New Jersey residents who are struggling with financial problems may decide to file bankruptcy. Before filing, however, it may be beneficial to understand what to expect regarding the process and the fate of certain assets and debts. This information could help in determining what type of bankruptcy to file along with when it would be most advantageous.
Individuals generally file one of two types of bankruptcy: Chapter 7 (liquidation) and Chapter 13 (reorganization). Which type will work best for a New Jersey resident depends on several factors such as owning a home, income and types of debts. It may also depend on whether a homeowner wants to keep certain assets or will surrender them during the bankruptcy.
An individual’s income could eliminate the need to decide whether to file a Chapter 7 or a Chapter 13. If a person’s income is high enough to repay debts through a Chapter 13 plan, Chapter 7 cannot be filed. On the other hand, if a person’s income is not high enough, Chapter 7 may be the only option.
A homeowner with substantial equity in the home may want to file a Chapter 13 because the home might be sold in a Chapter 7 in order to pay off debts. The same can be said for any assets not covered by certain property exemptions allowed by law. Furthermore, certain debts may not be eligible for discharge such as taxes and student loans, among others.
These are only some of the issues that need to be addressed before making the decision to file for bankruptcy. Knowing the differences between a Chapter 7 and a Chapter 13 can help an individual use the process in order to achieve the best outcome possible. If the bankruptcy is closed, it will be years before another one can be filed. Therefore, it is imperative to be sure that everything is done properly the first time in order to successfully start over financially.
Source: FindLaw, “Is Bankruptcy a Good Idea for You?“, Accessed on Aug. 14, 2015