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Bankruptcy in New Jersey: Chapter 7 versus Chapter 13

When debts have piled up to an overwhelming degree, filing for bankruptcy can offer a way out for New Jersey consumers. Some important decisions will need to be made before filing, starting with choosing from two different types of personal bankruptcy options: Chapter 7 and Chapter 13. There are some distinct differences between the two proceedings.

A Chapter 7 bankruptcy is known as a "liquidation bankruptcy," and is based on income. This type of bankruptcy plan can result in a court order for the filer to liquidate many non-exempt assets (hence its nickname). A bankruptcy lawyer can explain in detail, but examples of exempt assets include, among other things, a primary residence, a car and domestic support benefits, such as alimony or child support. The amount of each of these exemptions can vary depending upon the state in which bankruptcy is being filed. The individual may then be required to liquidate assets that are non-exempt and use the proceeds to at least partially pay off creditors; with a few exceptions, remaining debts are discharged and the individual is no longer responsible for them.

If, based on income, a filer is not eligible for Chapter 7, he or she has the option of filing for bankruptcy through Chapter 13. Instead of requiring a liquidation of assets, Chapter 13 is a repayment plan. After a filer's petition and plan to restructure his or her debt is approved by the court, some or all unsecured debts are paid off over a period of three to five years. The filer is required to pay creditors at least the same percentage of unsecured debt as he or she would have been required to under Chapter 7 bankruptcy. Just as with Chapter 7, unpaid unsecured debts (again, with some exceptions) are discharged at the end of the successfully completed repayment period.

The particulars of filing for bankruptcy in New Jersey and the differences between the types can be more fully explained by a bankruptcy lawyer. An attorney with an understanding of debt reorganization plans can help filers determine which plan would best suit their needs. With the aid of an experienced attorney, filing Chapter 7 or Chapter 13 can be the first step in preparing for a more financially stable future.

Source: 360financialliteracy.org, "What's the difference between chapter 7 and chapter 13 bankruptcy?", Accessed on Nov. 30, 2016

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  • NACBA | National Association of Consumer Bankruptcy Attorneys
  • NACA | National Association of Consumer Advocates
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Goldman & Beslow, LLC is a Federal Debt Relief Agency by an Act of Congress. We have proudly assisted consumers seeking relief under the U.S. Bankruptcy Code for over 38 years.

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