NJ. Bankruptcy Attorney Explains What Happens To A Person Who Owes A Debt With Someone Who Filed For Bankruptcy Protection in New Jersey.
Two people that owe a joint debt to a New Jersey creditor, are both responsible for the entire debt. The creditor may sue each person for the entire debt, or any portion of the debt. However, obviously, the creditor may not receive more than the total amount due.
Lets assume two people owe the same credit card debt, but only one files a New Jersey chapter 7 bankruptcy case. The person that files the bankruptcy case is called a bankruptcy debtor. Pursuant to the bankruptcy Automatic Stay Provision, after the bankruptcy filing, the creditor may no longer collect the debt from the bankruptcy debtor. Immediately upon the bankruptcy filing, the creditor’s action to collect the debt from the bankruptcy debtor must cease, no matter the status of the collection process. This means that if the bankruptcy case is filed after a lawsuit has commenced, the lawsuit must be dismissed as to the bankruptcy debtor, only, after the bankruptcy filing.
However, the bankruptcy filing has no effect on the creditor’s ability and right to continue and/or pursue the collection of the same debt against the non bankruptcy filing joint debtor. This means that after the bankruptcy filing, the creditor may commence and/or continue a lawsuit against the non bankruptcy filing joint debtor, only, without limitation.
However, in a New Jersey chapter 13 case, the bankruptcy laws are different regarding two people that owe a joint consumer debt, when only one debtor files for bankruptcy protection. The Chapter 13 bankruptcy code includes additional protections as to the non bankruptcy filing joint debtor, who owes a joint debt with a chapter 13 debtor. The chapter 13 “Co-Debtor Stay” prohibits a creditor from pursing and/or collecting a debt from the non bankruptcy filing joint debtor, who has not filed for bankruptcy, in connection with a joint consumer debt.
This means that the creditor must cease any and all collection efforts against the both, the non bankruptcy filing joint debtor and the chapter 13 bankruptcy joint debtor, upon the bankruptcy debtor’s bankruptcy filing. Such a stay applies against the non bankruptcy filing joint debtor for the entire bankruptcy case, or until the creditor requests permission from the bankruptcy court to proceed against the non bankruptcy filing joint debtor. Therefore, if the creditor takes no action to proceed against the non bankruptcy filing joint debtor, the creditor may pursue such person for the entire debt balance, after the bankruptcy case is either dismissed or discharged.
A creditor may proceed against the non bankruptcy filing joint debtor by requesting permission from the bankruptcy court to collect the amount that the bankruptcy debtor is not paying to the creditor, through his bankruptcy plan. Consequently, if the bankruptcy debtor is not paying any of the debt, the creditor will likely be granted permission to collect the entire debt from the non bankruptcy filing debtor, while the case is pending. If the bankruptcy debtor is paying back 100% of the debt, it is unlikely that the court will permit the creditor to pursue the non bankruptcy filing joint debtor.
You may call attorney, Robert Manchel, at 866 503 5644, to discuss your New Jersey. bankruptcy law questions.