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New Jersey Bankruptcy Center

Chapter 7 | Chapter 13

Are your debts out of control?
Have creditors sued or are threatening to sue you?
Are creditors garnishing your wages or threatening to repossess your motor vehicle?
Are your credit card or other debts so high that you are merely “spinning your wheels” trying to keep up with minimum or very low payments every month?
Are you in danger of losing your home because you have fallen behind in your mortgage payments?
Do you wish someone could stop all of those abusive and annoying collection phone calls and threatening letters?
If you answered “YES” to any of the above questions, then bankruptcy may be a solution to your problems.
The bankruptcy laws have been enacted by Congress specifically to protect individuals who are experiencing difficulties in paying their debts. Under the bankruptcy law, you are afforded a great many rights and protections, while the court determines which of your debts can be eliminated and which, if any, must be paid.

At Mariano & Coiro, P.C., we have successfully represented bankruptcy clients for more than 35 years. Let us review your matter to see how we may be of help to you.

Bankruptcy protection for individuals is typically available in one of two forms: Chapter 7 or Chapter 13.

Chapter 7

The purpose of a Chapter 7 bankruptcy is to provide you, the debtor, with a “fresh start”, under the law. A Chapter 7 bankruptcy is usually referred to as liquidation. A Chapter 7 is generally appropriate if the debts you owe exceed what you own, or you otherwise lack the ability to pay them. In a Chapter 7, you are essentially asking the court to “liquidate”, or take what you own in order to help pay what you owe. Depending on their type, many debts can be completely discharged (eliminated). Debts which are discharged are gone forever. Your creditors may never again collect even a penny of a discharged debt.

Some debts cannot generally be discharged in a bankruptcy. Examples of such debts are child support; money owed to a governmental entity (such as most taxes owed to the IRS or most guaranteed student loans); and most secured debts (such as the mortgage on your house or loan on your motor vehicle).

It is important to note that what you own may NOT be subject to liquidation at all, however, because the law provides you with various “exemptions”. Exemptions allow you to keep much of what you own, under most circumstances. An exemption is really like a “free pass” for a particular asset you own, provided the asset’s value does not exceed the exemption amount allowable by law. The exemption schedule is far reaching and protects a number of assets. For example, in many cases, you are allowed to retain your household goods; personal effects; jewelry; most 401(k), retirement or IRA accounts; your car or truck (provided you continue to make the payments); government benefits (such as disability or Social Security payments); your home; and many other assets, provided they are within the exemption amounts and you meet other legal requirements. If you are married and your spouse will be filing with you, your exemptions are doubled for each asset you own together.

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Chapter 13

A Chapter 13 bankruptcy is not liquidation, but is in reality a “catch-up plan” for debts which have fallen in arrears. It is often referred to as a “wage earner plan”, which generally allows you to keep your personal property and home, while getting caught up on your debts through a court-monitored repayment plan.

Chapter 13 is designed specifically for individuals who have a regular source of income which is sufficient to meet their regular monthly fixed payments, AND with enough money left over to fund a “plan” for becoming current on the debts which they are behind, usually over a 3- to 5-year period.

The most common use of Chapter 13 is by a person who has fallen behind on their home mortgage payments because of a nonpermanent financial setback (such as the temporary loss of a job, or illness), which has since been resolved. Although a debtor may now be re-employed and fully capable of making regular mortgage payments, the bank may have begun foreclosure on the home, because the debtor cannot make a lump-sum payment for all of the payments missed. A Chapter 13 is an ideal way to immediately stop the foreclosure and force the bank to accept a court-approved payment schedule for all of the missed payments.

As a debtor in a Chapter 13 matter, you would make all of your regular, current fixed monthly payments, such as a mortgage or car payment, directly to your creditors. Then, you would make one monthly “Plan Payment” to the bankruptcy trustee, towards all of your “past due” debts, under the “repayment plan” we will help you establish. During the term of your repayment plan, you enjoy the full protection of the bankruptcy laws. So long as you make all of your scheduled payments under your approved court plan, creditors may NOT attempt to collect anything further from you. They must accept the payments as set forth by your plan and approved by the court. Depending upon your particular situation, you may even be able to eliminate some of your other debt in a properly presented Chapter 13.

Bankruptcy may literally be a financial life-saving option for you. However, the bankruptcy laws are extensive and very complex. Don’t try to go it alone. What you don’t know really can hurt you. Contact the law office of Mariano & Coiro, P.C., for your FREE CONSULTATION. Our attorneys are experienced in representing bankruptcy clients and can show you how the laws can protect and help you.

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