What Is The Chapter 7 Bankruptcy Exemption Rule?
Chapter 7 bankruptcy exemption rules differ significantly from state to state. In New Jersey, everyone takes the federal exemptions, which are more liberal than the very minimal New Jersey law exemptions. The largest exemptions are for equity, real estate, and household goods. For example, an individual debtor can exempt $25,150 in real estate equity, $4,000 in automobile equity, and $13,400 in household goods. There is also an exemption for personal injury lawsuit proceeds in the amount of $25,150. A joint filing such as between a husband and wife allows each Debtor to assert their own individual exemptions would result in a real estate equity exemption up to $50,000. Also, the cash surrender value of any whole life insurance policy up to the limit of $13,400.00.
What Type Of Debt Is Dischargeable In A Chapter 7 Bankruptcy?
Credit card debts in most circumstances are dischargeable in a Chapter 7 bankruptcy. People often have loans from friends and family which fall in the category of contract debt and are also dischargeable. In general, the debts that people seek to have discharged in a Chapter 7 bankruptcy arise from agreements between credit card companies, online lenders, or friends and family members or contracts with vendors and leasing companies.
What Type Of Debt Is Not Forgiven In A Chapter 7 Bankruptcy?
Non-dischargeable debts are defined by the statute and include alimony and child support and domestic support obligations. Claims arising from fraudulent conduct are not dischargeable. For example, if a creditor alleges that there was a misrepresentation of income on a credit card application or a pattern of usage on a credit card prior to the bankruptcy that could demonstrate the size and frequency of purchases with historical usage, then those debts might not be dischargeable. In these instances, a creditor must file an adversary complaint and be able to prove fraudulent intent by the totality of the circumstances.
Tax debts are generally non-dischargeable, but under some circumstances, they can be discharged if tax returns were timely filed and the debt is over 3 years old. Debts associated with an accident caused by willful conduct such as drunk driving are not dischargeable. There are other categories under the bankruptcy code that detail which debts would be unaffected.
Matrimonial debts are in an interesting category because they’re considered domestic support obligations. Domestic support obligations include debts that arise as a result of a divorce decree or court order. Very often the issue comes up of whether the equitable distribution component is dischargeable. In a Chapter 7 bankruptcy, the rules are fairly simple in that if the equitable distribution claim was agreed upon in the property settlement agreement, then it’s not dischargeable. In a Chapter 13 bankruptcy, equitable distribution claims are potentially non-dischargeable; this is determined on a case-by-case basis and requires a careful analysis of the nature of the debt and the filing of a Complaint by the creditor. If the Debtor’s Chapter 13 plan devotes all disposable income and has been filed in good faith, a Debtor may be able to partially discharge a matrimonial debt.
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