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Which bankruptcy chapter is right for me?

On Behalf of | Mar 6, 2023 | Bankruptcy |

The bankruptcy process provides a way for people struggling with their debt to start over. But, before beginning the process, it’s essential to research the various options you have to ensure that you make the best decision for your future.

Chapter 7 Bankruptcy

Chapter 7, often referred to as liquidation, is the most common form of bankruptcy. In fact, 230,000 people filed for Chapter 7 bankruptcy in 2022.  A Chapter 7 bankruptcy 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.

The Bankruptcy laws provide you various “exemptions” that allow you to keep much of what you own, under most circumstances. In a nutshell, bankruptcy exemptions are laws that protect your property in a bankruptcy. 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 many assets. For example, in many cases, you are allowed to retain your household goods; personal effects; jewelry; certain 401(k), retirement or IRA accounts; your car or truck; 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.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy is really a reorganization of debts, not a liquidation.  It 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 repaying the debts on which they are behind, usually over a 3- to 5-year period. During the term of your repayment plan, you enjoy the full protection of the bankruptcy law. So long as you make all your scheduled payments, creditors may NOT attempt to collect anything further from you. They must accept the payments as set forth by your plan, monitored and approved by the court.

Even though a filer will have to repay all or most of their secured debts, there are other benefits that Chapter 13 bankruptcy provides. For example, New Jersey residents who decide to file for Chapter 13 bankruptcy will be able to protect their homes from the foreclosure process. A Chapter 13 is an ideal way to immediately stop the foreclosure and force the bank to accept a payment schedule for all the missed payments.

Dealing with overwhelming debt can take a toll on a person’s mental and financial health. Fortunately, there are options for people to expunge their debt and regain control over their financial future. If you or a loved one are currently struggling with debt, now may be the time to consider filing for bankruptcy. For guidance on beginning the bankruptcy process, reach out to the experienced attorneys at Mariano & Coiro, P.C. by calling 732-860-7620 or emailing us.

We are a debt relief agency. We help people file for bankruptcy relief under the U.S. Bankruptcy Code.