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Chapter 13 bankruptcy could help when income is less than debt

No matter how much money a New Jersey resident makes, he or she can still be overwhelmed by debt. Many people believe that if a person earns a large salary, he or she does not have problems with debt. However, that can be far from the truth. Income level has little to do with the amount of debt a person may accumulate. For some, filing for Chapter 13 bankruptcy could help them pay off debt and achieve stability once again.

Credit card offers might be too good to pass up. The lure of reward points and the ability to make purchases when cash is unavailable are enticing reasons to incur credit card debt. Unfortunately, this type of debt can quickly get out of control. When credit card debt is added to a car loan, a mortgage and any other similar debt, the amount of available cash each month dwindles.

Even so, many people fail to stop using their credits cards or otherwise spending money on luxuries. This creates a never-ending cycle that can feel impossible to break. People making a substantial amount of money can end up living paycheck to paycheck just as easily as anyone else.

Chapter 13 bankruptcy helps New Jersey residents who have at least some disposable income at the end of every month to reorganize their debt under the supervision of the Bankruptcy Court and a trustee. Creditors receive payments based on priority in accordance with a repayment plan approved by the court. Payments are made to the trustee, who then distributes the money to creditors. Unsecured creditors -- such as credit card companies -- are at the bottom of the list and may not be paid the full amount of the debt they are owed. This type of bankruptcy can help the filer get out of debt and regain control of his or her finances once again.

Source: Fox Business, "Uh Oh: My Debt is Bigger Than My Salary", , March 28, 2014

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