalties – This type of penalty has its own set of guidelines when it comes to bankruptcy law.

Unpaid bail bonds – Since bankruptcy Code 523 states that bail bonds are not monies owed to a governmental authority, they are dischargeable as long as there wasn’t any fraud involved in their acquisition.

Remember, having your debts relieved via bankruptcy is not a basic right. In order to be granted a discharge, there are many rules and regulations you need to follow throughout the entire bankruptcy process. Failing to list all of your creditors is only one of many reasons your bankruptcy petition can be denied. Some other actions to avoid during the entirety of your case include:

Failing to provide any and all documents required

Hiding property or assets with intent to commit fraud

Hiding or destroying financial records

Lying about anything relating to your case, and

Disregarding a court order

To learn more about the New Jersey bankruptcy process and what it takes to file, please read our bankruptcy blog. We will consult with you free of charge, so call our office or email us to set up an appointment. You have nothing to lose but your debt!

 

Image credit: The Digitel

Can I Change my Mind After I File for Bankruptcy?

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It doesn’t happen often, but there are times when debtors file for bankruptcy and then want to back out of it at the last minute. This usually occurs when the most immediate and frightening financial threat has been resolved – whether it was the fear of foreclosure or a particularly aggressive debt collector. When people file for bankruptcy in order to put a stop to a particular crisis – once that crisis has been averted, sometimes bankruptcy doesn’t seem so desirable anymore.

The thing about filing for bankruptcy is that it is not something you should ever enter into casually or without seriously consulting with an experienced bankruptcy attorney first. Your decision to file for bankruptcy will affect many different people/creditors – not to mention: YOU! Even if you are able to have your bankruptcy case dismissed, your credit report will show that you have at one point at least filed for bankruptcy. This will not look good to future lenders, banks and potentially even employers.

Let’s say that you (hopefully with the help of your well-trained and seasoned NJ bankruptcy lawyer) have decided to file for Chapter 13 bankruptcy. This means that you’ve decided that you will be able to repay your debts as long as they are reorganized so that they are in line with your financial situation. In this type of bankruptcy proceeding, the filer can make a formal request to the bankruptcy judge for voluntary dismissal of their case, should they decide not to go forward with it. The judge is the only person or entity who is able to dismiss your Chapter 13 bankruptcy.

A Chapter 7 bankruptcy is even harder to have dismissed. As the filer, you cannot request a voluntary dismissal. You and your attorney can file a Motion to Dismiss your case, which will be reviewed carefully by the bankruptcy court and your trustee. If it is found that your wish to cancel your bankruptcy is due to fraudulent reasons, you will not only be forced to stay in bankruptcy court, but you may also be held in contempt.

Keep in mind that if your financial situation has reached the point where you have taken the steps to actually file for bankruptcy, there is a very real possibility that you will experience similar problems again in the future. Remember that the dismissal of a bankruptcy case (even if voluntary) does not mean there will be no evidence of the bankruptcy. It will remain listed on your credit report for all future potential lenders and employers to see, and will cause your credit score to drop.

We are big proponents of using bankruptcy to get your life back on track. If you’ve gone so far as to find a bankruptcy attorney in NJ and have filed the bankruptcy paperwork, we urge you to reconsider turning back now. Take a good hard look at what choices got you to this point in the first place. The bankruptcy will be noted on your credit report either way, and going through with the bankruptcy will give you a (likely) much needed fresh start.

 

Image credit: Raquel Baranow