Bankruptcy Discharge - Bankruptcy Discharges - Discharged Debt - Discharged Debts - New Jersey Bankruptcy Discharge Lawyer

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 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.