NJ. Lawyer Explains The Chapter 7 Process
The most prevalent type of bankruptcy filing in New Jersey are Chapter 7, Chapter 13 and Chapter 11. People refer each bankruptcy type as “chapters” because the bankruptcy code reflects the law of each chapter, in the actual chapter number of the code. In other words, chapter 13 laws are located in chapter 13 of the bankruptcy code, which is after chapter 12 of the code.
Chapter 7 is referred to as a liquidation bankruptcy, which is intended to discharge (eliminate) certain debt. An individual person and/or a partnership, or any other corporate type entity may file for chapter 7 bankruptcy protection. Typically, individuals file for chapter 7 protection to eliminate unsecured debt, such as credit card debt and personal loans. People can also discharge (eliminate) secured loans, such as auto loans. However, if you want to keep the collateral, such as an auto, one must continue making the monthly payments.
The chapter 7process will be complete approximately four months after the filing. When considering whether to file for bankruptcy protection, one should seek the counseling of an experienced bankruptcy lawyer. A lawyer will determine if one meets the criteria. Also, an attorney will counsel a person about the consequences of any pre-filing transfers, earned income, receipts of money and asset values that are problematic. Maybe the debtor should wait to file, in order to save assets, or meet the criteria.
Prior to filing the bankruptcy petition with the court, each debtor must complete pre-filing credit counseling, which consists of answering questions and discussing their financial situation with a court approved counseling agent. The counseling may be completed online. The counseling takes about one and one half hours. After the counseling, the agency emails the debtor a certificate reflecting that the credit counseling is complete.
A bankruptcy petition must be completed and filed with the court, together with the counseling certificate. The petition must include household income, expenses, list of creditors and assets. One must also provide various information about property transfers and finances. After the petition is completed , the debtor must review and sign the petition. Experienced bankruptcy lawyers file the petition from their bankruptcy software. However, the petition may be filed with the clerk of court, by submitting paper documents.
A chapter 7 trustee and judge is assigned to each filed case. A trustee’s job is to determine if any property may be sold due to a substantial asset value that may not be fully exempt. Additionally, the trustee advises the judge of his recommendation as to whether a debtor should be granted a discharge of debt. The case is complete when the order of discharge is entered. However, due to atypical circumstances, the order of discharge may be delayed.
The trustee reviews the bankruptcy petition and the documents hereinafter stated: last three years of income tax returns; any and all of the debtor and spouse’s pay stubs, covering the six months prior to the filing; statements of all investments; valuation of real estate; mortgage payoff statement; child support orders; all bank statements for the six months prior to the filing; and, possibly other related documents. Lawyers typically ask for such documents prior to preparing the petition.
After the petition is filed, the court will automatically schedule a 341(a) Creditors’ Meeting before the trustee. The hearing is not in a courtroom and no judge may attend the hearing. The debtor and her attorney attend the hearing, which is located in a classroom setting. The appearance of any creditor is very unusual. Typically, the only creditors having personal issues with the debtor, such as an ex-spouse, appear at the hearing. The trustee will ask the debtor a series of questions about their finances, assets and the information contained on the petition and above referenced documents. Typically, the judge will enter an order discharging debt in about two and one half months after the hearing.
Please note that a person may file a Reaffirmation Agreement with the court regarding their auto financing. This is explained in another part of this website. Also, although very unusual, if the there is an irresolvable issue regarding a creditor, the debtor may need to handle such matters in court. Additionally, if there are funds to distribute to creditors, which is also unusual, the trustee must provide the court with an accounting, that must obtain the court’s approval. However, under the ladder scenario, the order of discharge will not be delayed.
Contact Attorney Robert Manchel at 866 503 5644.