Please note that, in light of Governor Murphy's recent "stay at home" order in New Jersey due to the COVID-19 pandemic, McLaughlin & Nardi, LLC's attorneys and staff are working remotely at this time. However, we are still ready, willing, and able to address all of your individual and business legal needs. Please contact us by phone at (973) 890-0004 or email at info@esqnj.com. We are committed to providing the same high level of legal services that our clients have come to expect over the years. Thank you.

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Bankruptcy Considerations During the Coronavirus (COV-19) Part 3: Chapter 7 Bankruptcy

The need to file bankruptcy can come quickly and abruptly due to a serious life event such as a serious medical diagnosis that results in large medical bills or being terminated or laid off from a job that results in a loss of income.  Many individuals have experienced this as a result of the Coronavirus (COV-19), which has caused these individuals to feel as though they are “drowning in debt.”

If an individual or family is in a position where they are significant debt and cannot pay their bills, filing a Chapter 7 bankruptcy may be an appropriate step to get them a “fresh start” financially.

 

Fresh Start

A Chapter 7 bankruptcy is often referred to as a liquidation bankruptcy because a bankruptcy trustee is assigned to liquidate non-exempt property for the benefit of creditors.  The debt that is not satisfied by the liquidation is generally discharged, meaning that the person does not have to pay these debts any longer and creditors will not go after the individual any further.  Therefore, at the close of the bankruptcy, the person is given a “fresh start” financially to start over again.

It is important to note that there is no limit to the amount of debt that a person has at the time of filing a Chapter 7 bankruptcy.  This is unlike a Chapter 13 bankruptcy, where in order to be eligible to file, the individual is limited in the amount of debt he or she has.

 

Exemptions

As discussed above, when a person files a Chapter 7 bankruptcy, a trustee is assigned to liquidate the individual’s assets.  There are limits that prevent a trustee from selling all of an individual’s assets in a Chapter 7 bankruptcy called exemptions.  Exemptions provide protections to several of an individual’s assets including but not limited to one’s house, car, and household items.  Before filing, it is important to speak with an attorney to discuss what property is protected by either the state or federal exemptions and what property is subject to being sold in the bankruptcy.

 

Timing

A Chapter 7 bankruptcy can often take only three to four months before the Bankruptcy Court issues the discharge order – discharging the individual’s debt in the bankruptcy.  This is significantly quicker than a Chapter 13 bankruptcy which can last upwards of three to five years.   What this means is that a person will be on his or her way to this financial “fresh start” very quickly.

 

Automatic Stay

Like in all bankruptcies, an automatic stay is put into place immediately upon filing a Chapter 7 bankruptcy.  An automatic stay requires creditors to stop all collection activities such as a wage garnishment, bank levy, or collections calls.  This is extremely important for individuals in Chapter 7 bankruptcies to allow them a break from these collection matters and focus on the bankruptcy and getting them the fresh start that they are seeking.

 

Contact Us for Help

The decision on whether to file bankruptcy is a difficult one and the process for filing bankruptcy may be confusing and time consuming.  We want to help advise you through these hard times that have been brought by Coronavirus and discuss the options available to you.  Therefore, if you have any questions or would like to discuss the benefits of filing a Chapter 7 bankruptcy with one of our attorneys, please visit our website or contact one of our lawyers at (973) 890-0004.

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