New Jersey Attorney Explains The Consequences Of Filing For Bankruptcy Protection In New Jersey
The consequences of filing for bankruptcy protection and obtaining a discharge varies based on each person’s: intentions; assets; income; expenses; and financial position.
Chapter 7 Bankruptcy
After the chapter 7 has been completed, in approximately four months, the debtor is free to move forward with their life, without the debt that is discharged. A New Jersey chapter 7 discharge will result in the elimination of unsecured debt, such as credit card debt, personal loans, utility bills, medical bills, etc. A person who does not wish to save or keep their house will eliminate mortgage debt and liens on their house. A person who does not wish to keep their car will eliminate their auto finance and/or lease debt. Additionally, it is possible that none, all, or a portion of tax debt may be eliminated, as well. Any and all wage garnishments and bank levies are permanently eliminated. Also, pending lawsuits in connection with unsecured debt are permanently stopped and/or eliminated.
A person that wishes to keep their house, may possibly eliminate all or a portion of their non-mortgage house liens, depending on various factors. The debtor is liable for any portion of taxes that are not eliminated by the bankruptcy filing. Utility debt is discharged and the utility company must allow the debtor to restore service and/or continue service. Automobile fines will not be eliminated and must be resolved after the discharge.
Chapter 13 Bankruptcy
A New Jersey Chapter 13 debtor will receive a discharge after making trustee payments for 36 to 60 months. A chapter 13 discharge will has similar consequences as a chapter 7, with the following possible exceptions. If a debtor filed a chapter 13 to cure their mortgage arrears and save their house, their house payments should be current at the completion of the case. The debtor may do the same for automobile finance arrears. At the completion of the case, all tax debt will be paid or eliminated. There will be no tax debt that must be paid after the discharge. Also, any child support or alimony debt will have been paid during the life of the bankruptcy case. Therefore, there will be no such debt that must be paid after the discharge. A chapter 13 may allow for additional benefits such as paying one’s automobile fines. Another benefit of a chapter 13 is to allow debtors to eliminate second mortgages in certain situations. Also, any liens that are eliminated and discharged in a New Jersey chapter 7 and chapter 13, do not attach to property purchased after the bankruptcy discharge.
11 U.S.C, section 524, of the bankruptcy code is called the, “Effect of Discharge”. This code section prohibits certain acts by creditors after a bankruptcy discharge, for all chapters. Therefore, after a discharge, certain creditors’ acts may still be a violation of the bankruptcy code. If a creditor violates this code section, the debtor may bring them back into bankruptcy court for the reinforcement and sanctioning of such actions. In general, this section prohibits a creditor’s act to collect a debt that was discharged, or collect on a lien that was eliminated and discharged. This section also prohibits telephone calls, letters, lawsuits, etc., regarding debt that was incurred prior to the filing. There are other non-bankruptcy laws that may be breached by the same acts.
The other portions of this website explain, in detail, other effects of bankruptcy, including, but not limited to: rebuilding credit; obtaining debt after bankruptcy; how to recover; and what to expect.