The Fresh Start of Chapter 7 Bankruptcy
What is Chapter 7 bankruptcy?
Bankruptcy is a process created by federal law that provides relief for debtors, who can either eliminate their debts or repay their debts. The Bankruptcy Code is divided into “chapters” for the various types of bankruptcies. A Chapter 7 “liquidation” is the process by which individual debtors are rid of many of their debts. A Chapter 13 “reorganization” is the process by which an individual or a business prepares a plan for repayment of creditors. Bankruptcy is also intended to protect creditors’ interests by either dividing a debtor’s assets for repayment or creating a plan of repayment.
How does a Chapter 7 debtor get a “Fresh Start” to begin a new financial life?
Chapter 7 debtors seek to “wipe the slate clean” and start new financial lives. In fact, one of the goals of the Bankruptcy Code is to give debtors a “fresh start,” without the burden of overwhelming debt. Once a Chapter 7 debtor has received a “discharge” in bankruptcy, he is no longer responsible for most of his debts. Debts that cannot be discharged or eliminated in bankruptcy include student loans, most tax liabilities, and child support.
The Bankruptcy Code permits debtors to keep some assets or property that are necessary to begin with a “clean slate” or to make a “fresh start.” These assets and items are called “exempt property.” A debtor may or may not be permitted to keep his home; this depends on a number of factors, including the equity in the home and the “homestead exemption” laws applicable in the state.
What debts can be discharged in Chapter 7 bankruptcy?
Generally, most unsecured debt is dischargeable in Chapter 7 bankruptcy. A Chapter 7 debtor is usually granted relief from having to pay the following types of debts:
- Unsecured or personal loans
- Medical and dental bills
- Court ordered judgments
- Repossession deficiencies
- Claims in automobile accident or negligence cases
- Motor Vehicle Commission Surcharges
Depending on the circumstances, a debtor may be granted a discharge of the following types of debt:
- Divorce property settlements
- Debts incurred by dishonesty, fraud, or concealment
- Amounts received by embezzlement
- Judgments due for intentional or willful torts
- Some taxes, including some “old” income taxes
- Some student loans, but only in very limited “undue hardship” situations
- Balances due on credit cards, except purchases made with the intent to file bankruptcy
Chapter 13 Bankruptcy
A Chapter 13 Bankruptcy can best be described as a court supervised payment plan which can last for up to 60 months. Most often the single payment you make to the Chapter 13 Trustee is significantly less than the total you owed to your creditors prior to the bankruptcy. Additionally, only a Chapter 13 Bankruptcy offers you the opportunity to repay mortgage arrears in full over 60 months and stop foreclosure or to “Cram Down” or “Strip Off” fully unsecured mortgages or lien.
A Chapter 13 bankruptcy provides you with the power to stop or prevent foreclosures and sheriff’s sales and stop repossessions or utility shutoffs while catching up on secured debts.
Chapter 13 is not suitable for everyone. To be successful, you must have regular income and be able to resume your regular monthly payments on your home mortgage and auto loan within one month after the bankruptcy is filed and also have the ability to make an additional payment to the Chapter 13 Trustee toward your mortgage arrears.
How can Chapter 13 Bankruptcy help you?
• Stop Foreclosure and Sheriff Sales
Is your home currently in foreclosure or have you received notice of an impending sheriff’s sale? Filing a Chapter 13 bankruptcy will stop the foreclosure or sheriff’s sale any time prior to the sale of the house. The Chapter 13 filing will allow you to pay your mortgage arrears through the bankruptcy directly to your mortgage company.
• Stop Creditor Harassment
Are creditors calling you at home and at work? Are they contacting your friends and family members? Put an end to your creditor harassment by speaking with one of our New Jersey bankruptcy lawyers. Once you retain our office, you will be able to refer your creditors to us. The creditor harassment will stop immediately. Under some circumstances, this creditor harassment may be in violation of the Fair Debt Collection Practices Act (FDCPA) and you may have cause for further action.
• Stop Repossession
Are you behind on your automobile payments? Are you in fear that your car is near repossession? A chapter 13 bankruptcy can help save your car and stop the finance company from moving forward with repossession. Contact one of our New Jersey bankruptcy lawyers today and they can help you consolidate your past due payments as well as the balance on your car loan into the Chapter 13 bankruptcy. You will make one payment to the trustee and the finance company will not be able to move forward with repossession. Under some circumstances, our New Jersey bankruptcy lawyers may even be able to recover your car after repossession and consolidate the balance of your car loan.
• Prevent Utility Shutoffs
Worrying about utility shutoffs? Filing a Chapter 13 bankruptcy can stop creditors from shutting off your utility service. Contact one of our New Jersey bankruptcy lawyers today to prevent a disruptive utility shutoff before it’s too late. We have three offices in New Jersey to serve you better.
• Eliminate Debt
Debts like credit cards, pay-day loans, medical bills, law suits, utility bills, repossessions or foreclosure deficiencies can be eliminated for a fraction of what you owe.