The State of New Jersey may impose a state surcharge against an individual for certain driving offenses and for an accumulation of points. New Jersey may suspend a license based on failure to pay surcharges. The state may also file a lien against an individual in connection with the surcharge fees. The issue regarding the effect of bankruptcy on surcharges has been litigated for years and continues to be unsettled.

Chapter 7

In a chapter 7 bankruptcy case in New Jersey, the debtor’s surcharges are possibly discharged. Presently, the surcharges may be are discharged. However, New Jersey may at any time in the future decide that the surcharges are no longer discharged. Therefore, the discharge is not definite. I understand that this sounds crazy.

If the debtor’s license is suspended solely due to the failure to pay surcharges, a chapter 7 filing, will permit the reinstatement of their license. If the license was suspended for any other reason, a chapter 7 will not permit the reinstatement of the license. Again, New Jersey, at any time in the future may decide to suspend their license.

Chapter 13

A New Jersey chapter 13 bankruptcy case permits the debtor to reinstate their license, immediately upon the filing, if the suspension was solely based on the debtor’s failure to pay state surcharges. A chapter 13 treats surcharge fees as unsecured debt. Therefore, surcharge fees are dischargeable in a New Jersey chapter 13 bankruptcy case. This means that it may be possible to eliminate the fees without having to pay any portion. After discharge, the State of New Jersey may never pursue the debtor for the debt and/or suspend his license for the debt, which is permissible in a chapter 7.

The state may file a lien against the debtor for surcharge fees. However, the debtor may eliminate the lien if there is no equity in the debtor’s property after subtracting the mortgage payoff from the fair market value of the property. In words, the payoff must be more than the property value.

Contact a NJ Bankruptcy Attorney

The Law Offices of Robert Manchel have been handling bankruptcy cases in New Jersey for 18 years. If you have any questions about your chapter 7 or chapter 13 bankruptcy proceedings or you are considering filing for bankruptcy, contact Robert Manchel for an evaluation of your case. Browse our website for more information, fill out our online contact form, or call us at (866) 503-5655. Free consultations.