How does Chapter 13 bankruptcy work?

If you are considering filing for bankruptcy in New Jersey, then it is a good idea to consider your options. You have two types of bankruptcy that you can file: chapter 7 and chapter 13. Due to the latest changes in bankruptcy law, chapter 7 can be difficult to file unless you have a lower income. Most people end up having to file chapter 13. 

According to the United States Courts, chapter 13 bankruptcy is a repayment plan. Unlike chapter 7, you cannot completely wipe out your debts through chapter 13. It does give you bankruptcy protection so creditors have to stop trying to collect debts and must be cooperative in the creation of your repayment plan for the debt. The repayment plan gives you up to five years to repay your debts.

The benefit of this bankruptcy option is that you can get yourself out of debt while also being able to save your assets. For example, if your home is in foreclosure, you may be able to get your payments back up to date and save your home. It also consolidates your debts, so you are making one payment to the trustee in your case that covers all your debts. Chapter 13 is easier to qualify for than chapter 7 because it does not have the income limits. Some businesses can file under this option, but corporations and partnerships cannot. 

Once you file your bankruptcy, you have to complete the plan to get your bankruptcy discharged. There is a hardship option that may be granted to allow you to extend your bankruptcy if you cannot complete your payment plan as set out. This information is for education and is not legal advice.

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