Like most adults in New Jersey, you've likely encountered and overcome numerous financial challenges. Some situations are definitely more serious than others. In fact, if a financial problem gets out of control, you may not have the means for getting things back on track without tapping into additional resources, such as bankruptcy. If you're the type of person who cringes at the mention of that word, you are definitely not the only one. In the past, there were social stigmas attached to bankruptcy that made it undesirable.
Nowadays, however, many more people have come to understand that filing for bankruptcy can be a valuable financial tool. It not only can help you obtain immediate debt relief but may also help lay the groundwork for a stronger financial future. There are several types of bankruptcy though, and it's critical that you understand the differences between them so that you can determine which option best fits your current needs and ultimate financial goals.
Chapter 7 and Chapter 13
The two most common types of bankruptcy are Chapter 7 and Chapter 13. You may be eligible for one but not the other, which is why it's important to understand the differences between these two debt relief tools. The following list provides information to help you choose:
- Perhaps you've missed a mortgage payment or two but believe you could get your finances back on track if you could adapt your payment plan. Chapter 13 bankruptcy might be an option because it involves re-organizing your payments and finances.
- If you have no current reliable means of income and do not foresee being able to make any payments at all toward existing debt, a complete liquidation of assets may be the better way to go, which is what a Chapter 7 bankruptcy typically entails.
- In order to qualify for Chapter 7, your income must be at or below a certain level. Taking a means test, which compares your income to the average median in New Jersey, helps determine whether you qualify for this type of debt relief.
- Chapter 13 is often called the worker's bankruptcy because you must have reliable, sufficient income to keep making payments on time. If you don't qualify for Chapter 7 because of income level, you might be eligible for Chapter 13 instead.
- Chapter 7 is a much quicker process for discharging debt. It typically takes three to five months to complete this program whereas Chapter 13, which is a repayment plan, can take anywhere from three to five years.
The good news is that filing for bankruptcy is often a way to help avoid foreclosure. If you're worried that you might lose your house if things keep going the way they are now, you might be a candidate for Chapter 7 or Chapter 13 bankruptcy.
No need to go it alone when making bankruptcy decisions
Many people in New Jersey and beyond like to keep their financial information as private as possible. However, sometimes discussing a problem with someone well-versed in debt relief options and regulations can help determine a best course of action. Loss mitigation, foreclosure avoidance and restoring financial stability are all issues that an experienced bankruptcy law attorney addresses on a frequent basis.