Facing financial hardship can be an overwhelming experience, and for many residents of New Jersey, bankruptcy offers a viable path toward a fresh start. Filing for bankruptcy in New Jersey is a complex legal process designed to help individuals and businesses eliminate or repay their debts under the protection of the federal court system. It\'s crucial to understand that bankruptcy is not a sign of failure, but rather a legal mechanism to address insurmountable debt, providing relief from creditor harassment, lawsuits, and wage garnishments. This guide will walk you through the intricacies of the bankruptcy process in the Garden State, from understanding your options to navigating the courts and fulfilling all necessary requirements. While bankruptcy can discharge many types of debt, such as credit card balances, medical bills, and personal loans, it generally cannot eliminate obligations like child support, alimony, most student loans, or recent tax debts. The process primarily takes place in the federal bankruptcy courts, with most individuals in New Jersey typically filing under Chapter 7 or Chapter 13, depending on their financial situation and income.
Understanding Your Bankruptcy Options in New Jersey
In New Jersey, as in all states, individuals primarily consider two main types of bankruptcy: Chapter 7 and Chapter 13. A third option, Chapter 11, is generally reserved for businesses or individuals with extremely complex financial structures and high debt limits, making it less common for the average consumer.
Chapter 7 Bankruptcy (Liquidation)
Chapter 7, often referred to as liquidation bankruptcy, allows individuals to discharge most unsecured debts, such as credit card debt, medical bills, and personal loans. To qualify for Chapter 7, debtors must pass the means test, which evaluates their income against the state median. If your income is below the median, you generally qualify. If it\'s above, further calculations determine eligibility. In Chapter 7, a trustee is appointed to sell non-exempt assets to repay creditors; however, most filers in New Jersey find that all their property is protected by state and federal exemptions. The process is typically quicker, often concluding within 4-6 months.
Chapter 13 Bankruptcy (Reorganization)
Chapter 13, known as reorganization bankruptcy, is designed for individuals with regular income who can afford to repay a portion of their debts over time. This chapter allows debtors to keep their property, including homes and cars, by proposing a repayment plan to the court. The plan typically lasts three to five years, during which the debtor makes regular payments to a trustee, who then distributes the funds to creditors. Chapter 13 is often chosen by those who do not qualify for Chapter 7 due to higher income, or those who want to prevent foreclosure, stop repossession, or catch up on past-due mortgage or car payments. Upon successful completion of the repayment plan, remaining eligible debts are discharged.
Chapter 11 Bankruptcy for Individuals
While primarily used by businesses, Chapter 11 bankruptcy is available to individuals with substantial debts that exceed the limits for Chapter 13, or those with complex financial situations requiring more flexibility than Chapter 7 or 13 can offer. It involves a reorganization plan approved by creditors and the court, allowing the debtor to retain assets while repaying debts. However, due to its complexity and high costs, it is rarely pursued by the average consumer.
In New Jersey, Chapter 7 and Chapter 13 are by far the most common types of bankruptcy filed by individuals. Chapter 7 is preferred for those seeking a quick discharge of unsecured debts and who meet the income requirements, while Chapter 13 is suitable for those with higher incomes, valuable assets they wish to protect, or specific goals like stopping foreclosure.
Comparison Table: Chapter 7 vs. Chapter 13 Bankruptcy
| Feature | Chapter 7 (Liquidation) | Chapter 13 (Reorganization) |
|---|---|---|
| Eligibility | Must pass the Means Test (income below state median or insufficient disposable income). | Must have regular income and debts within specific limits. |
| Debts Discharged | Most unsecured debts (credit cards, medical bills, personal loans). | Most unsecured debts, and can help manage secured debts and priority debts. |
| Property | Non-exempt assets may be sold by trustee (most filers keep all property due to exemptions). | Debtor keeps all property; repayment plan addresses secured debts. |
| Timeline | Typically 4-6 months from filing to discharge. | 3-5 year repayment plan. |
| Cost | Filing fee: $338. Attorney fees typically $1,000-$3,500. | Filing fee: $313. Attorney fees typically $3,000-$6,000 (often paid through the plan). |
| Outcome | Discharge of eligible debts, fresh start. | Repayment of a portion of debts, discharge of remaining eligible debts, fresh start. |
New Jersey Bankruptcy Courts and Filing Locations
Bankruptcy cases in New Jersey are handled by the United States Bankruptcy Court for the District of New Jersey. This single district is divided into three vicinages (divisions), each serving specific counties. Understanding which vicinage covers your county is crucial for proper filing.
District of New Jersey
- Website: njb.uscourts.gov
Newark Vicinage
- Counties Served: Bergen, Essex, Hudson, Morris, Passaic, Sussex, Union, Warren
- Address: Martin Luther King, Jr. Federal Building & U.S. Courthouse, 50 Walnut Street, Newark, NJ 07102
Trenton Vicinage
- Counties Served: Burlington, Hunterdon, Mercer, Middlesex, Monmouth, Ocean, Somerset
- Address: Clarkson S. Fisher Federal Building & U.S. Courthouse, 402 East State Street, Trenton, NJ 08608
Camden Vicinage
- Counties Served: Atlantic, Cape May, Cumberland, Gloucester, Salem, Camden
- Address: Mitchell H. Cohen Federal Building & U.S. Courthouse, 4th & Cooper Streets, Camden, NJ 08101
It is important to note that each bankruptcy court may have its own local rules in addition to the Federal Rules of Bankruptcy Procedure. These local rules govern specific practices and procedures within that court. You can typically find the local rules on the court\'s official website (njb.uscourts.gov/local-rules). Familiarizing yourself with these rules is essential for a smooth bankruptcy process, especially if you are filing without an attorney.
Do You Qualify? The Chapter 7 Means Test in New Jersey
The Means Test is a critical component for determining eligibility for Chapter 7 bankruptcy. It was established to ensure that bankruptcy relief is primarily available to those who truly cannot afford to repay their debts. The test compares your current monthly income to the median income for a household of the same size in New Jersey. If your income is below the state median, you generally qualify for Chapter 7.
New Jersey Median Income Figures (for cases filed on or after November 1, 2023)
| Household Size | Median Annual Income |
|---|---|
| 1-person household | $73,548 |
| 2-person household | $96,852 |
| 3-person household | $113,148 |
| 4-person household | $133,944 |
For households with more than four people, add $9,900 for each additional person.
If your income is above the median, you must proceed to the second part of the Means Test, which involves calculating your disposable income. This calculation deducts certain allowed expenses from your income, such as living expenses, secured debt payments, and taxes. If, after these deductions, you have sufficient disposable income to repay a significant portion of your unsecured debts over five years, you may not qualify for Chapter 7. In such cases, Chapter 13 bankruptcy, which involves a repayment plan, becomes the primary alternative.
Required Credit Counseling
Before you can file for bankruptcy in New Jersey, federal law mandates that you complete a credit counseling course from an approved agency. This course must be completed within 180 days before you file your bankruptcy petition. The purpose of this requirement is to explore alternatives to bankruptcy and to help debtors understand the implications of filing. The U.S. Trustee Program maintains a list of approved credit counseling agencies. You can find these agencies on the Executive Office for U.S. Trustees (EOUST) website (justice.gov/ust/credit-counseling-debtor-education-information).
In addition to the pre-filing credit counseling, you are also required to complete a debtor education course after your bankruptcy case is filed but before your debts can be discharged. This second course focuses on personal financial management and aims to help you avoid future financial difficulties. Failure to complete both courses will result in your bankruptcy case being dismissed or your discharge being denied.
The Bankruptcy Forms You\'ll Need
Filing for bankruptcy involves a comprehensive set of official forms that must be accurately completed and submitted to the court. These forms provide the court, the trustee, and your creditors with a detailed picture of your financial situation. All official bankruptcy forms are available for free on the U.S. Courts website (uscourts.gov/forms/bankruptcy-forms).
Key Official Bankruptcy Forms for Individuals:
| Form Number | Form Name | Description |
|---|---|---|
| B101 | Voluntary Petition for Individuals Filing for Bankruptcy | The primary form that initiates the bankruptcy case, providing basic information about the debtor and the type of bankruptcy being filed. |
| B106A/B | Schedules A/B: Your Property | Lists all real and personal property owned by the debtor. |
| B106C | Schedule C: The Property You Claim as Exempt | Lists all property the debtor claims as exempt from creditors. |
| B106D | Schedule D: Creditors Who Hold Claims Secured By Property | Lists all secured creditors and the property securing their claims. |
| B106E/F | Schedule E/F: Creditors Who Have Unsecured Claims | Lists all unsecured creditors, both priority and non-priority. |
| B106G | Schedule G: Executory Contracts and Unexpired Leases | Lists any contracts or leases that are still in effect. |
| B106H | Schedule H: Your Co-debtors | Lists any individuals or entities who are co-liable on debts with the debtor. |
| B106I | Schedule I: Your Current Income | Details the debtor\'s current income from all sources. |
| B106J | Schedule J: Your Current Expenditures | Details the debtor\'s current monthly living expenses. |
| B107 | Statement of Financial Affairs for Individuals Filing for Bankruptcy | Provides a comprehensive history of the debtor\'s financial transactions, including income, property transfers, and lawsuits over the past few years. |
| B122A-1 / B122A-2 | Chapter 7 Statement of Your Current Monthly Income and Means-Test Calculation | Used to perform the Chapter 7 Means Test calculation. |
| B122C-1 / B122C-2 | Chapter 13 Statement of Your Current Monthly Income and Calculation of Commitment Period and Disposable Income | Used for Chapter 13 debtors to calculate disposable income and commitment period. |
| B108 | Statement of Intention for Individuals Filing Under Chapter 7 | Indicates the debtor\'s intentions regarding secured property (e.g., surrender, redeem, reaffirm). |
Accurate and complete preparation of these forms is paramount. Any errors or omissions can lead to delays, requests for additional information, or even dismissal of your case. Many debtors find the assistance of a qualified bankruptcy attorney invaluable in navigating this complex paperwork.
Step-by-Step: How to File Bankruptcy in New Jersey
Filing for bankruptcy in New Jersey involves a series of steps that must be followed carefully. While the specifics can vary slightly depending on whether you file Chapter 7 or Chapter 13, the general process is outlined below:
- Determine which chapter to file: Evaluate your financial situation, income, assets, and debts to decide whether Chapter 7 or Chapter 13 is more appropriate for you. Consider factors like the Means Test, your desire to keep specific assets, and your ability to make regular payments.
- Complete credit counseling: As mandated by federal law, you must complete an approved credit counseling course within 180 days before filing your bankruptcy petition. Ensure the agency is approved by the U.S. Trustee Program.
- Gather financial documents: Collect all necessary financial records, including pay stubs, tax returns (typically for the last two years), bank statements, credit card statements, loan documents, property deeds, vehicle titles, and any other documents related to your income, assets, and debts.
- Complete and file the bankruptcy petition and schedules: Fill out all required official bankruptcy forms accurately and completely. This includes the Voluntary Petition, Schedules A/B through J, the Statement of Financial Affairs, and the appropriate Means Test forms. Once completed, file these documents with the U.S. Bankruptcy Court for the District of New Jersey.
- Pay the filing fee (or apply for waiver/installments): The filing fee must be paid at the time of filing. If you cannot afford the fee, you may apply for a fee waiver (for Chapter 7 only) or request to pay in installments.
- Automatic stay takes effect: Immediately upon filing your petition, the automatic stay goes into effect. This legal injunction temporarily stops most collection actions against you, including lawsuits, wage garnishments, foreclosures, and repossessions.
- Attend the 341 Meeting of Creditors: Approximately 20-40 days after filing, you will attend a meeting with your bankruptcy trustee and any creditors who choose to appear. This meeting is held under oath, and the trustee will ask questions about your petition and financial affairs.
- Complete debtor education course: After filing but before your debts can be discharged, you must complete a second approved course on personal financial management.
- Receive discharge (Chapter 7) or complete repayment plan (Chapter 13): In Chapter 7, if all requirements are met, you will typically receive a discharge of eligible debts within 60-90 days after the 341 meeting. In Chapter 13, you will complete your 3-5 year repayment plan, and upon successful completion, remaining eligible debts will be discharged.
Filing Fees in New Jersey
The filing fees for bankruptcy cases are set by federal law and are uniform across all U.S. bankruptcy courts, including those in New Jersey. These fees are separate from any attorney fees you may incur.
| Bankruptcy Chapter | Total Filing Fee |
|---|---|
| Chapter 7 | $338 |
| Chapter 13 | $313 |
| Chapter 11 (Individual) | $1,738 |
Fee Waiver Eligibility (Chapter 7 only): If your household income is less than 150% of the federal poverty line, you may be eligible to apply for a waiver of the Chapter 7 filing fee. The court will review your application and financial situation to determine if you qualify. If granted, you will not have to pay the filing fee.
Installment Payments: If you do not qualify for a fee waiver but cannot afford to pay the entire filing fee upfront, you can request to pay the fee in installments. The court typically allows up to four installment payments over a period of 120 days, though extensions may be granted under certain circumstances. It is crucial to make these payments on time, as failure to do so can result in the dismissal of your case.
The Automatic Stay: Immediate Protection
One of the most significant benefits of filing for bankruptcy is the implementation of the automatic stay. This is a powerful legal injunction that automatically goes into effect the moment your bankruptcy petition is filed with the court. Its purpose is to provide immediate relief from most collection activities by creditors.
What the Automatic Stay Does:
- Stops Collection Calls: Creditors are legally prohibited from contacting you to demand payment.
- Halts Lawsuits: Most civil lawsuits, including those related to debt collection, are paused.
- Prevents Wage Garnishments: Creditors cannot garnish your wages or bank accounts.
- Stops Foreclosures: Foreclosure proceedings on your home are temporarily halted, giving you time to explore options like Chapter 13 to save your home.
- Prevents Repossessions: Creditors cannot repossess your car or other property.
- Ends Utility Shut-offs: Utility companies generally cannot shut off service for unpaid bills incurred before filing.
Exceptions to the Automatic Stay: While broad, the automatic stay does have limitations. It generally does not stop actions related to:
- Criminal proceedings.
- Collection of domestic support obligations (alimony, child support).
- Certain tax actions.
- Actions to perfect a lien.
- Evictions where a judgment for possession was obtained before filing.
Violations of the Automatic Stay: If a creditor knowingly violates the automatic stay by continuing collection efforts, they can be held in contempt of court and may be ordered to pay damages to the debtor, including attorney fees and emotional distress damages. It is crucial to inform your attorney immediately if any creditor attempts to collect a debt after your bankruptcy case has been filed.
The 341 Meeting of Creditors in New Jersey
The 341 Meeting of Creditors, also known as the Meeting of Creditors or First Meeting of Creditors, is a mandatory proceeding for all bankruptcy filers. It typically occurs approximately 20 to 40 days after your bankruptcy petition is filed. Despite its name, creditors rarely attend these meetings, especially in consumer bankruptcy cases.
Who Attends: You (the debtor), your bankruptcy attorney (if you have one), and the bankruptcy trustee assigned to your case. Creditors have the right to attend and ask questions, but they seldom do.
Purpose of the Meeting: The primary purpose of the 341 meeting is for the trustee to verify your identity, place you under oath, and ask questions about your bankruptcy petition, schedules, and financial affairs. The trustee will ensure that you have accurately disclosed all your assets, debts, income, and expenses, and that you understand the consequences of filing for bankruptcy.
Typical Questions Asked: The trustee will generally ask questions to confirm the information in your bankruptcy forms, such as:
- Did you review the petition and schedules before signing them?
- Is all the information contained in the petition and schedules true and correct to the best of your knowledge?
- Did you list all your assets and debts?
- Have you transferred any property in the last two years?
- Do you owe child support or alimony?
- Have you filed for bankruptcy before?
What to Bring: You must bring a government-issued photo identification (e.g., driver\'s license) and proof of your Social Security number (e.g., Social Security card). Your attorney will advise you on any other documents you might need to bring, such as recent pay stubs or bank statements.
Duration: Most 341 meetings are relatively brief, often lasting only 5 to 10 minutes, especially if your paperwork is in order and there are no complex issues or creditor objections. In most cases, the trustee and the debtor are the only active participants.
What Happens to Your Property in New Jersey
One of the most common concerns for individuals considering bankruptcy is what will happen to their property. The outcome depends significantly on the type of bankruptcy filed (Chapter 7 or Chapter 13) and whether your property is considered exempt or non-exempt.
The Role of the Bankruptcy Trustee
In both Chapter 7 and Chapter 13 cases, a bankruptcy trustee is appointed. The trustee\'s primary role is to administer your bankruptcy estate. In Chapter 7, the trustee identifies and liquidates any non-exempt assets to distribute the proceeds to creditors. In Chapter 13, the trustee oversees your repayment plan and distributes payments to creditors.
Exempt Property in New Jersey
Both federal and state laws provide for exemptions, which allow debtors to protect certain types and amounts of property from being sold by the trustee. New Jersey is an opt-out state, meaning debtors can choose to use either the federal bankruptcy exemptions or the New Jersey state exemptions, but not a combination of both. Most debtors find that all, or nearly all, of their property is protected by these exemptions. For a detailed guide on what property you can protect, please refer to our companion guide: New Jersey bankruptcy exemptions.
Non-Exempt Property in Chapter 7
If you have property that is not covered by an exemption, it is considered non-exempt. In a Chapter 7 bankruptcy, the trustee has the authority to sell this non-exempt property to pay your creditors. Common examples of non-exempt property might include a second home, luxury items, or significant cash savings above exemption limits. However, it is important to reiterate that a large majority of Chapter 7 cases are no-asset cases, meaning debtors have no non-exempt property for the trustee to sell.
How Chapter 13 Handles Property
In Chapter 13 bankruptcy, you get to keep all of your property, both exempt and non-exempt. Instead of liquidating assets, the value of your non-exempt property is factored into your repayment plan. You must propose a plan that pays your unsecured creditors at least as much as they would have received if you had filed Chapter 7. This allows individuals to protect valuable assets, such as a home with significant equity or a second vehicle, while still addressing their debts through a structured repayment plan.
How Long Does Bankruptcy Take in New Jersey?
The duration of a bankruptcy case in New Jersey varies significantly depending on the chapter filed and the complexity of the individual case.
Chapter 7 Timeline
A Chapter 7 bankruptcy case is generally the quicker of the two main options. From the date of filing to the date of discharge, most Chapter 7 cases are completed within 4 to 6 months. The key milestones include:
- Filing to 341 Meeting: Approximately 20-40 days.
- 341 Meeting to Discharge: Approximately 60-90 days, assuming no complications.
Factors that can extend the timeline include objections from creditors or the trustee, the need for additional documentation, or the discovery of non-exempt assets that require liquidation.
Chapter 13 Timeline
Chapter 13 bankruptcy is a much longer process due to the repayment plan. The plan itself typically lasts for either 3 or 5 years. The length of the plan depends on your income relative to the state median income. If your current monthly income is below the state median, your plan will generally be for three years. If it is above, the plan will typically be for five years. The discharge of debts occurs only after all payments under the confirmed plan have been successfully completed.
Factors that can extend a Chapter 13 timeline include:
- Adversary Proceedings: Lawsuits filed within the bankruptcy case.
- Trustee Objections: Disagreements with the trustee regarding the plan.
- Plan Modifications: Changes to the repayment plan due to unforeseen circumstances.
- Failure to Make Payments: Missing payments can lead to dismissal or conversion of the case.
Life After Bankruptcy in New Jersey
Filing for bankruptcy is not the end of your financial journey; it is a new beginning. While it provides immediate relief from debt, it also has long-term implications, particularly for your credit score. However, with careful planning and responsible financial habits, you can rebuild your credit and achieve financial stability.
Credit Score Impact and Recovery
Initially, filing for bankruptcy will significantly lower your credit score. A Chapter 7 bankruptcy typically remains on your credit report for 10 years from the filing date, while a Chapter 13 bankruptcy remains for 7 years from the filing date. Despite this, many individuals find that their credit score begins to improve within a few years after discharge, often because they are no longer burdened by overwhelming debt.
How to Rebuild Credit
Rebuilding credit after bankruptcy requires discipline and strategic steps:
- Obtain a Secured Credit Card: These cards require a deposit, which acts as your credit limit, making them easier to obtain after bankruptcy.
- Apply for a Small Loan: A small, manageable loan from a credit union or community bank, repaid on time, can help establish positive payment history.
- Monitor Your Credit Report: Regularly check your credit report for errors and ensure that discharged debts are reported as such.
- Live Within Your Means: Create and stick to a budget, avoiding new debt.
- Pay Bills on Time: Consistent on-time payments are the most crucial factor in improving your credit score.
What Debts Survive Bankruptcy?
While bankruptcy discharges many types of debt, some debts are generally non-dischargeable, meaning you will still owe them after your case is closed. These typically include:
- Most student loans (unless undue hardship is proven).
- Child support and alimony obligations.
- Certain tax debts (recent income taxes, payroll taxes).
- Debts for death or personal injury caused by driving while intoxicated.
- Debts incurred through fraud or false pretenses.
- Fines and penalties owed to government agencies.
Fresh Start Opportunities
Despite the challenges, bankruptcy offers a genuine fresh start. It eliminates the burden of unmanageable debt, stops creditor harassment, and allows you to regain control of your finances. Many individuals emerge from bankruptcy with a stronger understanding of financial management and the ability to build a more secure future.
Should You Hire a Bankruptcy Attorney in New Jersey?
While it is legally possible to file for bankruptcy without an attorney (known as filing pro se), it is generally not recommended, especially given the complexities of bankruptcy law and procedure. The bankruptcy process is intricate, involves numerous forms, strict deadlines, and specific legal requirements that can be challenging for non-attorneys to navigate.
Risks of Pro Se Filing
Statistics consistently show that pro se bankruptcy cases have a significantly higher dismissal rate compared to cases filed with the assistance of an attorney. Common reasons for dismissal include:
- Incorrectly completed forms.
- Failure to file all required documents.
- Missing deadlines.
- Lack of understanding of exemptions, leading to potential loss of property.
- Inability to effectively handle creditor objections or trustee inquiries.
A single mistake can lead to your case being dismissed, meaning you lose the protection of the automatic stay and remain responsible for your debts, often without the ability to refile for a certain period.
What a Bankruptcy Attorney Does
A qualified bankruptcy attorney provides invaluable assistance throughout the entire process:
- Evaluates Your Situation: Determines the most appropriate chapter of bankruptcy for your circumstances.
- Prepares Paperwork: Ensures all forms are accurately completed, filed on time, and that all necessary information is disclosed.
- Maximizes Exemptions: Helps you utilize available exemptions to protect your assets.
- Represents You: Attends the 341 Meeting of Creditors with you and handles any questions or objections from the trustee or creditors.
- Navigates Legal Issues: Addresses any complex legal issues that may arise during your case.
- Provides Guidance: Offers advice on post-bankruptcy financial planning and credit rebuilding.
Typical Attorney Fees in New Jersey
Attorney fees for bankruptcy vary depending on the complexity of the case and the attorney\'s experience. In New Jersey, typical fee ranges are:
- Chapter 7: $1,000–$3,500
- Chapter 13: $3,000–$6,000 (often paid in part through the repayment plan)
While these fees represent an upfront cost, the peace of mind and successful outcome an attorney can provide often outweigh the expense, especially when considering the potential financial losses from a dismissed pro se case.
How to Find a Qualified Attorney
When seeking a bankruptcy attorney, look for someone specializing in bankruptcy law, with experience in the New Jersey courts. You can start your search by visiting our directory: find a bankruptcy attorney in New Jersey. For specific needs, you can also find Chapter 7 bankruptcy attorneys in New Jersey or Chapter 13 bankruptcy attorneys in New Jersey.
FAQ Section
Can I file bankruptcy without an attorney in New Jersey?
While it is legally permissible to file for bankruptcy without an attorney (pro se), it is highly discouraged due to the complexity of bankruptcy law and procedures. The risk of errors, delays, or even dismissal of your case is significantly higher without legal representation. An attorney ensures all forms are correctly completed, deadlines are met, and your rights are protected.
Will I lose my house if I file bankruptcy in New Jersey?
Not necessarily. In most cases, individuals filing for bankruptcy in New Jersey do not lose their homes. New Jersey residents can utilize either federal or state bankruptcy exemptions to protect a significant portion of their home equity. If you have substantial equity that exceeds these exemptions, Chapter 13 bankruptcy can allow you to keep your home by including your mortgage payments in a repayment plan.
How does bankruptcy affect my credit score?
Bankruptcy will negatively impact your credit score initially. A Chapter 7 bankruptcy remains on your credit report for 10 years, and a Chapter 13 for 7 years. However, for many, their credit score has already suffered due to overwhelming debt. After bankruptcy, you have the opportunity to rebuild your credit by making timely payments on new credit (like secured credit cards) and managing your finances responsibly. Many people see their scores begin to improve within a few years.
Can I keep my car if I file Chapter 7 in New Jersey?
Often, yes. You can usually keep your car in Chapter 7 bankruptcy if you are current on your loan payments and the equity in the vehicle is protected by New Jersey\'s bankruptcy exemptions. If you have a car loan, you may choose to reaffirm the debt (agree to continue paying it), redeem the vehicle (pay its market value in a lump sum), or surrender it. If your car is paid off and its value is within exemption limits, you can typically keep it.
What debts cannot be discharged in bankruptcy?
Certain types of debts are generally non-dischargeable in bankruptcy. These include most student loans, child support and alimony obligations, recent tax debts, debts for death or personal injury caused by driving while intoxicated, and debts incurred through fraud or false pretenses. It\'s important to understand these exceptions when considering bankruptcy.