Chapter 7 bankruptcy is the fastest solution for overwhelming personal debt. Individuals who file for Chapter 7 bankruptcy can potentially secure a discharge of their eligible debts within a few months. Unlike other forms of bankruptcy, filers seeking Chapter 7 relief do not have to make structured payments for years to be eligible for a discharge.
The law limits who can file Chapter 7 bankruptcy to prevent inappropriate or fraudulent filings. Those pursuing Chapter 7 bankruptcy have to pass a means test based on their income. They may also face requirements to liquidate or sell some of their property before they are eligible for a discharge of their debt.
Do those seeking bankruptcy relief need to give up their most valuable assets as part of that process?
Most people do not have to liquidate their property
Although people do refer to Chapter 7 bankruptcy as liquidation bankruptcy, asset liquidation is only necessary in a small percentage of individual Chapter 7 cases. Filers preparing for Chapter 7 bankruptcy in New Jersey can protect their resources with the strategic use of exemptions.
Federal bankruptcy statutes establish baseline exemptions, and there are also unique exemptions available to New Jersey residents. Filers have to choose which set of exemptions to use based on the value of their property.
They must then disclose their assets and claim exemptions on Schedule C documents. This process is critical to their protection. The failure to list property appropriately and claim an exemption may result in liquidation of certain resources.
Choosing the right exemptions to use is also important for the protection of a filer. For those with home equity, federal exemptions may be the better option, as New Jersey does not have a rules for home equity specifically. With the right help, people can protect equity accrued in their homes, vehicle equity, personal property and even retirement savings from liquidation in a Chapter 7 bankruptcy.
Those preparing for Chapter 7 bankruptcy can easily make small mistakes that could put their assets at risk. Partnering with a bankruptcy lawyer can be beneficial. Filers who utilize the right exemptions can help protect their property while enjoying the debt relief that comes from the discharge of their eligible unsecured debts.