A chapter 7 process is about 4 months. After the 4 months, the debtor is completely out of the bankruptcy case and process. The debt that is dischargeable will be eliminated and the property that is exempt in the bankruptcy case may be kept by the debtor. Typically, people file for the purpose of eliminating certain unsecured debt, such as: credit card; personal loans; medical bills; etc. People can also eliminate secured debt that is connected to property that they are surrendering. This means that a person can eliminate a mortgage debt or an auto finance debt, in the event they wish to surrender their house or auto. Typically, a person may keep all of their property unless they own any type of real estate or property having substantial equity or value.
A person may not meet the criteria of a chapter 7 due to excessive disposable income. A person may not wish to file a chapter 7 if he owns valuable property that the trustee will take. Under either or both of these scenarios, a person could obtain financial relief by filing a chapter 13, which requires a monthly trustee payment for a period of 36 to 60 months. In this situation, the debtor will likely be required to pay back at least a portion of the unsecured debt.
A person may also file a chapter 13, as opposed to a 7, for other reasons, such as saving a house from foreclosure while in bankruptcy or an auto from repossession. A debtor may save his house from foreclosure by paying back the total arrears through a monthly bankruptcy plan, in addition to making his regular monthly mortgage payments. A person may save their auto in the same fashion as saving their house, in a chapter 13. In the alternative, a debtor may also keep their auto by paying the total balance on the loan through the trustee payments.
There are also additional benefits of a chapter 13, regarding the elimination of certain type of debt that will not be eliminated in a chapter 7, such as equitable distribution and homeowner’s association debt, in certain situations. A chapter 13 also permits a person to cure child support arrears, Homeoners’ Association arrears, etc.
Robert Manchel, the leading bankruptcy lawyer in NJ, may be contacted at (866) 503-5655 to discuss your options for seeking bankruptcy protection.