In general, bankruptcy deals with debt that was incurred prior to the filing. In a chapter 7, the bankruptcy filing, has no effects on debt that was incurred after the filing. This means that if the debtor finances a car or uses a credit card after the filing, the creditor may pursue the debtor for the collection of the debt.
A debtor has the option of converting their chapter 13 case to a chapter 7. In the event that a debtor incurs debt after the filing of a chapter 13 and prior to the conversion, the debt is treated as though it was incurred prior the chapter 13 filing. This means if the debt is typically dischargeable in a 7, then the debt will be discharged.
Any debt incurred by a chapter 13 debtor during the bankruptcy plan, has the right to wait until the completion of the case to pursue the debtor for any default or funds due to the creditor. However, certain chapter 13 creditors who lent funds to the debtor, after the filing, have the right to receive payment by the trustee, through the bankruptcy plan.
If a chapter 13 debtor incurs tax debt after the filing, the taxing entity may require the debtor to pay the debt during the balance of the trustee payment plan. Also, if the chapter 13 debtor incurs domestic support debt after the filing, the court will require that the debtor cure this debt, prior to receiving a discharge.
In a New Jersey chapter 13 bankruptcy case, if the debtor incurs a consumer debt that is necessary for the debtors performance under the plan, such as auto financing, the creditor may file a claim. The claim must be handled and paid, in compliance with the manner in which claims of that type are normally paid. Please note that if a chapter 13 debtor wishes to borrow money, she must first request approval from the trustee or court.
If a debtor incurs a debt in a chapter 13 that is not necessary for performance of the plan, or not for an after filing tax liability, and not for a domestic support obligation, the debtor and the creditor must agree to include the creditor’s claim in the bankruptcy case in order to be paid by the trustee.
To contact an experienced New Jersey Chapter 7 or Chapter 13 Bankruptcy Lawyer, call Robert Manchel at 1.866.503.5655.