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Chapter 13 can help New Jersey residents avoid foreclosures

In today's difficult financial climate, there are all sorts of reasons a New Jersey resident could encounter a seemingly hopeless situation. Exorbitant credit card interest rates, unexpected injury or illness resulting in unforeseen medical bills, the loss of a job … any of these things, or others, could mean massive amounts of debt without an obvious means of payment, and fear of losing cars, or even homes to foreclosures. This is where Chapter 13 bankruptcy can help people find relief, without having to worry about the loss of assets such as their home.

There are different kinds of bankruptcy that can be filed, with the most common type being Chapter 7, also referred to as a liquidation bankruptcy.  This means that a trustee sells any non-exempt properties and uses the proceeds to pay back creditors. However, in New Jersey, if an individual is facing foreclosure on his or her home, filing Chapter 7 usually serves as only a temporary delay of the foreclosure. If a person's secured asset, such as a home, is not completely covered by bankruptcy exemptions, then Chapter 7 may not be a viable option. This is where filing for Chapter 13 offers benefits.

Chapter 13 is also known as reorganization bankruptcy. This type of bankruptcy is for filers who have a regular source of income and are able to repay at least a portion of their debts. A repayment plan is designed to allow the filer to keep all or part of his or her assets, including the person's home. The repayment plan, which must be presented to and approved by the court, considers the person's income and then takes into account all expenses and different types of debt.

Chapter 7 bankruptcy is usually the better option for low-income filers who have very few assets. For individuals considering filing for bankruptcy who wish to keep many of their assets and avoid foreclosures on their non-exempt New Jersey homes, Chapter 13 bankruptcy is most likely the better choice. An attorney can explain the often confusing aspects of filing for bankruptcy and help filers decide which type is best for them in their particular set of circumstances.

Source: groundreport.com, "Understanding the Difference between Chapter 7, 11 and 13 Bankruptcies", Hassangill, Dec 17, 2016

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