How to Qualify for Chapter 7 Bankruptcy in New Jersey

Filing for Chapter 7 bankruptcy can offer much-needed relief for individuals facing overwhelming debt. At The Law Offices of Andy Winchell, P.C., we help New Jersey residents understand whether they qualify and guide them through the process with clarity and care. Here's what you need to know if you're considering Chapter 7 bankruptcy in the Garden State.

Understanding Chapter 7 Bankruptcy

Chapter 7 bankruptcy, also known as “liquidation bankruptcy,” allows individuals to eliminate most unsecured debts such as credit card debt, medical bills, and personal loans. In exchange, certain non-exempt assets may be sold to pay creditors. For many people, the opportunity to erase debt and get a fresh start outweighs the risks.

Step 1: Meet the Residency Requirement

To file for Chapter 7 in New Jersey, you must have lived in the state for at least 91 of the previous 180 days. If you’ve moved recently, you may need to wait or file in the state you previously resided in.

Step 2: Pass the Means Test

The most critical qualification for Chapter 7 is passing the means test. This test evaluates your income and expenses to determine whether you can repay your debts under Chapter 13 instead.

• Median Income Comparison: If your household income is below the New Jersey median for your household size, you automatically qualify. As of 2025, for a single filer, the median income is around $83,000 (subject to updates).
• Disposable Income Analysis: If your income is above the median, a more detailed review of your expenses will determine whether you have enough disposable income to pay back a portion of your debt.

Step 3: Review of Assets and Exemptions

New Jersey filers may use either the state or federal bankruptcy exemptions to protect certain property. These exemptions cover things like your home equity, car, retirement accounts, and personal belongings. A thorough asset review is essential to understand what you can retain.

Step 4: Complete Credit Counseling

Before filing, you must complete a credit counseling course from an approved provider within 180 days. This is mandatory under federal law and must be completed before the case can be filed.

Step 5: Previous Bankruptcy Filings

You cannot file Chapter 7 bankruptcy if:

• You received a Chapter 7 discharge in the last 8 years, or
• You received a Chapter 13 discharge in the last 6 years (with some exceptions).

Step 6: Evaluate for Abuse

Even if you pass the means test, the court may dismiss your case if it determines that you are attempting to abuse the system—for example, by incurring significant debts right before filing. Transparency and honesty in disclosing financial details are key.

We’re Here to Help

The Chapter 7 process involves detailed financial documentation, strict timelines, and potential court appearances. At The Law Offices of Andy Winchell, P.C., we help New Jersey residents navigate the process confidently and determine whether Chapter 7 is their best path forward.