Do I Qualify for Chapter 7 bankruptcy in New Jersey?

Wednesday , 25, September 2013 Leave a comment

Since the Bankruptcy Reform package “BAPCA” was passed in 2005 we have been stuck with a bright line formula called the means test. This test compares your income from the previous 6 months with allowable expenses which are taken from an IRS tax table. The test is pass or fail. However and experienced bankruptcy attorney can help you pass the test by manipulating the timing of the receipt of your income in the previous 6 months or by knowing how to choose which deductions are applicable.

Among the expenses that debtors may deduct on the Chapter 7 means test are:

  • Food and clothing
  • Out-of-pocket health care expenses
  • Non-mortgage housing expenses
  • Mortgage or rent
  • Utilities
  • Vehicle operation or public transport
  • Vehicle ownership
  • Taxes
  • Involuntary deductions for employment, such as union dues
  • Life insurance
  • Court-ordered payments
  • Education for employment
  • Health care
  • Telecommunication cost

There are some exceptions to the means test. Meaning that what you may have thought was income really is not income for purposes of the means test.

Social Security income: Means testing does not consider social security as income. Non-Consumer Debt: If a debtor has primarily non-consumer debt, then means testing does not apply. For example someone making more than the median income with primarily business debt, still qualifies for a Chapter 7.

401k distributions: 401k withdrawals are not income for the means test. The money was income at the time it was earned not when you decide to use it. National Guard and Reservists Relief Debt Act of 2008: If you are a National Guard Member or Armed Forces Reserve, then you will be temporarily excluded from the means test for entire time you are on active duty and 540 days thereafter, provided you serve at least 90 days. If your duty is less than 90 days, you do not qualify

The number below are the Median Family Income Figures for New Jersey Effective Nov. 1, 2011 (Effective for cases filed after 1/01/11 these number as mentioned above are subject to change)
Family Size                          Amount

1                                           $61, 146

2                                          $69,697

3                                          $85,016

4                                          $103,786
Add $7,500 for each individual in excess of 4.

The New Jersey personal bankruptcy attorneys at Riviere Cresci & Singer LLC can answer any questions you may have concerning bankruptcy. If you live in New Jersey, including Beachwood, Berkeley Township, Dover Township and Lacey Township call us for a free consultation to find out how we can help you.

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