Chapter 7 Bankruptcy

Any debt that is discharged in a chapter 7, means that the creditor can never attempt to collect the money owed from the debtor. If a secured debt such as a mortgage is discharged in bankruptcy, the mortgage company cannot attempt to collect the money from the debtor. However, if the debtor does not pay the mortgage, the mortgage company is permitted to take the collateral and foreclose on the house.
If the debtor meets the criteria of a chapter 7 bankruptcy filing and everything goes perfectly, there is certain debt that will not be discharged (eliminated). This means that any creditor that is owed debt, which is non-dischargeable, may continue to collect the money from the debtor after the chapter 7 case is complete, as if no bankruptcy case was filed. Most of the type of debt that is non-dischargeable includes the following:

1. most taxes, including, but not limited to, recently incurred income taxes, sales’ taxes, and taxes that an employer owes to the government that were withheld from employees;
2. any debt that was incurred for the payment of taxes that cannot be discharged;
3. domestic support obligations that are typically incurred in connection with a divorce;
4. debts incurred from causing injury to another from operating a motor vehicle, while intoxicated;
5. debts incurred by borrowing funds from certain pension plans;
6. certain debt that is not properly listed on the petition;
7. any debt, whereby the debtor specifically signs a Reaffirmation Agreement, which is approved by the court;
8. student loan debt;
9. certain debt due to a government, such as fines, penalties, forfeiters and criminal restitution debt;
10. debt incurred by fraud;
11. debt incurred by the willful and malicious injury to a person or property;
12. real estate association fees that become due after the filing and prior to the transfer of the deed from the debtor to a third party.

Please note that there are numerous exceptions and variations of the above list.
NJ Bankruptcy Lawyer Robert Manchel can be reached at 1 (866) 503-5655 to explain how you may benefit from a chapter 7 case or if bankruptcy protection is applicable in your case.

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.

Discharge means that the money owed on a certain debt is eliminated- in that the creditor may never pursue the debtor for payment of the debt. In a chapter 7, the debt that is eliminated does not eliminate the lien that is associated with the debt.
Liens may be created voluntarily or involuntarily. Two examples of a voluntary lien are a mortgage and auto financing. Typically at the time of the purchase the buyer permits the creditor to place a lien on the collateral, which is the property purchased. A creditor may also obtain a judgment by successfully suing the debtor and placing the lien against the debtor’s real estate in New Jersey. An example is a credit card company that successfully sues a person in court. There are statutory liens that are created by law automatically by performing a specific act. The above is not a complete list of any and all lien types.
A chapter 7 order discharging a debt does not eliminate the type of liens that are explained in the paragraph above. In other words, a general chapter 7 discharge will discharge the money owed on the mortgage, but will not eliminate the mortgage, which is a lien on the house. This means that the mortgage company can never pursue the homeowner for the money owed on the loan. However, if the debtor does not keep the mortgage payments current, the mortgage company may pursue a foreclosure action and take the debtor’s house, which is the collateral.
It may be possible to eliminate or reduce a judgment lien in the chapter 7 bankruptcy case by filing a separate motion and request with the court. A debtor may not reduce or eliminate a voluntary lien in a chapter 7, with possible exceptions.
Please note that there are a number of factors that effect a debtor’s ability to modify a loan that are not specifically discussed in this blog.
Robert Manchel, NJ bankruptcy attorney, may be contacted at (866) 503-5655 to discuss your financial standing and how bankruptcy protection may be applicable to your personal situation.

Many people enjoy motorcycles in their free time. Here we will discuss different scenarios for motorcycles in a Chapter 7 Bankruptcy Case.
The following pertains to a single Chapter 7 debtor, who is the sole owner of a motorcycle, that is owned free and clear of liens and financing
Assuming the motorcycle is owned free and clear of liens and financing, the debtor may keep his motorcycle in a chapter 7 if the motorcycle is fully exempt. In other words, if the amount of exemptions available to apply towards the motorcycle are in excess of the vehicle’s fair market value.
As explained in a separate part of my website, a debtor may apply his federal bankruptcy exemptions to personal property and real estate. The amount of exemptions is based on the type of personal property. The Federal exemptions in the bankruptcy code are modified periodically. At this time, a debtor is permitted to apply $3,450 towards a motor vehicle, plus $1,150 towards any property. Additionally, the bankruptcy code permits a person to use up to $10,825.00 of the exemptions that are not applied or needed towards their residence. Therefore if a single debtor, who is the sole owner of a motorcycle, does not need to apply the aforementioned exemptions towards any other property, he may be able to keep a motorcycle with a retail fair market value of approximately $15,425.
The following pertains to an individual chapter 7 debtor with motorcycle financing
In general, a chapter 7 debtor should not be able to afford motorcycle financing payments, which is typically considered a luxury item in bankruptcy. Therefore, the debtor can surrender the motorcycle and eliminate the financing debt.
In order to keep the motorcycle, the debtor must be able to fully exempt the retail fair market value of the vehicle, as explained above. However, the amount of the exemption(s), must only be applied towards the equity of the motorcycle’s retail value. This means that the exemptions explained above only need to cover the difference between the retail value, minus the financing payoff amount. If the retail value is $10,000 and the financing payoff is $7,000, than only $3,000 must be exempted.
In addition to the application of exemptions, the debtor may need to comply with the laws concerning reaffirmation agreements.
Please note that the above explanation is general information, which may not apply in your particular circumstances. Also, it is very unusual to have exemptions of $15,425 available for a motorcycle.
Robert Manchel, NJ Chapter 13 Bankruptcy Attorney, provides expert bankruptcy advice at (866) 503-5655. Call today to discuss your personal situation and bankruptcy protection.

What does “Abandonment” mean?
If a chapter 7 debtor owns real estate, the trustee must determine if he can sell or abandon his right to the property.
The trustee will perform a liquidation analysis to determine if thee is sufficient equity in the real estate that will allow him to sell the property. If the trustee determines that the real estate has no value or inconsequential value to the bankruptcy estate, he must notify the court of same. The trustee’s notice to the court that he is abandoning his right to the real estate is called a Notice Of Proposed Abandonment.
The trustee abandoning real estate is good for the debtor, not bad. This means that the trustee does not want anything to do with the property and he is abandoning his right to the property. This does not mean that the debtor must abandon the property. When the trustee abandons his right to the property, the property comes out of the bankruptcy estate and vests with the home owner(s).
What is the reason for such notice? The trustee is required to forward the proper notice to the court with a copy to the debtor and all interested parties. Although extremely unusual, any party has a right to file an objection to the trustee’s right to abandon the real estate. If no objection is filed with the court upon a certain date, the abandonment takes effect prior to the scheduled court date.
Please do not rely on this blog. You must contact your attorney to discuss this very important matter.
You may contact New Jersey bankruptcy lawyer Robert Manchel at (866) 503-5655 to discuss your personal situation and how bankruptcy protection may apply in your individual case.

What happens if my income changes after I file a chapter 7 bankruptcy case?
The criteria of a chapter 7 must be met at the time of the filing. One of the criteria is that the debtor’s projected household monthly income must be less than the household’s necessary and reasonable monthly expenses. The expenses include necessities such as the mortgage, auto, food, clothing, transportation, and utilities. The expenses do not include payments on credit cards. In other words, whether or not the projected household income is not sufficient to pay all of the projected reasonable and necessary monthly expenses.
The projected income is based on the debtor’s household’s income at the time of the bankruptcy filing. If the debtor lost his income one month prior to the filing and is receiving unemployment, the unemployment income is included as part of the household’s income. If the debtor obtained employment two days prior to the filing, the new unemployment income is included in the projected household’s income. If the debtor is unemployed at the time of the filing and obtains employment two weeks after the filing, the new employment income is not part of the projected income, but rather the unemployment.
Also, the debtor’s household’s monthly income for the six months prior to the filing must be less than the average income of a household of the same size in New Jersey for the six month period. Or, alternatively, if the income is in excess of the New Jersey’s average, the criteria may still be met if the household income is less than their monthly expenses for said six months prior to the filing. The expenses are based on the IRS allowable standards based on the household size.
The income for the six month period is based on the amount earned during the six months prior to the filing. If the debtors’ income changed during the six month period, the changed amount must be averaged into the calculations. However, if the debtor loses his job or his income is substantially reduced prior to the filing, the debtor may be permitted to argue that due to the substantial change in circumstances of income, the court should not consider this criteria and look only to the projected income and expenses. If the debtor’s income is substantially reduced after the filing, the debtor may also argue substantial changes in circumstances. If the debtor’s income increases after the filing, the increased income will not affect the result of the criteria.
Robert Manchel, New Jersey chapter 7 bankruptcy lawyer, can be reached at (866) 503-5655, to answer your questions about bankruptcy protection.