Chapter 7 Bankruptcy Attorney – New Jersey

The legal world captions chapter 7 bankruptcy as a “Liquidation Chapter”. However, ironically, it is very unusual that a debtor is required to sell any property. A typical case, which does not require the sale of an asset, is called a “no asset case”. The atypical case, which allows the trustee to sell an asset is called an “asset case”. The chapter 7 case takes about four months from the bankruptcy petition filing date, until the completion of the case. No bankruptcy payments are required and typically there is only one hearing that must be attended by the debtor.

Upon the filing of a Chapter 7 bankruptcy case, the Automatic Stay Provision of the bankruptcy code, 11 U.S.C. 362 (a), acts as a stay, which immediately stops the following:

• auto repossession;
• utility termination / restore energy;
• lawsuits, no matter the status;
• wage garnishments;
• bank levies;
• telephone calls;
• collection letters and all creditors’ communications
• foreclosure action;
• reinstatement of driver’s license under certain circumstances.
• Getting out from under credit card debt
• Getting a fresh financial start

In a chapter 7 case, the debtor (person filing) provides their attorney with the required documents and the petition is prepared, signed, and filed with the court. A trustee is arbitrarily assigned to administer the case and determine if the debtor meets the chapter 7 criteria for a discharge.  The trustee also determines if the debtor owns any property that has a substantial value, which may be sold. The trustee rarely sells a debtor’s property. After the filing, the debtor’s financial information, documents and the petition are provided to the trustee for evaluation.

About thirty days after the bankruptcy filing, the debtor and her attorney attend only one hearing, which is called a 341(a) hearing or a Meeting of Creditors. Generally, only the debtors and the debtors’ attorney appear before the trustee. Although the hearing may be located in the courthouse, it is not held in a courtroom and is located in a classroom like atmosphere. No judge appears at the hearing, and typically no creditors appear, as well. Generally, the trustee asks the debtors questions for about ten minutes. About 90 days after the hearing, the case discharge order is issued and the case is totally complete. Although typically the chapter 7 process proceeds smoothly, there may be various issues or other problems that occur. Such matters may be avoided by a knowledgeable and experienced bankruptcy lawyer, that knows what to look for and ask a client.

Typically a chapter 7 debtor’s financial problems are related to their inability to make monthly payments on their unsecured debt, such as the following: credit cards; personal loans, funds owed to auto finance companies regarding a repossessed auto, etc. Unsecured debt is debt that is owed to a creditor which does not maintain a lien on any property, that is called collateral. No matter the reason for the filing, the debtor must include all of their debts, liabilities, household income, household expenses and assets on the bankruptcy petition. Listing an asset on the petition does not mean the trustee or court will take the asset. In fact, the taking of an asset is extremely unlikely.

No payments are required to be made in connection with a chapter 7 case. At the completion of the case, the debtor is granted a discharge. A discharge is a court order that eliminates certain debt through eternity and permanently prevents the creditor from pursuing and collecting the debt. This means that the creditor of a discharged debt, may never attempt to collect the money by any means, including a wage garnishment, lawsuit or bank levy. Typically, all unsecured debt is discharged in a chapter 7 case filing. However, there may be exceptions such as fraud, liens, etc.

The bankruptcy code specifically excludes certain types of debt from discharge, which means specific types of debt may still be owed after the bankruptcy case is complete. The various types of debt that are not discharged include, but are not limited to, various taxes, alimony, support and student loans. Also, at the completion of the case, the general discharge order does not eliminate liens obtained by unsecured creditors. An unsecured creditors’ lien is obtained a judgment after prevailing with a lawsuit. Thereafter, the lien is typically filed with the state court against a house. However, the debtor may possibly be able to eliminate and remove certain liens, or portions of liens, by filing additional documents with the bankruptcy court. Such a lien that is not eliminated will likely be paid when the house is sold in the future.

Can I keep my house in a chapter 7 case? Although every unusual, a trustee will only sell a house, if there is substantial equity in the property, that is not totally exempt. In other words, if there is substantial value in property, that is considerably in excess of the mortgage payoffs, the trustee may possibly be permitted to sell a house. In other words, if the property is not totally exempt, under the bankruptcy code, the trustee may possibly sell the property. Other parts of this website explain how exemptions work, in detail. A chapter 7 trustee does not concern himself with a house, if the house is completely exempt.

A chapter 7 case will not permanently save a person’s house from foreclosure, in the event of mortgage payment arrears. If a debtor owns a house with low to no equity, that is totally exempt, but the debtor is behind with mortgage payments, the mortgage company will handle the default issues and not the trustee. Also, if the debtor is behind with mortgage  payments, a chapter 7 filing will only temporarily stop and delay the foreclosure action, by way of the bankruptcy Automatic Stay Provision. In the event of mortgage payment arrears, the mortgage company may ask the bankruptcy court judge to pierce the Automatic Stay Provision, which could authorize the mortgage company to proceed or commence a foreclosure action. Additionally, in the event of mortgage arrears, the mortgage company may wait until the case is completely done, to commence and/or proceed with a foreclosure action. A chapter 13 case is used to allow a person to save their house from foreclosure in the event of such payment arrears.

If the debtor is current with her mortgage payments, the mortgage company will not commence a mortgage foreclosure action and will allow the debtor to keep her property. Additionally, as stated above, if the debtor’s property does not maintain substantial value and is completely exempt, the trustee will not sell the property. Most chapter 7 cases describe the above scenarios, wherein the debtor’s property will pass through the bankruptcy case and the debtor may keep the property after the discharge, as long as the monthly mortgage payments are made. There are always exceptions and other related issues.

Can I keep my vehicle in a chapter 7 case? In General, the handling of an automobile in a chapter 7 case is similar to a house and mortgage. Although very unlikely, the trustee is only interested and concerned about an automobile that has substantial equity and is not totally exempt. Under this scenario, the trustee may be permitted to sell an automobile. In the event the debtor is behind with the auto lease or finance payments, the lease and finance companies typically proceed in the same manner as the mortgage company. In most cases, if the debtor is current with the payments and the equity is low and totally exempt, the vehicle passes through the bankruptcy case and the debtor keeps the auto. If the debtor wishes to keep the auto, the payments must be current. The handling of an auto has additional laws and possible requirements that are unrelated to a mortgage, including, but not limited to, a Reaffirmation Agreement. Reaffirmation Agreements are explained in other portions of this website.

Prior to the bankruptcy filing, the debtor and his attorney should research and obtain the estimated value and equity of the house and vehicle, to determine if a chapter 7 filing is prudent. In the event that any property, such as a house and/or an auto, maintains too much equity, a person would likely not file for chapter 7 bankruptcy protection, to avoid any possible trustee sale. In the event of mortgage and/or auto payments arrears, the debtor may wish to file a chapter 13 to save the property. Again, although the house, car, mortgage and auto financing creditors are included on the bankruptcy petition, does not mean a debtor may not keep his vehicle and house.

Oddly, chapter 7 also discharges and eliminates secured debt and the debtor’s personal liability, such as a mortgage, auto financing and furniture debt, to the extent that such creditors cannot pursue the debtor for collection of the money and the balance due. However, this does not mean that a person can get a free house, automobile, and/or any other property. This means that the general discharge order prohibits the secured creditor from collection of the money owed, in the event a debtor is behind with payments. However, in the event of mortgage arrears, the mortgage company, is permitted to pursue a lawsuit (foreclosure action) against the debtor for the possession of the property (house) (collateral), only. After the discharge, the mortgage company is not permitted to attempt to collect the money and debt, but only pursue possession of the house, in the event of mortgage arrears. In most situations, the same laws apply to an auto lease and finance companies regarding repossession. However, there are additional laws related to auto financing and leasing that must be handled in certain situations. Please note that certain finance and lease companies are more lenient than others regarding repossession. The laws related to furniture financing are similar to vehicle financing. However, the handling of such creditors is slightly different.

Proactive New Jersey Chapter 7 Bankruptcy Lawyer

The legal proceedings of bankruptcy can be confusing to a layperson. New Jersey bankruptcy attorney Robert Manchel explains the law in plain language so that you can make informed decisions about which course of action will be best for you and your family. His New Jersey bankruptcy law firm helps people living in Atlantic, Burlington, Camden, Cumberland, Gloucester, Hunterdon, Mercer, Middlesex, Monmouth, Ocean, Salem, and Somerset Counties. For more information on how Robert Manchel can help you get control of your finances, call him at 866.503.5655.

You may call 866.503.5655, to contact the Robert Machel, to discuss your chapter 7 questions.