Joel R. Glucksman
Partner
201-896-7095 jglucksman@sh-law.comFirm Insights
Options in Bankruptcy Protection: Chapter 7 & 13
Author: Joel R. Glucksman
Date: June 3, 2015
Key Contacts
Back
Bankruptcy Protection Options
Individuals who need to seek bankruptcy protection generally have two alternatives: “wage earner” bankruptcy under Chapter 13 or liquidation under Chapter 7. There are important differences between the two. Most notably, in a Chapter 7 liquidation the debtor essentially piles their assets into a heap, turns them over to the appointed trustee and walks away with a discharge of all remaining debts. By contrast, in a Chapter 13, the debtor is required — for up to five years — to deposit all of their net disposable income into the trustee’s hands, who then distributes them to creditors.
For this reason, in a Chapter 13, the debtor’s post-bankruptcy earnings during the five-year period are considered available to fund creditor payments. By contrast, in a Chapter 7, anything that the debtor earns from the moment they have filed their bankruptcy petition stays with them and is not distributed to creditors.
Chapter 7 & 13 Conversion
An issue has arisen from the fact that many debtors elect to try Chapter 13 but ultimately prove unable to continue with the required payments. Their cases therefore convert to Chapter 7 liquidations. The lower courts have disagreed as to what happens to any excess funds that remain in the Chapter 13 trustee’s hands when a Chapter 13 is converted to a Chapter 7.
In a May 18, 2015 decision, Harris v. Viegelahn, the United States Supreme Court has definitively ruled that, to the extent that the funds in the Chapter 13 trustee’s hand came to the trustee from the debtor’s post-bankruptcy earnings, they are to be returned to the debtor should a Chapter 13 case convert to a Chapter 7.
This is not all good news, however. One must remember that Chapter 7 is specifically limited to debtors below very specific income levels. It is not generally available to anybody.
Are you a creditor in a bankruptcy? Have you been sued by a bankrupt? If you have any questions about your rights, please contact me, Joel Glucksman, at 201-806-3364.
- Practices: Bankruptcy & Creditors' Rights, Corporate Transactions & Business, Bankruptcy Litigation
- Locations: Red Bank, NJ, New York City, Little Falls, NJ
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Related Posts
See all
Breaking Down New Jersey’s “Mansion” Tax: What Buyers and Sellers Need to Know
For many years, the New Jersey Mansion Tax has been a significant consideration in high-value real estate transactions. Recent legislative changes, however, have substantially altered how the tax operates, including who is responsible for paying it and the amount owed in certain transactions. Whether you are purchasing, selling, or investing in New Jersey real estate, […]
Author: George McGowan
Estate Planning for Digital Assets Under New Jersey Law
As our personal and financial lives increasingly move online, estate planning must evolve to address a new category of property: digital assets. From email accounts and social media profiles to cryptocurrency and cloud-stored business records, these assets often carry both financial and sentimental value. Yet, without proper planning, they can become inaccessible—or even lost—upon incapacity […]
Author: Marc J. Comer
The Role of Representation and Warranty Insurance in M&A Transactions
In today’s mergers and acquisitions market, representation and warranty (R&W) insurance has become a common feature of deal negotiations. Once used primarily in larger transactions, R&W insurance is now frequently incorporated into middle-market deals as buyers and sellers look for efficient ways to allocate risk and close deals. When structured properly, R&W insurance can help […]
Author: George McGowan
You Just Received a Federal Grand Jury Subpoena in New Jersey: Now What?
Receiving a federal grand jury subpoena is not something most businesses or individuals anticipate. While it can be concerning, a federal grand jury subpoena does not necessarily mean that you are being accused of wrongdoing. It does, however, mean that a federal criminal investigation is underway and that federal prosecutors believe you may possess information […]
Author: George McGowan
Why Every Business Should Conduct an Annual Insurance Coverage Review
Most New Jersey business owners purchase insurance policies, file them away, and assume they are protected if a claim arises. Without a regular insurance coverage review, many companies discover gaps only after a lawsuit, cyberattack, property loss, or other significant event occurs. An annual insurance coverage review can help businesses identify potential risks, ensure their […]
Author: George McGowan
Demand Letters & Cease and Desist Letters: When to Send One (and When Not To)
Businesses and individuals often encounter situations where another party breaches a contract, fails to pay a debt, or continues harmful conduct. In many such disputes, a precisely drafted demand letter or cease-and-desist letter serves as a powerful legal tool. It can frequently resolve the dispute and avoid litigation. While demand or cease-and-desist letters can resolve […]
Author: George McGowan
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.