Chapter 7 - also known as "liquidation" or "straight bankruptcy"
NJ Chapter 7 discharges many of your debts, such as credit cards, medical bills, personal loans, repossession debt and most court judgments. However, you are still responsible for student loans and most taxes, and you must continue to make car and mortgage payments should you wish to retain your house or car. In addition, you are still responsible for alimony and child support obligations, as well as certain other categories of debt. Chapter 7 allows you to protect a certain amount of equity in your home without the risk of liquidation by the Chapter 7 Trustee. The equity in certain other types of assets are also exempt, up to specific amounts. As a New Jersey bankruptcy attorney, I can help you determine if Chapter 7 bankruptcy is a good option for you.
Chapter 13 - also known as "reorganization"
Chapter 13 requires you to pay back all or a pro-rated portion of your debts over 3 to 5 years. It provides immediate relief from phone calls from credit card companies and other creditors. It also stops repossession or foreclosure as long as you meet your Chapter 13 obligations. Essentially, Chapter 13 is a court-supervised repayment plan for your debts. Under Chapter 13, your debts are consolidated and you make monthly payments to a Trustee, who in turn disburses your money to your creditors. The amount of debt that you must pay back depends on a number of factors, including your income, monthly living expenses and how much property you own. Also, if you are in arrears on secured debts such as your home or car, you may be able to avoid foreclosure or repossession through a Chapter 13 filing. If you have too much equity in your home or other property that you cannot protect with the exemptions associated with Chapter 7 liquidation, you may be able to protect those Items with a Chapter 13 filing.
There are many additional and complex requirements involved with both Chapter 7 and Chapter 13 in New Jersey. The above is meant to provide you with a very broad overview. During your initial consultation, I will be able to advise you about filing for Chapter 7, Chapter 13, or suggest another alternative.
Contact me today to discuss with a NJ bankruptcy lawyer if bankruptcy is right for you.
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NJ Chapter 7 & Chapter 13 Bankruptcy