If you've been telling yourself that filing for bankruptcy would make you an outlier among your neighbors, the newest federal data says otherwise. According to the Administrative Office of the U.S. Courts, bankruptcy filings nationwide rose 12.2 percent during the twelve-month period ending June 30, 2026, climbing from 542,529 cases to 608,511. Non-business filings, the kind most New Jersey households rely on when medical bills, job loss, or credit card debt pile up faster than income, increased 12 percent on their own, while business bankruptcies jumped nearly 17 percent.
New Jersey has not been an exception to that trend. The United States Bankruptcy Court for the District of New Jersey, which handles every consumer and business case filed in the state, recently issued a fresh round of local rule revisions for 2026, and consumer attorneys across the state report a steady rise in first-time callers asking the same question: is bankruptcy the right move for me?
If you are one of them, here is what the 2026 numbers actually mean, and what filing for bankruptcy in New Jersey really involves. Our firm’s attorneys in NJ have experienced an increase in our filings year to date
The Numbers Behind the Headlines
According to the federal courts' own reporting, the chapter breakdown for the year ending June 30, 2026 looked like this:
- 382,161 Chapter 7 filings
- 215,490 Chapter 13 filings
- 10,320 Chapter 11 filings
- 336 Chapter 12 filings for family farmers and fishermen
Chapter 7 (straight liquidation) and Chapter 13 (a structured repayment plan) together account for a majority of cases, and for most individuals and families, one of those two chapters is exactly where the analysis starts.
It's worth keeping some perspective. Filings are climbing, but they remain far below the nearly 1.6 million cases recorded at the peak of the last major wave, in September 2010. What the current increase tells us is that more households are reaching the point where bankruptcy protection is a serious, rational option, not a last resort reserved for financial catastrophe.
Why More New Jersey Families Are Filing in 2026
Every attorney has a slightly different theory, but a few pressures come up again and again in consultations: credit card balances that grew faster than wages during a period of elevated interest rates, medical debt from a single unexpected illness or injury, and the slow erosion of savings that many households built up earlier in the decade. None of this is unique to New Jersey, but the state's high cost of living means a temporary income disruption, a layoff, a divorce, a medical leave, can turn into unmanageable debt faster here than in many other parts of the country.
The important thing to understand is that rising filing numbers are not a sign of anything shameful. Bankruptcy is a federal legal process, written into the Constitution and refined by Congress precisely so that people who fall behind through no fault of their own have a structured way back to solvency.
Chapter 7 vs. Chapter 13: Which Fits Your Situation?
Chapter 7 Bankruptcy (Liquidation)
Chapter 7 is the faster of the two options, typically running four to five months from filing to discharge. It is designed to eliminate unsecured debt, credit cards, medical bills, personal loans, in exchange for the possibility that a bankruptcy trustee could sell non-exempt assets to pay creditors. In practice, most individual Chapter 7 filers in New Jersey keep everything they own, because the exemptions available to them, discussed below, cover the value of what a typical household actually has. Chapter 7 is called the Liquidation chapter but assets are not typically liquidated. Critically, an attorney should review your situation before you file to make sure assets will not be sold.
Chapter 13 Bankruptcy (Reorganization)
Chapter 13 is built for people with regular income who have too much of it, or too much valuable property, to qualify for Chapter 7, or who are behind on a mortgage and want to keep the house. It restructures debt into a court-supervised repayment plan lasting three to five years, and it is often the only path that lets a homeowner catch up on missed mortgage payments over time while stopping a foreclosure sale.
Our firm’s founder, John J. Scura II, was the Standing Chapter 13 Trustee for 24 years and revolutionized the way the process worked in New Jersey. As a result, our firm’s attorneys have extensive knowledge from different angles of the Chapter 13 practice. Now, the firm represents debtors in Chapter 13 and works with the Chapter 13 Trustees in the three vicinages in NJ to attempt to have plans successfully confirmed and debtors on their way toward reorganization.
Do You Qualify? A Quick Look at the Means Test
Before anyone can file Chapter 7, federal law requires a “means test” to confirm the filer isn't using liquidation to avoid debts they could reasonably repay. The test starts by calculating your Current Monthly Income, generally the average of the income you received over the six full calendar months before filing, then compares the annualized figure to New Jersey's median income for a household of your size, using figures the U.S. Trustee Program publishes and updates periodically under 11 U.S.C. § 104.
If your income falls below the state median, you generally qualify for Chapter 7 without further analysis. If it's above the median, the court moves to a second calculation of your “disposable income” after allowed deductions for taxes, secured debt payments, and support obligations. Only if that number exceeds a statutory threshold does a presumption arise that Chapter 7 would be an abuse of the process, and even then, the presumption can sometimes be rebutted by documenting special circumstances such as a medical condition or a call to active military service.
We've written a full breakdown of how the current income limits work for New Jersey filers, including how the six-month lookback period is calculated: Chapter 7 Bankruptcy Income Limits in New Jersey.
What You Get to Keep: Exemptions in a New Jersey Bankruptcy
This is the question every prospective filer asks first, and understandably so. New Jersey is one of the states that lets debtors elect the federal bankruptcy exemptions found in 11 U.S.C. § 522(d), rather than being limited to a narrow list of state-specific exemptions, and most individual filers in the state use exactly that federal scheme. In broad terms, it protects a defined amount of equity in a primary residence, one motor vehicle, household goods and furnishings, tools of your trade, and retirement accounts such as 401(k)s and IRAs, among other categories.
The United States Bankruptcy Court for the District of New Jersey warns filers directly that claiming property exempt under the wrong law can mean losing it entirely, which is exactly the kind of technical mistake an experienced bankruptcy attorney is trained to avoid.
Busting the Two Biggest Bankruptcy Myths
“I'll lose everything I own.”
For the overwhelming majority of individual filers, this simply isn't true. Between the federal exemptions described above and the practical reality that most people's possessions are worth far less than they think on a resale market, most Chapter 7 filers keep their home, their car, and everything in it.
“My credit will never recover.”
A bankruptcy filing does show up on a credit report for up to ten years, but it also wipes out the debt that was dragging your credit utilization and payment history down in the first place. Attorneys routinely see clients rebuild a workable credit profile within two to three years of a discharge.
Filing in the District of New Jersey: What to Expect
Every bankruptcy case filed in the state goes through the United States Bankruptcy Court for the District of New Jersey, which maintains courthouses in Newark, Camden, and Trenton and handles filing, the required meeting of creditors, and, in Chapter 13 cases, ongoing plan supervision. The court's newly published local rule revisions for 2026 are a reminder that procedural requirements do shift from year to year, and a filing prepared to last year's specifications can run into avoidable delays.
Frequently Asked Questions
- How long does Chapter 7 bankruptcy take in New Jersey?
- Most individual Chapter 7 cases run four to five months from filing to discharge, assuming no complications or objections from creditors.
- Will I have to go to court?
- In the large majority of consumer cases, the only required appearance is the “341 meeting of creditors,” a brief, informal session with the trustee, not a courtroom hearing before a judge.
- Can I file for bankruptcy more than once?
- Yes, subject to waiting periods between filings that depend on which chapters were involved and when the earlier case was filed or discharged.
- Does bankruptcy stop wage garnishment and collection calls?
- Filing triggers an automatic stay, a federal injunction that immediately halts most garnishments, lawsuits, and collection calls the moment your case is filed.
- Will bankruptcy stop a mortgage foreclosure?
- The automatic stay halts a pending foreclosure sale immediately, and a Chapter 13 plan can give you three to five years to catch up on missed mortgage payments while you keep the home, something Chapter 7 generally cannot do if you want to stay in the property long term.
- Can I keep a credit card open after filing?
- Any credit card debt you owed before filing is discharged along with your other unsecured debt, and issuers almost always close the account as part of that process, but there is nothing stopping you from applying for new, typically secured, credit once your case is resolved, and many filers see offers within months of discharge.
Talk to a New Jersey Bankruptcy Attorney Before You Decide
Rising filing numbers tell us that more of your neighbors are exploring this option, but nothing in this article is a substitute for a conversation about your specific numbers, your specific creditors, and your specific goals, whether that's keeping a house out of foreclosure, protecting a paycheck from garnishment, or simply putting a stop to the phone calls. Our attorneys have guided New Jersey families and business owners through Chapter 7 and Chapter 13 filings for years, and a consultation with one of our New Jersey attorneys costs you nothing but the time it takes to find out where you stand.
