Chapter 7 Bankruptcy
In a chapter 7 bankruptcy, the debtor declares all assets owned at the beginning of the case. This collection of assets is called the "estate." The debtor also declares who all of his or her creditors are. The bankruptcy trustee assigned to the case determines whether the estate has any assets that would be available for liquidation to creditors in order to repay any of the debts owed.
Most debtors get to keep all of their property in a chapter 7 case because bankruptcy law permits people to retain certain types of assets up to a certain value. The categories of assets that the debtor is permitted to keep are called "exemptions." For example, a chapter 7 debtor with equity in his or her home can keep the property as long as the value of the equity is less than what is called the "homestead exemption," currently slightly more than $23,000 in the state of New Jersey. So, a chapter 7 debtor without a lot of equity in their home can keep their house as long as they continue to make the regular mortgage payments.
It is very important that a debtor be honest about his or her assets and liabilities. For the most part, a debtor who is honest during the process has a good chance of having his or her debts "discharged" or forgiven within six months of the beginning of the case. However, when a debtor omits something, either accidentally or intentionally, the process can change dramatically and the debtor's discharge may be at risk.
Certain types of debts cannot be discharged in bankruptcy. The most common of these are recent taxes, spousal and child support and many forms of student loans. Please speak with someone in our office regarding your questions or concerns about dischargeability.