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Determining whether to file Chapter 7 or Chapter 13 bankruptcy

Overwhelming debt can either sneak up on a person or hit them like a ton of bricks, depending on the circumstances. Either way, the results are the same -- people are unable to pay their bills and creditors are harassing them. In order to obtain a financial fresh start, many New Jersey residents decide to file for bankruptcy. When that happens, they inevitably have numerous questions about where to begin.

The biggest question many people have is whether they should file Chapter 7 or Chapter 13, which are the most common types of bankruptcy individuals file. For some New Jersey residents, keeping their homes is a priority. Most Chapter 13 filers keep their homes, but only under certain circumstances do those who file under Chapter 7.

A Chapter 7 is considered a liquidation bankruptcy because any property that does not fall within certain allowable property exemptions will be sold in order to pay creditors. In a Chapter 13, a filer enters into a court-approved repayment plan that lasts anywhere from three to five years. In either case, certain debts may be discharged. There are other differences between the two chapters as well. A bankruptcy attorney will be able to explain all of the differences between them.

You have the option to choose which type of bankruptcy to file, but the means test might preclude you from filing a Chapter 7 proceeding. The process can be complex and paper intensive -- especially before the petition is even filed. Therefore, it would be a good idea to hire an attorney to help you through the process and answer the questions you have.

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