Primary Debt in Chapter 7 Personal Bankruptcy in New Jersey

Filing for personal bankruptcy is a significant step that can carry a variety of consequences and benefits depending upon your debts, making it important that you fully understand the process before making the important decision to file.

One primary aspect of a Chapter 7 bankruptcy case is understanding the way in which debts are categorized when proceeding through the case, and how that categorization will impact the final resolution.  Whether or not filing under Chapter 7 is advantageous will depend upon the types of primary debt in a Chapter 7 personal bankruptcy in New Jersey. Speak with an experienced lawyer to learn more.

Non-Dischargeable Priority Debts in New Jersey

In a Chapter 7 personal bankruptcy, no repayment plan is required and the debtor’s debts will largely be discharged upon resolution of the case.  However, it is important to understand that not all debts are dischargeable in bankruptcy, making it important to evaluate the individual’s primary debt in a Chapter 7 personal bankruptcy in New Jersey to ensure it is the best course of action.

Non-dischargeable debts, which are sometimes referred to as priority claims, are paid first in a Chapter 7 bankruptcy and liability for these obligations will continue to exist even after the conclusion of the case.  These debts include:

  • Child support
  • Alimony
  • Student loans
  • Certain tax obligations
  • Certain debts that arose out of a criminal proceeding brought against the debtor, such as restitution for injury or death sustained in a drunk driving accident

If the debtor’s primary debt includes those discussed above, it is likely that Chapter 7 personal bankruptcy will not provide a significant benefit to the debtor.

The Debtor’s Secured Obligations in Chapter 7 Personal Bankruptcy 

A secured obligation is a debt where the creditor has a lien on a specific piece of property so that the creditor is entitled to reclaim that property in satisfaction of the debt if it is not paid according to its terms.  When a debtor’s primary debt in Chapter 7 personal bankruptcy in New Jersey consists of secured debt, they may be able to eliminate liability for the debt itself.  However, this will also result in a loss of the property that secures the debt.

Whether or not Chapter 7 filing is advantageous will depend upon whether the debtor has the means to continue paying secured debts and whether they would like to keep the secured property.

Unsecured, Dischargeable Debt

Unsecured debts include:

  • credit card debts
  • medical and utility bills
  • most types of personal loans that are not specifically secured by collateral

When an individual’s primary debt in a Chapter 7 personal bankruptcy case in New Jersey consists of unsecured debts, they are likely to realize the greatest benefit from a Chapter 7 filing.  Although some non-exempt assets may be sold to satisfy creditors’ claims to the extent possible, all remaining unsecured debts will be discharged at the conclusion of the Chapter 7 proceedings, providing the “fresh start” that most debtors associate with bankruptcy. 

Understanding New Jersey Primary Debt in Chapter 7 Personal Bankruptcy

The makeup of your debts will be unique, meaning that there is no one-size-fits-all approach to determining whether bankruptcy is the right answer.  A bankruptcy attorney can help you understand the importance of determining how your primary debt will impact the benefits that can be realized in Chapter 7 personal bankruptcy in New Jersey.

Contact an attorney if you are considering filing for personal bankruptcy so that they can begin to evaluate your debt to determine whether bankruptcy is the best option in your specific case.