Foreclosureville, NJ

CNN recently ran a story on the astronomical foreclosure rates in Plainfield, NJ.  Nearly 10% of the homes in this middle class town is in the process of being foreclosed.  This is nearly 3 times the national average.  The unfortunate consequences include lower property values, business slowdowns, increased crime and population defections.  Filing for Chapter 13 bankruptcy can stop a foreclosure and enable you to make up missed payments in a court approved Plan.  This makes sense if you want to keep the home and have enough equity in the home.  If the home is underwater, meaning the mortgage balance is higher than the home’s value, then filing for Chapter 7 bankruptcy can protect the homeowner from the bank.  New Jersey is a “recourse state,” meaning that the bank may sue the homeowner for the difference between the mortgage balance and the foreclosure sale price.

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Recession Still in Full Effect

Different news agencies and governmental entities have been telling the public that the recession is slowly ending, but is it really?  Locally in New Jersey, the grips of the recession are still in full effect.  The multiple closings of anchor stores such as Pathmark and A&P supermarkets have devastated other small businesses in their respective shopping centers.  The small businesses often rely on the volume of customers that these anchor stores bring.  The sudden loss ultimately leads to decreased revenue and income.  Many small business owners who never considered bankruptcy are now faced with the decision to file because bills that were previously dutifully paid now have balances piling up with exorbitant interest rates.  Bankruptcy is one option for qualified individuals to combat the ravages of the recession.

Celebrity Chef Declares Bankruptcy

Although a vast majority of people that file for personal bankruptcy are regular people who have fallen on hard times, even well-known celebrities use bankruptcy as a legal tool to get control of their finances.  Recently, Chef Geoffrey Zakarian filed for bankruptcy in attempt to get rid of legal claims brought against him.  The Chopped celebrity chef is connected with the well known Water Club at the Borgata in Atlantic City, NJ.  Interestingly, he only listed $50,000 in assets, while having about $1 million in liabilities which includes the class action lawsuit filed against him by former restaurant workers who argue that he owes back and overtime pay.  The outcome of his filing will be known in the upcoming months.

Household Size and Bankruptcy

The size of a household is an important factor when determining whether a filer is eligible for Chapter 7 bankruptcy.  A member of the household includes family members and other dependents living under the same roof.  In New Jersey, a single filer must have a GROSS income below $59,060.  For a household of 2, the allowable gross income jumps to $70,680.  For 3, it’s $85,573.  For 4, it’s $101,106.

Gross income is income before taxes (federal, state, SS, etc.) are taken out.  People often confuse this with the “take home paycheck” amount, which is the net income.

If the gross income is higher than these amounts, then a Means Test applying expenses must be performed to see if the filer is still eligible for Chapter 7.  If the filer doesn’t pass the Means Test, then Chapter 13 bankruptcy is still an option.

Economy “Fair to Poor” Says Bankers

New Jersey bankers describe the economy in the state as “fair to poor.” Despite news that the national economy is getting better, unemployment and home foreclosure rates have not improved.  Bankruptcy filings will continue to be at steady levels or increase slightly in the state.  NJ bankers however believe that the state’s economy will improve.  On a personal level, bankruptcy is an option to immediately eliminate many debts and improve a filer’s financial outlook.  This gives the bankruptcy filer a chance to become an active participant in the economic recovery.

How Much Does Filing for Bankruptcy Cost?

There are four fees that part of each bankruptcy filing:

1) Mandatory Credit Counseling Course Fee $30-$50 (you must take this course before even filing for bankruptcy)

2) Bankruptcy Court Filing Fee $299 (Chapter 7) or $274 (Chapter 13)

3) Attorney Fees – Here is where fees differ the most according to geography and attorney – Can range from $1000-$3500 (depending on complexity and Chapter.  Chapter 7’s cost less than Chapter 13’s).  Chapter 7’s typically cost anywhere from $1000-$2000.  Chapter 13’s can cost anywhere from $2000-$3500.  However, you can also attempt to file for bankruptcy without an attorney at your own risk.

4) Mandatory Personal Finance Management Course Fee $40-$75

Overlooked Assets in a Bankruptcy Filing

Full disclosure is one of the most important themes in a bankruptcy filing.  Even if it seems unimportant, if it has any financial relation to you, it should be included in your filing.  Some examples include: forgotten bank accounts, tax refunds, marital settlements, rent security deposits, pawned property, rights as a beneficiary in a life insurance policy and legal claims that have been filed against a 3rd party.

The bankruptcy trustee will be interested in determining whether any of these are non-exempt.  Failure to disclose such assets may lead to a delay in the bankruptcy process or even a denial if it is found that such assets were purposefully hidden.