Chapter 7 Personal Bankruptcy Risks in New Jersey
If you find yourself drowning in debt, filing for Chapter 7 bankruptcy can seem like an appealing way to wipe the slate clean and eliminate most (if not all) of those debts. Despite this, choosing the bankruptcy course of action also comes with potentially substantial consequences and risks.
Before choosing to file, it is important to understand not only the benefits but also the Chapter 7 personal bankruptcy risks in New Jersey. An experienced personal bankruptcy attorney can help you weigh the pros and cons of Chapter 7 bankruptcy in New Jersey.
Potential Loss of Property
One of the more substantial disadvantages of filing for bankruptcy under Chapter 7 is the potential for the loss of property. If the debtor is facing foreclosure on their home when the bankruptcy petition is filed, the automatic stay that is triggered by Chapter 7 bankruptcy filing is only a temporary solution—meaning that the home can still be foreclosed upon once it has expired.
Further, the only exempt property is protected in bankruptcy in New Jersey. This means that all the debtor’s non-exempt property generally must be sold to satisfy the creditors to the greatest extent possible. If the person wants to keep any secured assets, such as a car or home, the debt securing the asset cannot be discharged in bankruptcy and they may be required to sign a reaffirmation agreement to keep the asset and continue paying the related debt.
Additional Disadvantages to Chapter 7
Filing for Chapter 7 bankruptcy can provide a clean slate for many individuals who have been overwhelmed by debt. However, there are consequences and risks associated with filing. Some of the more substantial Chapter 7 personal bankruptcy risks in New Jersey include the following:
- Co-signors – if the debtor has an outstanding loan with a co-signer, the individual who co-signed the loan may remain liable for the debt even after the primary debtor’s own personal liability has been discharged in bankruptcy
- Time limits – if an individual filed for Chapter 7 bankruptcy in the past, they must wait eight years before becoming eligible to file again
- Limitations on dischargeable debt – not all debts can be discharged in Chapter 7 bankruptcy
- New Jersey means test – not all individuals are eligible for Chapter 7 bankruptcy
If these risks apply, for example, if the debtor has debts that are generally non-dischargeable under Chapter 7, they may wish to consider a Chapter 13 bankruptcy filing. This will allow the individual to keep assets subject to a court-approved repayment schedule.
Contacting A Chapter 7 Bankruptcy Attorney for Help
If you are considering filing for personal bankruptcy, also consider contacting an experienced Chapter 7 bankruptcy attorney to walk you through the process before filing. They can help you understand the important Chapter 7 personal bankruptcy risks in New Jersey and how they will apply to your individual circumstances.
Because these risks may be permanent, it is even more important to seek out advice before determining whether and how to file for bankruptcy. Call today to set up a consultation to learn about Chapter 7 personal bankruptcy risks.