A Brief Guide to Chapter 13 Bankruptcy
If you do not meet the requirements for Chapter 7 bankruptcy or there are certain assets you want to protect from bankruptcy, Chapter 13 may be a viable option for you. By liquidating your assets to repay part or all of your debts over time, you can stop foreclosure proceedings, limit the impact on your credit, and reschedule payments on your secured debts.
If Chapter 7 Bankruptcy Is Not an Option
In many cases, debtors turn to Chapter 13 when Chapter 7 is not an option. You must meet very specific debt requirements and pass the means test before even considering filing a Chapter 7 bankruptcy in New Jersey. If your income is too high or you have assets with equity that may be subject to sale by a chapter 7 trustee, you may need to file a Chapter 13 instead. This allows your creditors to recoup part or all of their losses over time, while allowing you to repay debts on a more realistic timeline.
Protecting Your Assets
You might consider Chapter 13 bankruptcy if there are some assets you want to protect. If you’re facing foreclosure on a family home, own a car you want to keep, or you have assets that you would be required to liquidate in a Chapter 7 case, filing Chapter 13 bankruptcy may allow you to protect and keep your assets.
Making Up Your Overdue Payments
The key feature that distinguishes Chapter 13 from Chapter 7 bankruptcy is the requirement to pay back part of your debt. Several factors determine how much you have to repay. Your disposable income, determined, in part, by the New Jersey Median Income Guidelines and the Means Test, is a key factor. Furthermore, the amount received by your creditors in a Chapter 13 bankruptcy must be at least as much as what they would get from a Chapter 7 filing.
The Chapter 13 Process
The bankruptcy process is fairly straightforward, regardless of which type of case you decide to pursue. Your initial petition includes information on your financial affairs, current contracts and financial obligations, and a list of your assets and liabilities. It also includes your bankruptcy plan, which should explain how much you plan on paying each of your priority creditors. Your bankruptcy trustee then holds a hearing that confirms your plan. Once your plan is approved, you must make payments for a period of three to five years before your remaining debt is discharged. If your income is lower than the New Jersey median, you may make payments for three years. If your income is higher than the state median, you must typically follow a five-year repayment plan. At the end of this period, your remaining debt is discharged.
Are you ready to find out if bankruptcy is the right choice for you and your family? Discuss your options and the benefits of each one by calling Lucid Law at (908) 350-7505.