Immediately upon a NJ. bankruptcy filing of any chapter, the Automatic Stay Provision of the bankruptcy code applies, thereby protecting the debtor (person filing) from the creditors’ collection efforts. This means that no matter what type of bankruptcy case is filed, no creditor may proceed or commence a lawsuit against the debtor for money or property.
The Automatic Stay Provision stops the following actions: creditors’ correspondence, such as telephone calls and collection letters; bank and property levies; wage garnishments; lawsuits; utility shutoff; auto repossessions; foreclosure actions; prevent drivers’ license suspension and/or reinstate drivers’ license, under certain circumstances; prevents sale of property; filing of liens; possible limited protection from support arrears; and, delay collection from student loan creditors.
The Automatic Stay works as follows. If the bankruptcy petition is filed prior to the creditor commencing a lawsuit against the debtor, the creditor may not file the lawsuit. Immediately upon the bankruptcy filing, the lawsuit process stops. If the debtor files a bankruptcy case, after the lawsuit is filed and before the answer is due, the debtor need not file an answer. If the debtor files the bankruptcy petition after the creditor obtains a judgment from the lawsuit, the creditor may not attempt to collect money on the judgment.
A finance company may not repossess an auto if a bankruptcy case is filed, after the debtor is behind with payments, but before the auto is repossessed. If the auto is repossessed and not yet sold, the bankruptcy filing, may allow the debtor to obtain possession of the vehicle, under certain circumstances.
CHAPTER 7
The chapter 7 process is about four months long. After four months from the filing, the debtor is completely out of the bankruptcy case, with an order of discharge. Discharge means that the debt is eliminated. The discharge order completely eliminates certain debt, including all unsecured debt. Unsecured debt is debt that is not connected to collateral or property, such as credit card debt and personal loans. A chapter 7 does not require any court or trustee payments.
The bankruptcy code has a list of specific types of debt that are not discharged, including, but not limited to, child support, alimony, some types of tax debt and student loan debt.
A debtor may eliminate a mortgage if he does not wish to keep his house. Additionally, auto debt may be eliminated, if you are surrendering your auto. A chapter 7 will not permit someone to save an auto or house if he is behind with payments.
A debtor may possibly eliminate liens, as well.
CHAPTER 13
A chapter 13 requires monthly payments to a trustee for 36 to 60 months. The number of trustee payments vary based on numerous factors.
A person that does not meet the chapter 7 criteria, due to excessive income, may file a chapter 13 to pay back and/or eliminate a portion of their unsecured debt.
Also, a chapter 13 may permit someone to save a house from foreclosure and a car from repossession. Chapter 13 offers various options to save a house from foreclosure. However, the most likely options are to cure the mortgage arrears through the bankruptcy plan or obtain a loan modification. An automobile may be saved from repossession by way of various options. The most used options are to pay the finance arrears through the bankruptcy plan or pay off the total financing balance through the bankruptcy plan.
Under certain circumstances, a debtor may be permitted to eliminate a second or third mortgage. A debtor may be able to eliminate a lien too.
Bankruptcy lawyer, Robert Manchel, Esq., is available for a free consultation.