Bankruptcy is the legal process that releases individuals or businesses from their obligation to repay certain debts. It is a crucial aspect of the bankruptcy process and provides a fresh start for debtors burdened by overwhelming financial obligations. For individuals considering filing for bankruptcy in New Jersey, learning about the procedure on how to get a bankruptcy discharge and the implications of applying for bankruptcy is important.
If you are burdened by unmanageable debts and considering filing for bankruptcy in New Jersey, it is essential to gain a thorough understanding of how bankruptcy discharge works. When you get the assistance of an experienced attorney, you position yourself for a successful discharge. Our team of skilled New Jersey bankruptcy attorneys at Straffi & Straffi Attorneys at Law can help ensure that you meet the eligibility criteria, follow the required steps, and are equipped for what happens after a bankruptcy filing. We can also help alleviate concerns such as the impact on your credit or what happens to your home equity in the event of a Chapter 7 bankruptcy. Take the first step towards regaining control of your financial future by scheduling a consultation with one of our attorneys today. Contact (732) 341-3800 to learn more about how we can help you.
What Is Bankruptcy Discharge?
A bankruptcy discharge is a court order that eliminates the debtor’s legal responsibility to repay certain debts. Once a debt is discharged, the debtor is no longer personally liable for it, and creditors are prohibited from taking any further collection actions or pursuing legal remedies to recover the discharged debt. The discharge is a powerful tool designed to offer debtors relief and a chance to rebuild their financial lives.
Bankruptcy discharge plays a vital role in the bankruptcy process as it provides debtors with a fresh financial start. By eliminating the legal obligation to repay certain debts, debtors can alleviate the burden of overwhelming financial obligations and achieve freedom from the constant harassment of creditors. The discharge helps individuals and businesses regain control over their finances, allowing them to move forward and rebuild their economic stability.
There are different types of bankruptcy discharge available under the bankruptcy laws of New Jersey. The most common types include:
- Chapter 7 bankruptcy discharge: Under Chapter 7 bankruptcy, eligible debtors can obtain a discharge of most unsecured debts, such as credit card debt, medical bills, and personal loans. A bankruptcy trustee assigned by the court will be tasked with selling the debtor’s non-exempt assets to repay creditors.
- Chapter 13 bankruptcy discharge: In Chapter 13 bankruptcy, debtors propose a repayment plan to repay a portion of their debts over a specified period, typically three to five years. Upon successful completion of the repayment plan, debtors may be eligible for a discharge of remaining unsecured debts that were included in the plan. A Chapter 13 discharge provides a structured approach to debt repayment while allowing debtors to retain their assets.
It is important to distinguish between the different types of bankruptcy discharge to be able to select the type of bankruptcy appropriate for your case. A skilled New Jersey bankruptcy attorney can help provide you with more information, evaluate your case, and determine the type of bankruptcy to file based on your circumstances.
|Types of Bankruptcy Discharge||Description|
|Chapter 7 Bankruptcy||Discharge of most unsecured debts. Non-exempt assets may be sold by a bankruptcy trustee to repay creditors.|
|Chapter 13 Bankruptcy||Repayment plan proposed by debtors to repay a portion of their debts over a specified period. Successful completion may lead to discharge of remaining unsecured debts included in the plan.|
Chapter 7 Bankruptcy Discharge
Chapter 7 bankruptcy, also known as “liquidation bankruptcy,” is a type of bankruptcy proceeding available to individuals and businesses in the United States. It involves the sale of the debtor’s non-exempt assets by a bankruptcy trustee, who then distributes the proceeds to creditors.
In a Chapter 7 bankruptcy, a debtor seeks relief from overwhelming debts by filing a petition with the bankruptcy court. Once the petition is filed, an automatic stay is issued, halting all collection actions by creditors.
A key aspect of Chapter 7 bankruptcy is the discharge of debts. Upon successful completion of the process, the debtor receives a discharge order from the court, relieving them of personal liability for most unsecured debts. This means the debtor is no longer obligated to repay those debts, and creditors are prohibited from taking further collection actions.
To qualify for Chapter 7 bankruptcy, individuals must meet certain eligibility criteria:
- Means Test: Debtors must pass the means test, which evaluates their income, expenses, and family size to determine if their income falls below New Jersey’s median income level ($83,898.00 for a single-earner household in 2023). If the debtor’s income is below the threshold, they may qualify for Chapter 7 bankruptcy.
- Credit Counseling: Debtors must complete a credit counseling course from an approved agency within 180 days before filing for Chapter 7 bankruptcy.
- Previous Bankruptcy Discharge: If an individual has received a Chapter 7 bankruptcy discharge within the past eight years or a Chapter 13 bankruptcy discharge within the past six years, they may not be eligible for another Chapter 7 discharge.
Timeline for Chapter 7 Bankruptcy Discharge
The timeline for obtaining a Chapter 7 Bankruptcy Discharge in New Jersey generally follows these steps:
- Filing the Bankruptcy Petition: Debtors must file a petition for Chapter 7 bankruptcy with the United States Bankruptcy Court in New Jersey. This initiates the legal process.
- Automatic Stay: Once the petition is filed, an automatic stay goes into effect, which halts all collection actions by creditors, including lawsuits, wage garnishments, and phone calls.
- Meeting of Creditors: Approximately four to six weeks after filing, debtors must attend a meeting of creditors. The bankruptcy trustee and creditors may ask questions about the debtor’s financial affairs.
- Debt Discharge: If no objections are raised, and the debtor meets all requirements, the court will issue a discharge order, typically within three to four months from the date of filing. It is important to note that a debtor’s non-exempt assets with value, as determined by the bankruptcy trustee, would be sold to pay off part of the debt before the discharge.
A Chapter 7 bankruptcy can be very helpful for individuals with great debt; however, before making any decisions, it is crucial to seek the help of an experienced New Jersey bankruptcy attorney. With the help of a bankruptcy lawyer, debtors can increase the possibility of a successful discharge and protect their interests. An attorney can also help with preparing the application as well as with communicating with creditors.
Chapter 13 Bankruptcy Discharge
Chapter 13 bankruptcy is a type of bankruptcy proceeding available to individuals in the United States. Unlike Chapter 7 bankruptcy, which involves the liquidation of assets, Chapter 13 bankruptcy allows debtors to create a repayment plan to gradually repay their debts over a period of three to five years.
In a Chapter 13 bankruptcy, the debtor files a petition with the bankruptcy court, outlining their financial situation and proposing a repayment plan. The repayment plan is based on the debtor’s income and is designed to repay a portion of their debts while allowing them to retain their assets, such as their home and car.
The repayment plan typically prioritizes secured debts, such as mortgage or car loan arrears, while unsecured debts, such as credit card debts and medical bills, may receive partial or even minimal repayment. The debtor makes regular payments to a bankruptcy trustee, who then distributes the funds to creditors according to the approved plan.
One of the key benefits of Chapter 13 bankruptcy is that it allows debtors to catch up on missed payments and avoid foreclosure or repossession of their assets. It provides a structured approach to debt repayment and offers individuals an opportunity to regain control over their finances while retaining their property.
To be eligible for Chapter 13 bankruptcy discharge in New Jersey, individuals must meet certain criteria, including:
- Regular Income: Debtors must have a regular source of income, such as employment or self-employment, to demonstrate the ability to repay their debts through a repayment plan.
- Debt Limitations: The total secured debts (such as mortgages and car loans) and unsecured debts (such as credit card debt and medical bills) must fall within the limits set by New Jersey bankruptcy laws.
- Credit Counseling: Debtors are required to complete a credit counseling course from an approved agency within 180 days before filing for Chapter 13 bankruptcy.
Chapter 13 Hardship Discharge
Aside from the more common repayment plan or Section 1328(a) discharge granted after completion of the plan, Chapter 13 allows for a hardship discharge under Section 1328(b). The hardship discharge is a special provision available under Chapter 13 bankruptcy that allows debtors to request a discharge of their remaining debts, even if they have not completed their full repayment plan. It is intended to provide relief to debtors who face extraordinary circumstances that make it impossible for them to continue making payments.
To qualify for a hardship discharge, debtors must demonstrate that their failure to complete the repayment plan is due to circumstances beyond their control and that they have made their best effort to fulfill their obligations. The court will review the debtor’s situation and evaluate factors such as illness, disability, or significant financial hardship that hinder their ability to continue with the plan.
If the court grants a hardship discharge, the debtor will be relieved of their remaining unsecured debts, such as credit card debt or medical bills, even if they haven’t fully repaid them. However, certain debts, such as child support, alimony, student loans, and certain tax obligations, are not dischargeable under a hardship discharge.
Timeline for Chapter 13 Bankruptcy Discharge
The timeline for obtaining a Chapter 13 bankruptcy discharge in New Jersey generally follows these steps:
- Filing the Bankruptcy Petition: Debtors must file a petition for Chapter 13 bankruptcy with the United States Bankruptcy Court in New Jersey. This initiates the legal process and establishes a repayment plan.
- Development of Repayment Plan: Debtors, with the assistance of their bankruptcy attorney, create a repayment plan that outlines how they will repay their debts over a period of three to five years.
- Confirmation of Repayment Plan: The court holds a confirmation hearing to review and approve the proposed repayment plan. Creditors have an opportunity to object to the plan during this stage.
- Repayment Period: Debtors make regular payments to the bankruptcy trustee, who distributes the funds to creditors according to the approved repayment plan.
- Debt Discharge: Upon successful completion of the repayment plan, debtors may receive a discharge of remaining unsecured debts that were included in the plan. This typically occurs after the three to five-year repayment period.
It is essential for individuals seeking debt relief to have a comprehensive understanding of the eligibility requirements, timeline, and dischargeable debts involved in Chapter 13 bankruptcy discharge in New Jersey. Navigating the complexities of Chapter 13 bankruptcy and ensuring compliance with New Jersey bankruptcy laws can be challenging, which is why seeking consultation with an experienced bankruptcy attorney is highly recommended.
Receiving a Bankruptcy Discharge
Once the bankruptcy process is initiated, debtors in New Jersey can work towards receiving a bankruptcy discharge, which releases them from the obligation to repay certain debts. Several key steps are involved in the process, including filing the discharge request, engaging with the bankruptcy trustee, attending the meeting of creditors, and obtaining the discharge order.
Filing the Discharge Request
After completing the necessary bankruptcy requirements, including submitting the required documents and completing the repayment plan (if applicable), debtors must file a discharge request with the United States Bankruptcy Court in New Jersey. The discharge request signifies the debtor’s intention to seek relief from their debts and move towards a fresh financial start.
Role of the Bankruptcy Trustee
In New Jersey, the trustee is responsible for reviewing the debtor’s financial affairs, assets, and liabilities. They ensure the debtor’s compliance with bankruptcy laws and facilitate the fair distribution of assets to creditors, if applicable. The trustee reviews the discharge request and may raise objections or request additional information to ensure the debtor’s eligibility and compliance.
Meeting of Creditors
As part of the bankruptcy process, debtors in New Jersey are required to attend a meeting of creditors, also known as a 341 meeting. This meeting provides an opportunity for the bankruptcy trustee and creditors to ask questions about the debtor’s financial affairs, assets, and liabilities. The debtor must truthfully and accurately respond to inquiries related to their bankruptcy case. It is essential to be prepared for this meeting and provide the necessary documentation as requested by the trustee.
Upon successful completion of the bankruptcy process and meeting all requirements, the court issues a discharge order. This order declares that the debtor is released from personal liability for certain debts listed in the bankruptcy petition. The discharge order provides a legal barrier between the debtor and creditors, prohibiting them from taking any further collection actions or pursuing legal remedies to recover discharged debts. It is important to retain a copy of the discharge order for future reference and to provide it to creditors if necessary.
Receiving a bankruptcy discharge is a significant milestone in the bankruptcy process for debtors in New Jersey. It signifies the completion of the legal procedure and the opportunity to start anew financially. It is crucial to work closely with a bankruptcy attorney to ensure compliance with New Jersey laws and maximize the chances of a successful discharge.
Effectiveness of Bankruptcy Discharge
The bankruptcy discharge offers individuals in New Jersey a fresh start by providing relief from overwhelming debts. Understanding the effectiveness of bankruptcy discharge is crucial to fully appreciate the benefits it offers in terms of discharged debts, legal obligations, protection against creditors, rebuilding credit, and exceptions to dischargeability.
Discharged Debts and Legal Obligations
When a debt is discharged through bankruptcy, the debtor is no longer personally liable for it. Discharged debts are legally eliminated, and creditors are prohibited from taking any further collection actions to recover them. Debtors are no longer legally obligated to repay discharged debts, providing significant relief and allowing them to move forward with their financial lives. However, it’s important to note that certain obligations, such as child support, alimony, and student loans, may not be dischargeable under bankruptcy laws.
Protection against Creditors
One of the key benefits of a bankruptcy discharge is the protection it offers against creditors. While an automatic stay can be granted upon filing for bankruptcy, it can still be lifted if the case gets denied. Once a bankruptcy discharge is granted, creditors are legally prohibited from pursuing any further collection actions or contacting the debtor in an attempt to collect discharged debts. This protection provides debtors with peace of mind, shielding them from harassment, lawsuits, wage garnishments, or other forms of creditor harassment. It allows debtors to regain control over their financial affairs and focus on rebuilding their financial stability.
Rebuilding Credit after Bankruptcy Discharge
While bankruptcy can have a temporary negative impact on an individual’s credit score, it also provides an opportunity for a fresh financial start. After receiving a bankruptcy discharge, debtors can begin rebuilding their credit. It is important to adopt responsible financial habits, such as paying bills on time, managing credit responsibly, and establishing a positive credit history. Over time, with responsible financial management, debtors can improve their creditworthiness and regain a solid credit standing.
Exceptions to Dischargeability
While bankruptcy discharge provides significant relief, it’s important to be aware of exceptions to dischargeability. Some types of debts may not be eligible for discharge under bankruptcy laws. Common examples include certain tax debts, student loans (in most cases), child support, alimony, court-ordered fines or penalties, and debts arising from fraud or illegal activities. It is essential to consult with a bankruptcy attorney to understand which debts may not be discharged in a specific situation.
Bankruptcy Discharge and Legal Proceedings
A bankruptcy discharge can have implications for various legal proceedings and actions. Understanding how it relates to dischargeability complaints, challenges to the discharge, and reaffirmation agreements is essential for individuals navigating the bankruptcy process in New Jersey.
In some cases, creditors or other parties may file dischargeability complaints with the bankruptcy court. These complaints allege that certain debts should not be discharged based on specific grounds, such as fraud or willful misconduct. Dischargeability complaints initiate a legal process where the court evaluates the merits of the complaint and determines whether the debt should be discharged or remain legally enforceable. It is important for debtors to respond to dischargeability complaints in a timely manner and seek legal representation to present their case effectively.
In certain circumstances, debtors may choose to enter into reaffirmation agreements with their creditors. A reaffirmation agreement is a legally binding agreement between the debtor and a creditor, in which the debtor agrees to remain personally liable for a specific debt despite the bankruptcy discharge. Reaffirmation agreements are typically used for secured debts, such as car loans or mortgages, where the debtor wishes to keep the collateral and continue making payments. Reaffirmation agreements must be approved by the bankruptcy court and should be carefully considered with the guidance of a bankruptcy attorney, as they may have long-term financial implications.
It is important to consult a skilled bankruptcy attorney to be able to fully understand the implications of a bankruptcy discharge and how it affects your case. An attorney can also help represent your interests and protect your rights in the event of discharge contests or complaints.
Getting the Help of an Experienced New Jersey Bankruptcy Attorney
Seeking legal assistance is crucial during the bankruptcy discharge process in New Jersey. A bankruptcy attorney plays a vital role by providing guidance, ensuring legal compliance, and working towards a positive resolution for their clients. An attorney offers legal advice, prepares and files necessary documents, represents clients in court proceedings, negotiates with creditors, and provides financial guidance for post-bankruptcy planning and rebuilding financial stability.
Our team of knowledgeable New Jersey bankruptcy attorneys at Straffi & Straffi Attorneys at Law provides quality legal counsel and representation for individuals and businesses in New Jersey residents looking to start anew financially. Contact us today at (732) 341-3800 to schedule a consultation and learn more about how we can help.