CHAPTER 7 BANKRUPTCY
Chapter 7 bankruptcy is also called liquidation bankruptcy. The debtor has to turn over to a court-appointed trustee all of the debtor’s non-exempt property for sale. Money obtained from the sale is used to pay off expenses and creditors, based upon certain priorities. Any debt remaining is discharged by order of the bankruptcy court, meaning that the debtor no longer is required to pay back the debt.
The bankruptcy laws are not designed to take every piece of personal property away from an individual, leaving him or her with nothing. For this reason bankruptcy law allows individuals to keep some of their property, based upon exemptions. New Jersey individuals are allowed to choose between the New Jersey exemptions and Federal exemptions when filing their Chapter 7 bankruptcy petition. Every Chapter 7 petition that I have filed has elected the Federal exemptions, since they allow the debtor to keep more property than the New Jersey exemptions allow. In other states this is not the case, and often the state law exemptions are better for Chapter 7 debtors than the Federal exemptions. The majority of Chapter 7 consumer bankruptcies that I have filed are considered “zero asset” cases. In a “zero asset” case all of the property belonging to the debtor is either exempt or of such little value that the property is not worth the effort or the trustee to sell.
Chapter 7 bankruptcy is not a good option for individuals who have too much equity in their home, second-home or investment property, automobiles, or other valuable personal property, unless they are willing to give up these items. Chapter 7 bankruptcy is also not a good option for individuals who are behind in their mortgage payments, car loan payments, and other secured debt, unless the individual is willing to give up these items. To save your home, automobiles, and other secured property in these situations, Chapter 13 may be the better option, if it is available to you. An experienced bankruptcy attorney should be consulted to determine the best course of action for each individual.
Chapter 7 bankruptcy will discharge almost all of your debt. However, some types of debt are excluded from the discharge. Debts incurred through fraud, theft or embezzlement, or debts related to criminal acts, including debts from injuries incurred when DWI is involved, are also excluded from the discharge. In addition, criminal fines and penalties, alimony and child support, most student loans, taxes (with some exceptions), and debts imposed through a divorce decree or property settlement or also excluded from the discharge.
I offer a free consultation for anyone considering bankruptcy or other alternatives to solve their debt crisis. Please either call my office or complete the evaluation form by clicking the link below. I will provide an analysis of your situation, and otherwise answer any questions you may have immediately.