CHAPTER 7 NEW JERSEY BANKRUPTCY
Most of my New Jersey bankruptcy clients file what is called a “Chapter 7 bankruptcy”. Bankruptcy under Chapter 7 of the Bankruptcy Code is often referred to as liquidation bankruptcy. Under Chapter 7, it is often possible for a New Jersey bankruptcy debtor to have all of his or her debts erased by the Bankruptcy Court while retaining all of his or her property.
A debtor begins the New Jersey bankruptcy process by filing a petition with the New Jersey bankruptcy court. Once the petition is filed, the “automatic stay” goes into effect and the creditors are prohibited from making any attempt to collect their debt, including telephone calls, letters, lawsuits, foreclosure or repossession. Along with the petition, the debtor files various written “schedules” and “statements” to inform the New Jerse Bankruptcy Court of his or her outstanding debts, current income and expenses, existing contracts, current or potential lawsuits and any recent asset transfers, among other things. Upon receipt of the Petition, the Court appoints a Bankruptcy Trustee to handle the debtor’s case. The Trustee determines what assets, if any, it can collect from the debtor to sell to pay off the creditors. The Trustee can only collect certain assets, known as “non-exempt” assets, from the debtor. The debtor can keep his or her “exempt” assets, which is often all of the debtors assets. In New Jersey, federal bankruptcy law can often exempt all of the equity in a debtor’s home, the debtor’s bank accounts, furniture, furnishings, motor vehicles and other personal property. Most debtors only have “exempt” property. Once the Trustee sells the debtor’s “non-exempt” property, if any, and distributes the proceeds to the creditors, the Bankruptcy Court “discharges” (or erases) the debtor’s remaining debt (other than alimony and child support, student loans, most tax obligations, and debts resulting from fraudulent or malicious acts) and concludes the bankruptcy proceeding.
Still have questions about Chapter 7 bankruptcy? See my CHAPTER 7 BANKRUPTCY FAQ.