NJ. Bankruptcy Lawyer Explains When A Person May Keep their Financed Washer and Dryer In A Chapter 7.
Typically, in a New Jersey chapter 7 bankruptcy case, the debtor discharges (eliminates) all unsecured debt. Unsecured debt is any debt that is not connected to any property, such as credit card debt, or a personal loan. Generally, a credit card charge does not require the debtor to include any property as collateral. In others words, the debtor does not agree to give the creditor a lien in property that may be repossessed, if the debt is not paid. Also, credit card debt consists of borrowing funds for services, as well, which the creditor cannot lien
Secured debt is money that is borrowed, in which the debtor, grants the creditor a lien in certain property, such as a mortgage on a house and financing on an automobile. In a chapter 7, in New Jersey, secured debt is discharged as well, as unsecured debt. Discharge of the debt means that the creditor may not sue the debtor for the money that is due. However, if the debtor does not make payments on his mortgage, after the discharge, the mortgage company may take the property, only, by filing a foreclosure action. Auto financing is treated the same in that if a debtor does not make his auto finance payments, after the discharge, the finance company is permitted to repossess his car, only.
Even though a chapter 7 discharges the secured debt, such as a mortgage and/or auto financing debt, typically, the debtor may keep the house, or an auto, if the debtor continues to make timely payments on the secured debt, (ie: mortgage; auto payments). Generally, even though the debt is eliminated, the debtor must continue to make timely monthly payments to prevent a repossession and/or a foreclosure action, after the discharge.
What type of debt is connected to a washer and dryer? Typically the debt is secured debt, which grants the creditor a secured interest in the washer and dryer. The debt is generally secured, pursuant to state and bankruptcy laws, because the large item was purchased with the financing and the debtor grants the creditor a security interest in the items. Please note this explanation is simplified and the result depends on each transaction.
As a result, if the debtor falls behind with his payments, after the chapter 7 bankruptcy discharge, the creditor may not sue the debtor for the debt. However, the creditor may file a New Jersey State Court lawsuit ordering the debtor to turn over the appliances. Depending on the value of the items, it is unlikely that the creditor will pursue such action, as a result of the cost of lawyers and other lawsuit costs. Also, if the payments are not made in compliance with the contract, the warranty will likely be invalid.
Robert Manchel may be contacted at 866 503 5644 to discuss your NJ. bankruptcy law questions.