Dischargeable Debt During Bankruptcy in New Jersey

Making the choice to file bankruptcy can be a very big decision in your life. Before deciding to proceed with bankruptcy, you may have many questions that need answering, including what happens to your debt after you file bankruptcy.

The answer to this question may be important when considering whether or not to file bankruptcy. If you are considering bankruptcy, a skilled bankruptcy attorney could answer your questions and explain what happens with dischargeable debt during bankruptcy in New Jersey.

Debt That is Dischargeable in Bankruptcy

It is important to understand what type of debt gets discharged in a bankruptcy. Dischargeable debts are liabilities that are eliminated in bankruptcy through a court order issued by the bankruptcy court. A person is no longer obligated to pay back the debt that is discharged in their bankruptcy.

Common examples of dischargeable debt include credit card debt and medical debt. An individual could have debt that is considered to be discharged that is also secured debt. Secured debt is debt where a person’s lender has an interest in their property as security for payment. Examples of secured debt include car loans and mortgages.

With secured debt, a person has options to keep their secured property, surrender the secured property, or redeem (i.e. pay the replacement value) the secured property.

Debt Considered to be Non-dischargeable in Bankruptcy

In addition to the dischargeable debt during bankruptcy in New Jersey, there is also non-dischargeable debt. Non-dischargeable debts are obligations that are not eliminated at the conclusion of a person’s bankruptcy. In other words, they are still responsible for any debt that is not paid that is considered to be non-dischargeable. Examples of non-dischargeable debt include the following:

  • Child Support
  • Alimony
  • Tax obligations
  • Fines relating to violating certain laws

Paying Back Dischargeable Debt During a Bankruptcy

Someone may have to pay back dischargeable debt depending on the type of bankruptcy they file and their assets when it comes to the dischargeable debt during bankruptcy in New Jersey.

If they file a chapter 7 bankruptcy, their case is typically considered to be either an asset case or no asset case. If a person’s case is considered an asset case, this can mean they have assets that are available that can be sold to pay back their creditors. However, they will have exemptions available to the individual that can protect most or all their assets from creditors. Exemptions allow them to keep a certain amount of their property away from creditors.

In many cases, a person’s chapter 7 bankruptcy will be considered a no asset case, which means their dischargeable debt should be eliminated at the conclusion of their bankruptcy.

If an individual files a chapter 13 bankruptcy, they may be required to pay back some or all of their debt. This includes the dischargeable debt. Over the course of their repayment plan through their chapter 13 bankruptcy, the creditors of their dischargeable debt may get paid in full, in part, or not at all.

Whether or not these creditors are paid anything has no bearing on the debt being discharged. In other words, if a person successfully completes a chapter 13 bankruptcy repayment plan, any remaining dischargeable debt is eliminated.

Contact a Bankruptcy Attorney for More Information

Knowing the end result of your debt situation can be critical in determining if bankruptcy is the answer to resolving your debt. The classification of debt is not always straightforward because many factors can come into play, creating more complexity in the process of understanding the treatment of debt in bankruptcy. You do not have to face bankruptcy alone.

An experienced bankruptcy attorney could help you figure out how your debt will be treated in bankruptcy so you know what is considered to be dischargeable debt during bankruptcy in New Jersey.