How to Be Certain Bankruptcy Is the Right Option

What Bankruptcy Can and Cannot Do for You

If you’re one of the millions of Americans struggling financially because of the pandemic, you may be considering bankruptcy. There’s a common misunderstanding, though, that filing for bankruptcy will allow you to wipe out all your debt and start over again. While bankruptcy offers many benefits and can be instrumental in getting you back on solid footing, there are some limitations.

Chapter 7 Liquidation Proceedings

If you are eligible to file for protection under Chapter 7, you can potentially discharge some debts permanently. First, however, you must qualify by submitting to a means test, where the bankruptcy court looks at your financial situation and determines whether you have the ability to repay your creditors over a three-to-five-year period. If the court concludes that you do, you won’t be able to permanently rid yourself of debt. Instead, you’ll need to file for reorganization of your debts under Chapter 13.

If you do qualify to file Chapter 7 bankruptcy, you’re still limited with respect to the discharge of some obligations. Child and spousal support arrearages are specifically excluded from eligibility for discharge under the bankruptcy laws. In addition, most tax arrearages and student loan payments are extremely difficult to discharge, with complex rules that make elimination of debt rare.

It’s important to understand that the discharge referred to in the bankruptcy laws applies only to the debt, and not to any underlying lien. Accordingly, if you have property secured by collateral, your creditor may still exercise a lien and repossess the property, even after the debt is discharged.

Contact Attorney Howard N. Sobel

At the office of Howard N. Sobel, we work closely with people who suffer personal injury in New Jersey. Contact our office online or call us at 856-424-6400 to set up a free initial consultation (on selected cases). We are currently available by phone, text message, or videoconference. Evening and weekend appointments can be arranged upon request. We accept all major credit cards.

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