Chapter 7 bankruptcy is a legal process. It allows individuals who want a fresh start to eliminate certain debts by liquidating their assets.
In New Jersey, this process can erase past-due rent payments, offering relief to filers.
Automatic stay
The median gross rent in New Jersey is $1,577. This amount can be difficult for some people to meet when they are struggling financially.
Filing for Chapter 7 bankruptcy triggers an automatic stay. This provision halts most collection actions, providing a reprieve for tenants facing eviction due to past-due rent. Landlords must cease eviction proceedings during this period, allowing tenants some breathing room.
However, the resolution of a bankruptcy case does not automatically determine the outcome of a tenancy. If you wish to remain in the apartment, communicate with your landlord and work toward a resolution regarding any outstanding rent payments.
The discharge of debts
One of the primary benefits of Chapter 7 bankruptcy is the discharge of qualifying debts. Past-due rent payments equal unsecured debts. Bankruptcy can discharge these debts. However, landlords can challenge the discharge if they believe the tenant engaged in fraudulent behavior related to the rent.
Exemptions and the role of nonexempt property
While Chapter 7 bankruptcy allows for the discharge of certain debts, not all property is exempt from liquidation. Funds from selling nonexempt property can repay creditors, including landlords owed past-due rent. Examples of such property include expensive jewelry, high-end artwork and valuable collections such as rare coins or stamps.
Despite the challenges, Chapter 7 bankruptcy can provide tenants with an opportunity for a fresh start.