NJ Bankruptcy Lawyer: Chapter 7 and Chapter 13 Relief for New Jersey Residents
Filing for bankruptcy in New Jersey can provide protection from creditors and a structured path to eliminate or reorganize debt. A petition filed with the United States Bankruptcy Court for the District of New Jersey generally triggers an automatic stay under 11 U.S.C. § 362, stopping foreclosure and many actions to collect prepetition debts. Statutory exceptions, repeat-filing restrictions, and prior court orders can limit or prevent that protection. At Friscia & Associates LLC, our bankruptcy attorneys represent individuals and families in Chapter 7 and Chapter 13 proceedings, helping clients in Essex, Hudson, Union, Bergen, and Middlesex counties achieve a fresh financial start while protecting their homes, vehicles, and essential assets.
Chapter 7 Bankruptcy: Liquidation and Debt Discharge
Chapter 7 bankruptcy (11 U.S.C. § 701 et seq.) is designed for individuals who cannot repay their debts. In a Chapter 7 case, a court-appointed trustee reviews the debtor’s assets, liquidates any non-exempt property, and distributes the proceeds to creditors. In exchange, the debtor receives a discharge — a court order permanently eliminating personal liability on most unsecured debts, including credit cards, medical bills, personal loans, and deficiency balances from foreclosures or repossessions.
The Means Test (11 U.S.C. § 707(b)): The means test helps determine whether a Chapter 7 filing by an individual with primarily consumer debts is presumed abusive. It uses the Bankruptcy Code’s definition of current monthly income, generally based on the six full calendar months before filing with statutory exclusions. If annualized income is below the applicable New Jersey median income for the household size, the means-test presumption generally does not arise; this does not automatically establish eligibility or guarantee a discharge. Above-median debtors generally must complete an additional calculation using permitted expenses and other statutory deductions. A presumption of abuse may be rebutted in qualifying circumstances, and other eligibility, good-faith, and abuse rules remain relevant. We evaluate whether Chapter 7, Chapter 13, or another option is appropriate.
Exempt Property Under New Jersey Law: New Jersey debtors may choose between the federal exemptions under 11 U.S.C. § 522(d) and the New Jersey state exemptions. Key New Jersey exemptions include:
- Personal property: New Jersey provides a $1,000 general personal-property exemption, plus wearing apparel, under N.J.S.A. 2A:17-19. N.J.S.A. 2A:26-4 separately protects household goods and furniture up to $1,000 from attachment, subject to its conditions and purchase-debt exception.
- Wages: Ordinary judgment wage executions are subject to New Jersey limits under N.J.S.A. 2A:17-56 and applicable federal limits under 15 U.S.C. § 1673. Exceptions apply. These garnishment limits do not by themselves determine what wages or bank balances are exempt in bankruptcy.
- Retirement accounts: Qualifying retirement funds often receive substantial protection, but the result depends on the account, source of funds, applicable exemption or exclusion, and statutory exceptions. Certain IRA funds are subject to the federal limit in 11 U.S.C. § 522(n); qualifying New Jersey trusts may receive separate protection under N.J.S.A. 25:2-1.
- Life insurance: Proceeds payable to a named beneficiary other than the estate are exempt under N.J.S.A. 17B:24-6
New Jersey does not provide a general state homestead exemption, but eligible debtors may elect the federal bankruptcy exemptions. For cases filed on or after April 1, 2025, the federal residence exemption under 11 U.S.C. § 522(d)(1) is $31,575 per eligible debtor. A qualifying married couple filing jointly may protect up to $63,150 if each spouse has a sufficient ownership interest and is entitled to claim the exemption. Equity exceeding available exemptions may be at risk in Chapter 7; ownership, liens, sale costs, and exemption eligibility must be evaluated before filing. Our firm analyzes your specific asset profile to determine whether Chapter 7 is appropriate for your situation.
Debts That Cannot Be Discharged: Certain debts survive bankruptcy under 11 U.S.C. § 523, including: most student loans (absent proof of “undue hardship” under the Brunner test), child support and alimony obligations, most tax debts less than three years old, debts arising from fraud or willful injury, criminal restitution, and debts not listed in the bankruptcy schedules.
Chapter 13 Bankruptcy: Reorganization and Repayment
Chapter 13 bankruptcy (11 U.S.C. § 1301 et seq.) is designed for individuals with regular income who want to repay some or all of their debts over time while keeping their property. Chapter 13 is particularly valuable for homeowners facing foreclosure because it provides a mechanism to cure mortgage arrears while maintaining current payments.
How Chapter 13 Works: The debtor proposes a repayment plan lasting 3 to 5 years (the length depends on income relative to the state median). During the plan period, the debtor makes monthly payments to a Chapter 13 trustee, who distributes the funds to creditors according to the plan’s terms. At the end of the plan, remaining eligible unsecured debts are discharged.
Chapter 13 and Foreclosure: A Chapter 13 filing generally stops a pending foreclosure through the automatic stay, subject to statutory exceptions, repeat-filing restrictions, and prior court orders. The debtor’s plan can include a provision to cure the mortgage arrears — the total amount of missed payments, late fees, and foreclosure costs — over the 3-to-5-year plan period, while the debtor resumes making regular monthly mortgage payments directly to the lender. Under 11 U.S.C. § 1322(b)(5), the plan may “cure any default” on a long-term debt secured by the debtor’s principal residence. This is one of the most powerful tools available to homeowners facing foreclosure in New Jersey.
Eligibility: Chapter 13 is available to individuals with regular income, including qualifying self-employed individuals, but not corporations or LLCs. Under 11 U.S.C. § 109(e), the current limits require noncontingent, liquidated unsecured debts of less than $526,700 and noncontingent, liquidated secured debts of less than $1,580,125. These adjusted amounts apply to cases filed on or after April 1, 2025. Eligibility also depends on other Bankruptcy Code requirements, and the proposed repayment plan must satisfy the requirements for confirmation. Required tax returns must be filed in accordance with the Bankruptcy Code.
Priority and Unsecured Creditor Treatment: The Chapter 13 plan must pay all priority claims in full — including tax debts, domestic support obligations, and administrative expenses. Unsecured creditors must receive at least as much as they would have received in a hypothetical Chapter 7 liquidation (the “best interests” test under 11 U.S.C. § 1325(a)(4)). The debtor’s disposable income for the plan period must be committed to the plan under 11 U.S.C. § 1325(b).
The Bankruptcy Filing Process in New Jersey
Step 1: Credit Counseling. Federal law requires completion of a credit counseling course from an approved agency within 180 days before filing under 11 U.S.C. § 109(h). The course can be completed online in approximately one hour.
Step 2: Preparing and Filing the Petition. The bankruptcy petition and schedules — detailed lists of all assets, debts, income, expenses, and recent financial transactions — are filed with the U.S. Bankruptcy Court for the District of New Jersey (Newark Division or Trenton Division, depending on the debtor’s county of residence). Essex, Hudson, Union, and Bergen County cases are filed in the Newark Division. The filing fee for Chapter 7 is $338; for Chapter 13, $313.
Step 3: Automatic Stay Takes Effect. A bankruptcy filing generally triggers the automatic stay under 11 U.S.C. § 362. Actions covered by the stay must stop, but exceptions, repeat-filing restrictions, and prior court orders must be checked. An individual injured by a willful violation may recover actual damages, including costs and attorney fees, and, in appropriate circumstances, punitive damages under 11 U.S.C. § 362(k).
Step 4: Meeting of Creditors (341 Meeting). Approximately 30 to 45 days after filing, the debtor attends a Meeting of Creditors under 11 U.S.C. § 341. The bankruptcy trustee and any creditors who choose to attend may ask questions about the debtor’s financial situation and the accuracy of the filed schedules. The meeting is typically brief (5-15 minutes) and conducted by phone or video in the District of New Jersey.
Step 5: Discharge. In Chapter 7, the discharge is typically entered approximately 60 to 90 days after the 341 meeting if no objections are filed. In Chapter 13, the discharge is entered after the debtor successfully completes all plan payments over the 3-to-5-year plan period.
Bankruptcy and Its Effect on Your Home
For New Jersey homeowners, the interaction between bankruptcy and real property is critical:
Chapter 7: Filing Chapter 7 does not save a home from foreclosure long-term. Where the automatic stay applies, it temporarily halts foreclosure. The lender may seek relief under 11 U.S.C. § 362(d), and foreclosure may resume if the court grants relief or the applicable stay otherwise ends. However, Chapter 7 can eliminate other debts (credit cards, medical bills) that are competing for your income, making it easier to afford your mortgage payments going forward.
Chapter 13: Chapter 13 is the primary bankruptcy tool for saving a home. As described above, the plan can cure mortgage arrears over 3-5 years while the debtor maintains current payments. Maintaining plan and ongoing mortgage payments is essential. Foreclosure remains subject to the applicable stay, the confirmed plan, and any court order granting relief; filing Chapter 13 does not guarantee that the home will be saved.
Surplus Funds: If your home has already been sold at a sheriff’s sale and surplus funds exist, those funds may become part of the bankruptcy estate under 11 U.S.C. § 541. See our surplus funds and bankruptcy page for details.
Why Choose Friscia & Associates for Bankruptcy
Our firm represents debtors in the U.S. Bankruptcy Court for the District of New Jersey, Newark Division, handling both Chapter 7 and Chapter 13 cases. We serve clients throughout Essex County (Newark, East Orange, Irvington), Hudson County (Jersey City, Hoboken), Union County (Elizabeth, Plainfield), Bergen County (Hackensack, Fort Lee), and Middlesex County (New Brunswick, Perth Amboy).
We analyze your complete financial picture — income, debts, assets, and goals — to determine which chapter provides the best outcome. For homeowners facing foreclosure, we frequently coordinate bankruptcy filings with foreclosure defense strategies to maximize protection. Every situation is different, and we provide a candid assessment of your options before you decide to file.
Contact Friscia & Associates LLC to schedule a bankruptcy consultation at our Newark office. We offer evening and weekend appointments for clients who cannot meet during business hours.