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Chapter 7 of the Bankruptcy Code provides for “liquidation,” ( i.e., the sale of a debtor’s nonexempt property and the distribution of the proceeds to creditors.)

A Chapter 7 bankruptcy case does not involve the filing of a plan of repayment as in chapter 13. Instead, the bankruptcy trustee gathers and sells the debtor’s nonexempt assets and uses the proceeds of such assets to pay holders of claims (creditors) in accordance with the provisions of the Bankruptcy Code. Part of the debtor’s property may be subject to liens and mortgages that pledge the property to other creditors. In addition, the Bankruptcy Code will allow the debtor to keep certain “exempt” property; but a trustee will liquidate the debtor’s remaining assets. Accordingly, potential debtors should realize that the filing of a petition under Chapter 7 may result in the loss of property.

What Assets Can You Lose in a Chapter 7 Bankruptcy?

When seeking a fresh start through Chapter 7 bankruptcy in New Jersey, it may be intimidating to come to terms with the process of liquidating assets in order to pay creditors. However, with the guidance and reassurance of an experienced Chapter 7 Bankruptcy Attorney, you can put your mind at ease and have a reasonable estimation of what you may lose.

When filing under Chapter 7, you will be assigned a Chapter 7 bankruptcy trustee who will be in charge of valuing and liquidating assets they determine to be of significant enough value to help pay down the creditors to whom you owe. In Somerville, NJ, the bankruptcy will be handled in accordance with New Jersey bankruptcy guidelines, which come along with a set of exemptions and options you may take. These exemptions include possibilities to keep your home, vehicle, and some goods within the home, as long as you meet the established guidelines.

While this may seem confusing at first glance, a Personal Bankruptcy Lawyer can break down the specifics that apply to your unique set of circumstances and explain the procedures you may take to keep items of great importance. Generally, unless the property is exempt, you will need to pay the bankruptcy trustee the item’s value or an agreed-upon price. Otherwise, it will be subject to liquidation. In addition to exemptions laid out under New Jersey guidelines, there are also federally provided exemptions that may be of benefit to you.

Can I File for Chapter 7 Without it Affecting My Spouse?

While every case is entirely dependent on the details of your situation, there are general principles that apply to most cases we handle at Michael McLaughlin, LLC. As a typical rule, if you and your spouse carry separate debts, they will not be impacted by your choice to file for Chapter 7 bankruptcy. During the initial determination of indebtedness and financial analysis, a Chapter 7 Bankruptcy Attorney will assist in explaining each step of the process as you proceed and allow you to make the decisions as it continues.

While meeting with you and your spouse, we will determine what debt is shared, and what is held separately even in marriage. The best case to hope for is that as little shared debt as possible will be present, and we can proceed with filing without harming your spouse’s credit.

While you may be unsure of the specific guidelines that qualify in Somerville, NJ, Attorney Michael McLaughlin is ready and waiting to support you throughout the process. Since determinations are often complex, and the process to file even more so, it is wise to enlist the help of a Consumer Bankruptcy Attorney as soon as possible, even if you are only considering taking action at this point. To determine how best to proceed, the next step is scheduling an initial consultation at Michael McLaughlin, LLC as soon as possible. Since time is of the essence and creditors can be increasingly predatory as time goes on, don’t hesitate, and get the help you need today.

To qualify for relief under Chapter 7 of the Bankruptcy Code, the debtor may be an individual, a partnership, or a corporation or other business entity. 11 U.S.C. §§ 101(41), 109(b). Subject to the means test described above for individual debtors, relief is available under Chapter 7 irrespective of the amount of the debtor’s debts or whether the debtor is solvent or insolvent. An individual cannot file under Chapter 7 or any other chapter, however, if during the preceding 180 days a prior bankruptcy petition was dismissed due to the debtor’s willful failure to appear before the court or comply with orders of the court, or the debtor voluntarily dismissed the previous case after creditors sought relief from the bankruptcy court to recover property upon which they hold liens. 11 U.S.C. §§ 109(g), 362(d) and (e). In addition, no individual may be a debtor under Chapter 7 or any chapter of the Bankruptcy Code unless he or she has, within 180 days before filing, received credit counseling from an approved credit counseling agency either in an individual or group briefing. 11 U.S.C. §§ 109, 111. There are exceptions in emergency situations or where the U.S. trustee (or bankruptcy administrator) has determined that there are insufficient approved agencies to provide the required counseling. If a debt management plan is developed during required credit counseling, it must be filed with the court.

One of the primary purposes of bankruptcy is to discharge certain debts to give an honest individual debtor a “fresh start.” The debtor has no liability for discharged debts. In a Chapter 7 case, however, a discharge is only available to individual debtors, not to partnerships or corporations. 11 U.S.C. § 727(a)(1). Although an individual Chapter 7 case usually results in a discharge of debts, the right to a discharge is not absolute, and some types of debts are not discharged. Moreover, a bankruptcy discharge does not extinguish a lien on property.

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Michael McLaughlin, Esq.

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