Bankruptcy helps debtors in New Jersey get out of debt they can no longer handle. Debtors have the option of filing several types of bankruptcy, the most common being Chapter 7 and Chapter 13. Chapter 7 absolves filers of the most debt, but not all debts can be removed.
Debts that get erased under Chapter 7
When debtors file bankruptcy, they pay a fee and fill out a petition that includes secure and unsecured debts as well as non-exempt assets. A secured debt means debts backed by collateral, such as a mortgage or a vehicle loan. An unsecured debt has no collateral attached to it, such as medical debt or credit card debt.
Some debts that can be erased by Chapter 7 include medical bills, past-due utilities, business debt, auto accident claims that don’t involve DUI, non-fraudulent debt from bounced checks and credit card bills. While Chapter 7 bankruptcy erases some secured debt, the debtor must be willing to relinquish the collateral attached to the debt. Debtors may reaffirm certain secured debts that they don’t want discharged, but they must maintain payments to keep the collateral.
Debt that don’t get erased
Each state sets its own laws for debts that get discharged in Chapter 7, but most states have similar debts that can’t be discharged. Chapter 7 commonly does not remove liens that remain on the collateral, and the liens still could remain even after the discharge.
Bankruptcy usually does not remove current tax debt but may remove past-due taxes. Chapter 7 also does not eliminate debt arising from malicious actions, legal fines issued as punishment such as traffic tickets, criminal restitution, child support and alimony. Debts accrued after filing the petition usually do not get removed, and the court could consider them fraudulent if listed within 90 days of filing the petition.
While debtors may file bankruptcy on their own, laws vary and can confuse those not familiar with them. Hiring a lawyer may lower the risks of a case getting dismissed.