What is a Chapter 7 bankruptcy?

A Chapter 7 bankruptcy, often referred to as “liquidation”, contemplates an orderly, court-supervised procedure by which a trustee takes over the assets of the debtor’s estate, reduces them to cash, and makes distributions to creditors, subject to the debtor’s right to retain certain exempt property and the rights of secured creditors. 

In most Chapter 7 cases, if the debtor is an individual, he or she receives a discharge that releases him or her from personal liability for certain dischargeable debts.  The debtor normally receives a discharge just a few months after the petition is filed.

Filing a Chapter 7 petition “automatically stays” (stops) most collection actions against debtors or their property.  As long as the automatic stay is in effect, creditors generally may not initiate or continue lawsuits, wage garnishments, or demand payment.  However, there are a number of exceptions to the automatic stay  (a criminal proceeding, for example), and in some instances the automatic stay may only be in place for a short period of time.

Chapter 7 may be filed without an attorney, but it is a complicated process and it is highly recommended that you retain the services of an attorney.  Your failure to meet all of the requirements of a Chapter 7 can result in a loss of protection of the automatic stay, or a dismissal of the case.

For more information about Chapter 7 refer to the Bankruptcy Basics Guide.

What do I need to do before filing a Chapter 7 case?

If you are an individual, you must obtain credit counseling from an approved credit counseling agency before filing a Chapter 7 case.  (11 U.S.C. § 109).  The debtor must receive credit counseling within the 180 days before the bankruptcy petition is filed.  If you and your spouse file a joint bankruptcy petition, both of you must obtain credit counseling. Credit counseling may be conducted over the phone, over the internet or in person. When you complete credit counseling, the agency will provide you with a credit counseling certificate.  This certificate must be filed with the court when the petition is filed.

In addition to the credit counseling certificate, you must also complete:  

Voluntary Petition for Individuals Filing for Bankruptcy (Bankruptcy Form 101)

Place a check in the appropriate box of Part 5 of the Voluntary Petition indicating one of the following:

• Box 1 states that you received credit counseling within the180 days before the filing of the petition and you have the certificate from the agency.

• Box 2 states that you received credit counseling within the 180 days before the filing of the petition, but you do not have the certificate from agency.

Limited exceptions to the credit counseling requirement are addressed in Box 3 and Box 4:

• Box 3 states that you requested counseling from an approved agency, but were unable to obtain services within 7 days of the request and you are filing for an extension of time to file the Certificate of Credit Counseling due to exigent circumstances.  This means that unusual things happened that prevented you from getting the credit counseling before you filed the petition.  You must attach a separate sheet explaining what efforts you made to obtain the briefing, why you were unable to obtain it before you filed for bankruptcy, and what exigent circumstances required you to file this case.

• Box 4 states that you are not required to receive credit counseling because of incapacity or disability (defined in 11 U.S.C. §109(h)(4)), or active military duty in a military combat zone.If you believe you are not required to receive a briefing about credit counseling, you must file a motion for a waiver of the credit counseling requirement with the court.

Click here to locate an approved Credit Counseling Agency.

Click here for more information about Credit Counseling.

Note: Credit Counseling is not the same as the Personal Financial Management Course (Debtor Education).  The Personal Financial Management Course is required AFTER the petition is filed and must be completed before receiving a discharge.  See question "What is the Personal Financial Management Course (Debtor Education)?" for more information. 

Am I eligible to file a Chapter 7 case?

A chapter 7 debtor must complete a Statement of Your Current Monthly Income (Bankruptcy Form 122A-1).

To be eligible to file a Chapter 7 case, your current monthly income, as calculated on Bankruptcy Form 122A-1, may not be higher than the state median income.  If your current monthly income is higher than the state median income, it may be determined that you can repay a level of unsecured debt and the filing of a Chapter 13 case is appropriate. If you still choose to file a Chapter 7 case, you must also complete and file a Chapter 7 Means Test Calculation (Bankruptcy Form 122A-2) to determine if the presumption of abuse arises. You must also check box 2 on 122A-1 indicating that you will complete 122A-2.

Note 1: You may be exempt from the "means test" if you are a disabled veteran or because you do not have primarily consumer debts. If you believe you are exempt, you must check the appropriate box at the top of Form 122A-1 and complete and file with your petition a Statement of Exemption from Presumption of Abuse Under 707(b)(2) (Bankruptcy  Form 122A1-Supp). 

Note 2: The National Guard and Reservists Debt Relief Act of 2008 provides for a temporary exclusion from the bankruptcy means test.  The amendment to §707(b)(2)(D) is effective as of December 19, 2008.If you believe you are entitled to this temporary exclusion, you must check the appropriate box at the top of Form 122A-1 and complete and file with your petition a Statement of Exemption from Presumption of Abuse Under 707(b)(2) (Bankruptcy Form 122A-1Supp).

Click here for more information on Means Testing.

Where should I file my petition?

The petition and all documents relating to the bankruptcy case must be filed at the Bankruptcy Court Clerk's Office located in the geographic area (commonly referred to as vicinage) in which the debtor resides, or in which the debtor has its principal place of business.  The Bankruptcy Court for the District of New Jersey is divided by county into three vicinages (See D.N.J. LBR 1002-1).

The Camden vicinage consists of Atlantic, part of Burlington (the townships of Cinnaminson, Delran, Edgewater Park, Evesham [Marlton], Maple Shade, Moorestown, Mt. Laurel, Palmyra, Riverside and Riverton), Camden, Cape May, Cumberland, Gloucester and Salem counties.

The Newark vicinage consists of Bergen, Essex, Hudson, Morris, Passaic , Sussex and Union counties.

The Trenton vicinage consists of part of Burlington (excluded are the townships of Cinnaminson, Delran, Edgewater Park, Evesham [Marlton], Maple Shade, Moorestown, Mt. Laurel, Palmyra, Riverside and Riverton), Hunterdon, Mercer, Middlesex, Monmouth, Ocean, Somerset and Warren counties.

What filing fee do I have to pay?

The filing fee for a Chapter 7 petition is $338.00.  The Court does not accept cash or personal checks.  The fee may be paid by money order, certified check, or bank check payable to the Clerk, United States Bankruptcy Court. 

If the full filing fee cannot be paid at the time the petition is filed, Chapter 7 debtors may apply for an installment schedule or a waiver of the fee. 

To pay the filing fee in installments, file Application for Individuals to Pay the Filing Fee in Installments (Bankruptcy Form 103A).  Debtors may make up to four installment payments. The first installment must be paid at the time of the filing of the petition and must be equal to 25% of the full filing fee. Each additional installment must also be in an amount equal to 25% of the full filing fee. The final installment must be made within 120 days after the petition is filed.  If the debtor fails to pay any installment when due, the case may be dismissed and the debtor will not receive a discharge of debts.      

To apply for a waiver, you must file an Application to Have the Chapter 7 Filing Fee Waived (Bankruptcy Form 103B) .  By law, the judge may waive the filing fee only if the debtor’s income is less than 150 % of the official poverty guidelines for a specific family size and the debtor is unable to pay the fee in installments.

Click here for the complete Fee Schedule.

What forms do I have to file?

The table below lists all the forms that must be filed to commence a Chapter 7 case.

Click here for more information on Required Lists, Schedules, Statements and Fees

Note: The Bankruptcy Court Clerk's Office does not maintain hard copies of the official forms required for filing bankruptcy, but they may be downloaded from our website, www.njb.uscourts.gov.  They may also be purchased from any office supply store.  Please be sure to sign all documents where applicable.  Proper signatures are required to process all paperwork.  If a married couple files a joint case, both spouses must sign wherever a signature is required.

How many copies of all forms do I need to file?

How do I fill out the forms?

ALL BLANK SPACES AND LINES ON EACH FORM must be completed.  Some forms contain boxes to indicate that the debtor has nothing to report or a question does not apply.  On all other forms, a debtor should either insert “N/A” or “None” in response to any question or request for information that is not applicable or should cross out a printed statement that does not apply and initial the cross-out.

You should not include sensitive information in any document filed with the court unless such inclusion is required by statute, Federal Rules of Bankruptcy Procedure or Official Bankruptcy Forms or the inclusion is otherwise necessary and relevant to the case.  You must remember that any personal information not otherwise protected will be available on the internet via PACER.

Personal data identifiers should be redacted in the following manner:

Social Security numbers should only include the last 4 digits,

Financial account numbers should include only the last 4 digits,

Names of minor children should only include initials, and

Dates of birth should only include the year of birth.

Exercise caution when filing any of the following:

• any personal identifying number, such as driver’s license number
• medical records, treatment and diagnosis
• employment history
• individual financial information
• proprietary or trade secret information.

The Clerk’s Office will not review documents for the purpose of deleting sensitive information.  The court will image all pleadings as submitted even if they contain personal identifying information.

Click here for our court’s Privacy Guidelines.

What if I must file immediately, but can't complete all required forms?

If you have to file a case immediately, you MUST file:

• Voluntary Petition for Individuals Filing for Bankruptcy(Bankruptcy Form 101) or Voluntary Petition for Non-Individuals Filing for Bankruptcy (Bankruptcy Form  B 201)
• Statement About Your Social Security Numbers (Official Form 121)
• A Credit Counseling Certificate from an approved credit counseling agency (or indicate on the Voluntary Petition that you are claiming exigent circumstances or an exemption from the credit counseling requirement. See the frequently asked question titled "What do I need to do before filing a chapter 7 Case?" for more information regarding credit counseling)
• A complete List of Creditors (you must have at least one creditor). 

In addition, one of the following must accompany the Petition at the time of filing: the full filing fee OR an Application for Individuals to Pay the Filing Fee in Installments  (Bankruptcy Form 103A) OR an Application to Have the Chapter 7 Filing Fee Waived (Bankruptcy Form 103B).

What happens if I do not file all of the required forms?

Failure to file all required documents at the time the petition is filed will result in the issuance of an Order to Show Cause.  This Order advises debtors that they must submit all required documents or the bankruptcy case will be dismissed without further notice.  Debtors must request an extension by application to the court. 

What happens after I file?

Shortly after the petition is filed, the United States Trustee appoints a trustee and the court will issue a Notice of Chapter 7 Bankruptcy Case - No Proof of Claim Deadline. This notice is sent to all creditors in the case and contains the following information:

• Debtor’s name
• Date/time/location of the First Meeting of Creditors (also known as 341 Meeting)
• Deadline to file a complaint objecting to discharge or dischargeability of debts
• Deadline to object to exemptions

Note: Please read the notice carefully.  The meeting may not be held in the courthouse, but may be held at another location.

What is the role of the trustee in my case?

The trustee is appointed by the United States Trustee to administer the case.  The primary functions of the trustee are to examine the assets of your estate, if any, liquidate non-exempt assets, and serve as the disbursing agent to the creditors. The trustee technically becomes the temporary owner of all of your non-exempt property.  Your creditors are paid by selling non-exempt property of your estate.  If there are no non-exempt assets in your estate, the case is referred to as a “no asset” case.  Creditors do not need to file a proof of claim in a no asset case.  Creditors must file a proof of claim if assets are later recovered.

What is the First Meeting of Creditors, and how do I prepare for the meeting?

All debtors MUST attend the First Meeting of Creditors.  Failure to attend may result in the dismissal of your case.  If you and your spouse filed a joint petition, both of you must appear.  At the meeting, the Chapter 7 trustee will ask you questions, under oath, about what you owe, what you own and your income. 

No later than seven (7) days before the Meeting of Creditors, you must send the following to the trustee:

a.  A copy of your most recent federal income tax return (or transcript of return).

b.  Copies of pay stubs received within 60 days before the date of filing of the petition.

Note: DO NOT FILE PAY STUBS OR INCOME TAX RETURNS  WITH THE COURT.  Remember, it is the sole responsibility of the debtor to delete or black out sensitive information such as children’s names, account numbers (except the last 4 digits), and dates of birth (except the year). You should only show the last 4 digits of your social security number.

Bring the following with you to the First Meeting of Creditors:

c.  Picture Identification

d.  Proof of social security number

e.  Market analysis of any real estate you own

After I file, what happens to my creditors' collection activities against me?

Once the petition is filed with the court, the automatic stay will go into effect.  The automatic stay is an injunction that automatically stops lawsuits, foreclosure, garnishments and all collection activity against you by your creditors for any debt which arose before the filing of the bankruptcy.

Note: There are exceptions which may result in the automatic stay not going into effect, or being limited in duration.

Some exceptions, but not all, are listed below:

• Debtor had a previous case pending within the preceding one-year period, but the case was dismissed. In this situation, the automatic stay would terminate on the 30th day after filing the new case, unless the debtor applies for an extension of the automatic stay.
• Debtor had more than one previous case pending within the preceding one-year period, but the cases were dismissed.  In this situation, the automatic stay does not go into effect unless the debtor applies for imposition of the stay.

A creditor may file a Motion to Lift the Automatic Stay, which is a request by a creditor that, if granted, would allow the creditor to collect a debt against a debtor or the debtor’s property that would otherwise be prohibited by the automatic stay.

How do I amend my schedules after filing?

You may need to amend your original schedules filed with the petition. See D.N.J. LBR 1009-1 and the court's General Order Pending Amendment of Local Rules Under the Court's Annual Rule Making Cycle, dated January 27, 2016 for information about filing an amended schedule.

The addition of new creditors requires a new List of Creditors containing only those creditors being added.  There is a fee of $32.00 to amend Schedules D, E/F, G, or H.

There is no fee if Schedule D, E/F, G or H is amended to add the address of a previously listed creditor, or to add the name and/or address of an attorney for a previously listed creditor.

The court will issue and serve an Order Respecting Amendment.

What is a discharge and how do I receive my discharge?

A discharge releases a debtor from personal liability of certain debts known as dischargeable debts and prevents the creditors owed those debts from taking any action against the debtor or the debtor's property to collect the debts.  The discharge also prohibits creditors from communicating with the debtor regarding the debt, including telephone calls, letters, and personal contact.

The debtor is eligible for a discharge usually between 60 and 90 days after the Meeting of Creditors, as long as you:

1. have not received a discharge in a Chapter 7 or 11 case within eight (8) years of the new case

2.  have not received a discharge in a Chapter 12 or 13 case within six (6) years of the new case **

3.  do not have a complaint against you which objects to the discharge or the dischargeability of a debt

4.  have completed the Personal Financial Management Course (Debtor Education) and a Certificate proving compliance with the financial management course requirement has been filed by you or by the course provider.

** Note: When a new Chapter 7 case is filed, and a discharge was entered in a Chapter 12 or 13 case filed within the previous six (6) years, the court may not withhold the debtor’s discharge. However, creditors and parties in interest may file a complaint objecting to discharge under §727(a)(9).

Every debt is not discharged.  There are exceptions to the discharge, which include, but are not limited to:

• debts for alimony and child support
• most student loans
• debts arising from death or personal injury caused by driving while intoxicated or under the influence of drugs
• debts for criminal fines or restitution.

NOTE:  Once a debt is discharged, you are legally free of that debt.  The discharge is a permanent order that prohibits creditors from taking any type of collection action on discharged debts.  Any attempt to collect discharged debt is prohibited by bankruptcy law.  For your own protection, you should maintain accurate records and copies of all matters related to your bankruptcy.  In addition, you should routinely check your credit report with the various reporting agencies to ensure that discharged debts are not being reported as outstanding. 

What is the Personal Financial Management Course (Debtor Education)?

Debtors are required to complete an instructional course in personal financial management as a condition for receiving a discharge.  This course is in addition to the credit counseling requirement.  When the personal financial management course is completed, the debtor or approved course provider must file the Certificate issued by the course provider.  If you and your spouse filed a joint petition, both of you must attend the course and both of you must file separate Certificates. The Certificate must be filed within 60 days after of the first date set for the Meeting of Creditors.  If the Certificate is not filed, the court may close the case without a discharge.  If you then file a motion to reopen the case to allow the filing of the Certificate, you must pay the full filing fee due for filing such a motion.

There are limited exceptions to the personal financial management course requirement such as incapacity or disability (defined in 11 U.S.C. §109(h)) or active military duty in a military combat zone.  If you believe that an exception is applicable to you, you must file a motion for exemption from financial management course, which will be heard by the court on an appropriate hearing date.

Click here for a list of approved Debtor Education Providers.

Can I keep certain secured property such as my car?

If you would like to keep certain property, such as a car, you may “reaffirm” your debt.  A reaffirmation is an agreement between you and the creditor that you are liable and will pay all or a portion of the money owed, even though the debt would otherwise be discharged in the case.  In return, the creditor promises not to repossess or take back the car or other property as long as you continue to make payments.  Reaffirmation of a debt must be done before the discharge is entered in the case.  The reaffirmation agreement must be signed and filed with the court and the judge will decide if the reaffirmation agreement is approved.  The court must find that the reaffirmation does not impose undue hardship on you or your dependents and that it is in your best interest.  Reaffirmation agreements are voluntary.  If you agree to reaffirm a debt and fail to make the payment required, the creditor can take action against you to recover any property and you may remain personally liable for any remaining debt that you have reaffirmed.

Click here for a sample Reaffirmation Documents