Filing for Bankruptcy: Should I Wait Until After the Holidays?

nj bankruptcy

The holidays can be a stressful time of year for anyone, but it is especially stressful for those struggling financially. If your debts are too much to bear and you are considering bankruptcy, it can be hard to decide when is the best time to file. Should you file before the holidays to eliminate your anxieties, or is it the best plan to focus on enjoying the holiday season and figure out your finances in the new year? Every bankruptcy case is unique and the answer to this question will depend on the specifics of your situation.

Can Holiday Debt be Discharged?

In bankruptcy law, all the debt accumulated in the three months before and after Christmas is generally considered non-dischargeable debt. In other words, any money you spend on gifts, decorations, holiday parties, or travel during the holiday season is your responsibility to pay and cannot be eliminated through bankruptcy. With this kind of debt there are two options. The first option is to reaffirm this debt, which would allow you to make monthly payments until the debt is paid off. The second option is to redeem the debt, or pay the full balance. The exception to this rule is if the cause of the debt was an absolute necessity. In the case of necessary debt, even if it is accrued during the period of time surrounding the holidays, can be discharged during bankruptcy.

When trying to determine if you should file before or after the holidays, the best way to decide what to do is to take the means test. The means test is a set of steps you can use to determine if you should file for Chapter 7 or Chapter 13. Chapter 7 bankruptcy allows you to discharge many or all of your debts, while Chapter 13 bankruptcy, sets up a manageable monthly debt re-payment plan over a period of 3 to 5 years. One of the important areas of the means test is how much income you received in the six months prior to filing. If your income is above a certain threshold, you will not be able to file for Chapter 7 bankruptcy and will therefore be held responsible for more of your debts.

Chapter 7 

You will need to know precisely how much income you receive in the six months prior to filing – this include all incoming funds like child support, lottery winnings, inheritance money, survivor’s benefits and holiday bonuses. If you know you will be receiving a holiday bonus, it may be a good idea to file before you receive this extra income. If you file before you receive the bonus, it can raise your income and make you ineligible for Chapter 7 bankruptcy.

Your income taxes can also impact your filing status. In Chapter 7 bankruptcy, debtors typically have what is known as a “no asset” bankruptcy. This means that what you own is either exempt or worth too little to be sold off to help pay for your debts. Under no asset Chapter 7, if you file after January 1, the IRS will not be paid from the bankruptcy proceedings. This does not mean debt owed to the IRS is forgiven, but instead that you will have to agree to a payment plan to pay off any income tax owed.

If you do own any valuable assets when you file for Chapter 7 bankruptcy, any non-exempt item that meets the valuation criteria will be liquidated to pay your creditors. The IRS, as a priority debt, will receive payment before your other creditors.

Chapter 13

Chapter 13 bankruptcy presents three significant benefits to filing for bankruptcy after your income taxes are due.

  1. You will be protected from the IRS while you are repaying your debts.
  2. Because there is a decent amount of flexibility for repayment, you can choose to pay debts in order of priority.
  3. No interest or penalties will accrue during your bankruptcy case. If you want to take advantage of these benefits under Chapter 13 bankruptcy, you should wait to file in the New Year.

The holidays are a time to enjoy family, friends, and cherished traditions. If financial stress is keeping you from enjoying the holiday season, don’t suffer alone. Veitengruber Law can help you determine when and how to file for bankruptcy. Our legal team is experienced in bankruptcy law and debt management. We can answer any of your questions and help you decide which option is best for your specific situation, and we will be by your side throughout your entire bankruptcy case.

Secured vs Unsecured Debt: Understanding the NJ Bankruptcy Petition

New Jersey bankruptcy

At the beginning of every bankruptcy case, the person filing will need to complete official bankruptcy forms. The cover document, known as the petition, will include identifying information like your name, address, and the chapter of bankruptcy you are filing. The petition will also include information about your income, your creditor claims (or debts), and assets in specific forms called schedules. Classifying creditor claims can be complicated. All of your debts will need to be listed as either a secured or unsecured claim. It’s important that you properly label each debt. Here, we look at how to list creditor claims in your bankruptcy paperwork.

Secured Claims

In order to have a secured claim in bankruptcy, you must have two things: a debt that you owe and a lien or security interest on property that you own. Examples of secured debt are a mortgage, a car payment, or another collateralized debt. If you fall behind on payments or are unable to keep up with the terms of your contract, the lien can allow the lender to recover the property through foreclosure or repossession. The lender will then sell the property and use the proceeds to pay down your account balance. Secured claims are typically voluntary, but a creditor could obtain an involuntary lien against your property. A creditor could secure an involuntary lien against your property through a lawsuit, whereas if you fall behind on your taxes, the IRS automatically has the right to a tax lien against your property.

During bankruptcy proceedings, a creditor with a secured claim has an advantage. A bankruptcy charge will remove your obligation to pay a debt, but it will not remove a lien on your property. Because of this, a creditor can still opt to take back the property if the loan does not get paid. Therefore, if you file for bankruptcy but you don’t want to lose your property, continue making payments to the lender until the debt is paid off. It is possible to get rid of specific types of property liens in bankruptcy. One option is to get a legal judgement on the grounds that a lien negatively impacts your bankruptcy exemptions. Another option is to wipe out an unsecured junior lien through Chapter 13 bankruptcy.

Things can get complicated, though, if there is significant equity in the property in question, as you will be able to protect a certain amount of equity in bankruptcy. Under Chapter 7 bankruptcy, the trustee will likely try to sell the property. However, the trustee has to make enough in the sale to pay off the loan, return any exempt funds to you, and pay off creditors. The trustee will likely not sell the property if there is not enough equity to pay something worthwhile to creditors. On the other hand, a Chapter 13 bankruptcy will allow you to keep any property with significant equity, as long as you can afford high monthly payments towards the nonexempt equity in the plan.

Unsecured and Priority Claims

With unsecured claims, there is no lien involved in the debt owed. It is, however, important to know if the claim is priority unsecured or nonpriority unsecured. Priority unsecured claims are not dischargeable and will take precedence in repayment plans over nonpriority debts. Examples of priority claims are alimony, child support, tax obligations, and debts from personal injury or drunk driving lawsuits. Priority debts cannot be discharged in a Chapter 7 bankruptcy and you will still be responsible for paying back the full balance. In Chapter 13 bankruptcy, you will have three to five years to pay back the balance in full.

Nonpriority unsecured claims are dischargeable with the exception of student loans. Before these debts can be paid with bankruptcy funds, all priority debts must be taken care of first. Examples of nonpriority unsecured claims are credit card debt, medical bills, and personal loans.

Filing for bankruptcy includes a lot of detailed, complex paperwork. Determining how to categorize your debts can be confusing for the average consumer. Veitengruber Law offers a total approach to debt relief. Our experienced legal team knows how to expertly demystify the bankruptcy process so that our clients have a clear understanding of what is happening – every step of the way.

How to Buy a Home After NJ Bankruptcy

NJ bankruptcy

Buying a home is at the core of the American dream. The advantages are clear: tax incentives, stability, investment, and being independent of a landlord. Since the housing market crash of 2008, banks have become much more scrutinous of potential homebuyers’ credit history. Do you have to give up on your dream of home ownership if you’ve had a NJ bankruptcy discharge? You may be surprised to learn that owning a home is a real possibility.

In chapter seven bankruptcies, an individual’s assets are liquidated and used to repay their debts, with any remaining debts are discharged, or cleared. This will give you a clean financial slate to start over with. In a chapter thirteen bankruptcy, you can keep some assets but you will have to abide by a payment schedule for repaying your debts over three to five years. After the time period is over, your remaining debts are often dismissed. There are several different types of home loans that have different requirements for post-bankruptcy discharge.

New Jersey Housing and Mortgage Finance Agency (NJHMFA) Down Payment Assistance (DPA)

If you are a potential first-time home buyer you may want to look into the NJHMFA Down Payment Assistance program. It provides $10,000 towards a down payment and/or closing costs. The DPA is considered a second loan with no interest or payments. Once a buyer has lived in their home for five years, the loan is considered paid. There are several qualifications that must be met in order to participate in the program:

  • You must wait 24 months after chapter seven or chapter thirteen bankruptcy discharge.
  • You need to have a FICO credit score of 620 or above and meet debt-to-income requirements.
  • Only homes purchased in New Jersey are eligible.
  • The DPA must be paired with an NJHMFA first mortgage loan which is a 30-year fixed interest, government-insured loan through participating lenders.
  • The property must fall below purchase price limits.
  • The borrower’s income must fall below limits of 140% of median area income.

Qualifying for $10,000 interest-free is a huge incentive to acquiring an NJHMFA loan. After your bankruptcy discharge you can work towards meeting these requirements and getting your credit score above 620.

Federal Housing Authority (FHA) Loan

If you’re not a first-time home buyer or don’t otherwise qualify for the NJHMFA loan, an FHA loan is your next best bet. An FHA loan is a government-insured loan which has less requirements than conventional loans.

In regards to chapter seven filings, you’ll need to wait two years after the date of discharge (with a notable exception). If you can prove that you filed for bankruptcy due to no fault of your own, you can apply for a twelve-month exception. These circumstances may include illness, divorce, or theft. You will also need to demonstrate responsible financial behaviors in the months following the discharge.

Chapter thirteen filings require ongoing payments for three to five years so if you wish to purchase a home during that time, you will need to involve the court in your loan application. This is where a skilled bankruptcy attorney like George Veitengruber can assist you and present your purchase in the best possible light. First, you must make twelve months of payments to creditors. You will need to show the court that the reason you filed for bankruptcy was an anomaly.

Conventional Loans

Conventional home loans have tougher requirements for post-bankruptcy home buyers. Both chapter seven and chapter thirteen bankruptcies require a waiting period of 48 months after discharge to apply. In the exception of bankruptcy that was beyond your control, the waiting period can be reduced to 24 months. A conventional loan requires a twenty percent down payment on a property. Down payments of less than twenty percent are subject to mortgage insurance, which can be removed after the 20% has been paid. Conventional loans also traditionally require a higher credit score than an FHA loan.

The good news is that bankruptcy does NOT mean the end of your financial independence. You can rewrite your story and craft your new future. Since each of these loans requires a waiting period, take that time to plan carefully rebuild your credit so that you can embark on your new home purchase with a solid financial foundation.

Will a New Jersey Bankruptcy Resolve My Plastic Surgery Debt?

new jersey bankruptcy

Medical debt is one of the leading causes of excess debt in the US. Even when covered under medical insurance, many NJ residents find themselves facing bankruptcy as they struggle under the pressure of medical debts. Bankruptcy can seem intimidating, but it can be a great way to get a fresh start if you find yourself struggling to pay back medical debts. Whether you choose to fully discharge these debts under Chapter 7 bankruptcy or enter into a more manageable repayment plan with a Chapter 13 New Jersey bankruptcy reorganization, filing for bankruptcy can set you on the path to financial health.


Bankruptcy is meant to allow people to move forward from previous financial mistakes or setbacks.


What about plastic surgery debt?

While it is true that plastic surgery is a medical procedure, it is elective and that choice makes the difference when filing for bankruptcy. Plastic surgery is considered a luxury debt. Luxury debts include any goods or services you purchase with a credit card that are not considered necessary to the maintenance of you or your dependents. Also in this category are jewelry, home décor, beauty products/services, vacations, electronic devices, and even alcohol. It is important to include any luxury debt when you file for bankruptcy, but that doesn’t mean these debts will be discharged.

The timing of the purchase of these products and services is what is crucial to whether or not they will be discharged in your bankruptcy case. In NJ, if the debt was accrued within the 60 days immediately before you file for bankruptcy, it is within the right of the credit card company to refute your claim. The credit card company could argue that you made the purchase using credit you had no intention of paying back. This is called constructive fraud, or fraud that occurs when a debtor’s actions imply fraud even if their intentions weren’t to commit fraud. Any luxury purchases totaling $1,150 or more made in the 60 days just prior to your bankruptcy is filed could be scrutinized as constructive fraud.


There are a plethora of myths and misconceptions surrounding bankruptcy proceedings. Turn to an expert when you have questions.


If either your credit card company or plastic surgeon decide to sue for nondischargeability of the debt, you will become the defendant in a lawsuit. It will be your responsibility to prove to the court that the purchase was necessary. You will also have a chance to defend yourself against the suit if you can prove you had the intention to repay the debt and show that you made an effort to do so before filing for bankruptcy. If the court decides this purchase was unnecessary—or that it was considered fraudulent—your plastic surgery debt will be deemed non-dischargeable and you will still be responsible for paying off this debt.

Luckily, this only applies to luxury debt accrued within the 60 days before filing for bankruptcy. It is very likely that debt from plastic surgery accumulated before the preceding 60 days will be included as dischargeable debt in the final decision for your bankruptcy case. Whether the plastic surgery debt was from elective surgical or non-surgical medical procedures should not make a difference in making it eligible to be discharged under either Chapter 7 or Chapter 13 bankruptcy. Bankruptcy is meant to allow people to move forward from previous financial mistakes or setbacks, and plastic surgery debt is no exception.

There can be a lot of myths and misconceptions surrounding bankruptcy proceedings. Veitengruber Law is experienced in providing full-service debt relief solutions. We understand the stress caused by seemingly insurmountable debt and we work hard to offer solutions to even the most difficult financial problems. We know that bankruptcy is not the end of the line, but a chance for our clients to get back on their feet and on the road to financial health. We offer customized bankruptcy analysis based on your specific goals and financial needs. Call us today at 732-852-7295 for your free, no-obligation consultation with our experienced team of bankruptcy experts.