When a New Jersey resident files for bankruptcy, the first step is to determine under which Chapter to file. This decision is often less about the individual’s preference since income level often drives that choice. If a person’s income is above a certain level, he or she will need to file a Chapter 13 bankruptcy, and certain debts are treated differently in such a filing than in a Chapter 7 petition.
In a Chapter 13, a filer is often able to keep his or her home so long as payments outlined in a court-approved repayment plan are kept current. The same is true for car loans. Some debts, however– such as child support, student loans and alimony (called support debts) — are generally not discharged in either type of personal bankruptcy.
Non-support debts from a divorce, on the other hand, may be erased at the end of a Chapter 13 payment plan. This includes any co-debts that the filer originally agreed to pay in the divorce. In a Chapter 7, the creditor would be able to look to an ex-spouse, or other party on the debt, for payment. In a Chapter 13, however, the creditor may not seek payment during the bankruptcy.
There are other differences between a Chapter 13 and Chapter 7 bankruptcy. Regardless of the type, however, filers are required to meet certain other requirements and deadlines, along with providing the proper paperwork to the court. New Jersey residents who are considering filing for bankruptcy protection would benefit from the advice and assistance of a professional familiar with the process, its requirements and the documentation needed to achieve a successful result.
Source: FindLaw, “Chapter 7 vs. Chapter 13 Bankruptcy“, Sept. 17, 2015