What is a Chapter 7 bankruptcy?
This part of the bankruptcy code permits debtors who amass more debt than their non-exempt assets a fresh start. It is used by individuals, married couples, and certain small businesses. Debtors keep assets that are exempt and turn over any non-exempt assets (if there are any) to a trustee who converts the assets to cash and pays the debtor's creditors. Most people filing Chapter 7 bankruptcy keep all their assets and are released from paying their dischargeable debts.

What kinds of debts are dischargeable?
Credit card debts, medical and dental bills, unsecured loans owed to people or banks, charge card debts, utility bills, past due rent, auto loan deficiencies, mortgage loan deficiencies, and numerous other types of debts.

Does this mean I can keep my home and car without paying the mortgage and car loan?
No. Those loans are examples of secured loans. You pledged your car as collateral for the car loan and your home as collateral for the mortgage debt. Generally, you must continue to pay these debts if you wish to retain the collateral.

What kinds of debts are not dischargeable?

• Debts for alimony, maintenance, or support, and if the creditor files a complaint in the case, certain other divorce related debts including some property settlement debts if the Court determines the hardship imposed on the debtor to pay the debts is outweighed by the hardship imposed on the debtor's divorced spouse if debtor is permitted to discharge the debts.
• Most tax debts and debts incurred to pay federal tax debts.
• Debts for money, property services or credit obtained by means of false pretense, fraud or a false financial statement, if the creditor files a complaint in the case including debts for luxury goods or services and debts for cash advances made within the 60 day period before the Chapter 7 petition is filed.
• Debts for certain fines and penalties, including motor vehicle surcharges, municipal and criminal court fines.
• Debts for personal injury or death caused by the debtor's operation of a motor vehicle while intoxicated.
• Debts for intentional or malicious injury to the person or property of another, if the creditor files a complaint in the case.
• Debts for educational benefits and student loans that become due within the last seven years, unless a court finds that not discharging the debt would impose an undue hardship on the debtor and his/her dependents.
• Debts that were not listed on debtor's petition unless the creditor knew of the filing in time to file a claim.
• Debts for fraud, embezzlement, or larceny, if the creditor files a complaint in the case.
• Debts that were or could have been listed in a previous bankruptcy filing in which debtor did not receive a discharge.

Can my spouse and I file a joint bankruptcy if we are getting a divorce?
Yes, so long as you are still married. Often this relieves both people from heavy debts and makes it easier for them to afford separate housing and expenses of raising children.

What if my spouse wants to file for bankruptcy and I don't?
Either spouse is able to file a separate chapter 7 petition without the consent of the other spouse. The other spouse may be listed as a creditor on a separate petition.

I just received notice my spouse filed for bankruptcy under Chapter 7. Will it effect my child support?
Child support is not dischargeable. You may receive your child support more promptly because the debtor will have fewer debts to pay to other creditors.

My agreement (or court order) says he/she has to pay the orthodontist bill, our child's dance lessons and an old bill for past medical treatment. Can these obligations be discharged?
If it is clearly stated that payment of these bills is child support, then it is not dischargeable. If it is not clearly stated, they may be treated as dischargeable debts. To prevent this a complaint must be filed by the creditor right away asking the bankruptcy court to determine that those payments are child support obligations and therefore nondischargeable.

What if both of us agree that those bills are child support?
Only the bankruptcy court can decide what is child support and what isn't and rule on dischargeability of debts. The two of you can file a consent order with the bankruptcy court specifying your conclusion and asking the bankruptcy court to enter the order settling the matter.

How do I know whether I have to file my own documents with the bankruptcy court to protect my interests?
The best way is to obtain the advice of a lawyer familiar with support/alimony issues and consumer bankruptcy. Sometimes an appearance of child support creditor and/or proof of claim is all that needs to be filed. Other times an adversarial complaint must be filed to protect your rights as a creditor. Appearance by a child support creditor and a proof of claim are simple documents that can be filed without a filing fee. An adversarial complaint is more complex and usually is filed by a lawyer for the creditor.

Where do I obtain the proof of claim form or appearance of child support creditor form?
A copy of each form used in the District of New Jersey United States Bankruptcy Court is available under New Jersey Documents.