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Chapter 13 may be right for many New Jersey residents

A New Jersey resident can quickly become overwhelmed by debt after a divorce, job loss, accident or illness. Under these circumstances, filing for bankruptcy may be an easy decision. However, deciding whether to file a Chapter 13 or Chapter 7 bankruptcy -- the most commonly filed by individuals -- may not be quite as easy.

Each type of bankruptcy has its own filing requirements and benefits for the petitioner. A Chapter 7 is a liquidation of the petitioner's assets to pay his or her debts. In a Chapter 13, however, an individual's debts are restructured. Payments are made each month for anywhere from three to five years under court supervision.

The petitioner is not required to sell his or her assets in order to repay his or her creditors. In order to file under Chapter 13, certain eligibility requirements must be met. The court conducts a means test to determine what one is able to pay each month to creditors after allowing a certain amount for living expenses, such as food, utilities, and rent or mortgage payments.

A trustee is appointed to review the repayment plan presented by the petitioner, make a recommendation to the court and oversee the plan. The trustee collects payments from the petitioner and distributes them to creditors in accordance with the plan. As long as the terms of the plan are met, any debt remaining at the end of the plan is forgiven.

A New Jersey resident who is struggling to repay debts could benefit from filing a Chapter 13 bankruptcy. For instance, an individual who wants to keep his or her home and otherwise qualifies may find that filing for a Chapter 13 may be the best option. A thorough review of an individual's circumstances by someone familiar with the different types of bankruptcy could reveal his or her options for eliminating the debt that is plaguing his or her financial outlook.

Source:, "Should I File for Chapter 13 Bankruptcy?", Jessica Whitmore, Feb. 17, 2015

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