If a person meets the chapter 7 criteria, he can discharge all debt except the following type of debt: students loans, (unless undue hardship); debt incurred by fraud; certain taxes; condo fees due after the filing and before transfer of the property, etc.
Also, after a discharge, a judgment lien cannot attach to a house purchased after the discharge. Although a discharge does not eliminate the judgment lien from the debtor’s present house, in most cases the lien may be reduced or eliminated by filing a separate motion with the court, requesting same.
Typically the debt that is discharged is unsecured debt, such as credit card debt and personal loans. Discharging a debt means that the creditor may never attempt to collect the money from the debtor personally. Secured debt (i.e. auto financing, mortgage) may be discharged as well. However, if the monthly payment is not made after the filing, the creditor can apply to the state court to repossess or foreclose on the property and take the collateral, such as a house or car.
In addition to the discharge and the fresh start aspect of a chapter 7 case, the law permits the debtor to keep a certain amount of personal property and real estate. In the vast majority of cases, the court or trustee will not take your property, unless the value of any property is substantial. The trustee will only take an auto or a house if the value is substantially more than the payoff of the mortgage / financing. If a debtor is able to fully exempt the equity of any property, the trustee or court will not sell the property.
Immediately upon the filing of any bankruptcy case no creditor may commence or pursue an action to collect a debt. This means that the following actions must stop immediately: wage garnishments; law suits for collection of money; avoid utility termination; require utility restoration; bank account levy; attempt to repossess automobiles; mortgage foreclosure actions; must restore license if suspended due to state surcharges. Bankruptcy only deals with money and money related issues.
Robert Manchel is an experienced New Jersey bankruptcy lawyer whose practice focuses exclusively on bankruptcy law. Please call Robert Manchel at 1 (866) 503-5655 to discuss your situation and how bankruptcy protection may be applicable to your personal situation.