If you are one of the many that find themselves in financial difficulties, you likely are feeling large amounts of shame, fear and stress. Although this is normal when faced with a financial crisis, rest assured, you are not trapped in your present situation.
For many in your situation, filing bankruptcy is the best way to deal with your situation. You may already know that there are two main types of bankruptcy for individuals-Chapter 7 and Chapter 13-but may not know which type would be right for you. The answer to this question depends on your personal circumstances, but knowing the basic differences between the two types is helpful in deciding.
Chapter 7, also called liquidation bankruptcy, works by selling your unencumbered nonexempt assets to pay your debts. Once this is done, you receive a discharge of most of your unsecured debts, such as medical bills and credit cards. Although you may think that filing Chapter 7 would mean losing most of your property, this is not true in most cases, as federal and New Jersey law protects most of your important assets, such as the equity in your house.
Due to how it works, Chapter 7 is generally better for those with few nonexempt assets (i.e. vacation homes and most luxury items). Although filers must pass a means test before they may qualify for bankruptcy, most with financial problems have no problem doing so.
Also known as reorganization, Chapter 13 works by giving you 3-5 years under a payment plan to pay back your debts in monthly installments. Although it may seem that all your debts must be repaid under the plan, this is not true. In general, only secured (e.g. mortgages) and certain other debts (e.g. court expenses) must be brought current before the plan is concluded. Most unsecured debts end up discharged after the repayment period. After the payment plan has been completed, you are caught up on most of your delinquent secured debts and are free of most other types of debt.
Chapter 13 requires filers to have a stable income, so it may not be the best choice for everyone. However, if you are facing the loss of your home in foreclosure or a vehicle to repossession, it offers certain benefits not found in Chapter 7. Additionally, if you own property that you would lose in Chapter 7, Chapter 13 would allow you to keep it.
What do I do next?
If you are facing financial problems, contact the law office of Mariano & Coiro. Our attorneys have been helping those in central New Jersey find solutions to their financial problems since 1987. We will explain the bankruptcy process to you in plain English and work on your behalf to get you back on financial track.