New Jersey Bankruptcy Blog

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.

A chapter 13 debtor (person filing for bankruptcy) at some point may no longer be able to make their monthly trustee payments due to various factors, such as a reduction in income, higher expenses, etc.
The bankruptcy code permits a debtor to file a modified plan based on a number of circumstances. However, the amount of the monthly payment may not be permitted to change.
A portion of the monthly trustee payment may include funds that will be paid to various creditors, such as payments to the mortgage company for pre-filing mortgage arrears. A portion of the trustee payment may be paid to an auto finance company for auto arrears. There may also be disbursements to unsecured creditors, (ie. credit card companies), that are paid pro-rata.
If a debtor is no longer able to continue paying the same amount to the trustee, typically he will not be able to reduce the payment by paying less to the mortgage company if he wishes to keep the house. He may be able to eliminate the mortgage payment if he decides to surrender the house. This same analysis applies to payments to the finance company for a vehicle.
A debtor may possibly reduce their monthly payment by extending the number of months of the plan to a 60 month plan, which will allow for a reduced monthly payment by paying the funds over a longer time period. Please note that this may not be possible.
If no trustee funds are to be paid to unsecured creditors, under the original plan, then it is likely that no payment will be required to be paid to unsecured creditors under the modified plan in the event that the debtor’s income is reduced. It is also possible to modify the plan to reduce or eliminate the amount of funds that will be paid to the unsecured creditors under the modified plan. However, if the amount of funds paid to the unsecured creditors is a result of substantial assets at the time of the bankruptcy filing, a modified plan will not permit the debtor to reduce the amount that is required to be paid under the original plan.
Depending on the judge and the trustee administering the case, a plan may not be modified to less than a 60 month plan if the debtor’s household’s income was more than the average NJ household’s income of the same number at the time of the initial bankruptcy filing.
Robert Manchel,  NJ bankruptcy lawyer, may be contacted at (866) 503-5655 to answer your bankruptcy questions.