When your New Jersey finances start spiraling out of control due to medical debt, high-interest rates or other factors, you may feel overwhelmed. You may, too, be searching for a way to regain control over this area of your life and thinking about whether filing for bankruptcy might be the right call. If you do decide to move forward with filing for bankruptcy, you may do so through either a Chapter 7 or a Chapter 13 format.
Per Rocket Money, while Chapter 7 and Chapter 13 bankruptcies are both consumer bankruptcies, there are some important differences between the two types of filings.
Chapter 7 bankruptcies
You have to have limited income and pass a means test proving as much before you may file for Chapter 7. Sometimes called “liquidation” bankruptcies, Chapter 7 filings sometimes involve surrendering certain assets to pay back your debts. A Chapter 7 bankruptcy filing typically impacts your credit score for up to 10 years.
Chapter 13 bankruptcies
If you do not pass the means test needed to qualify for Chapter 7, or if you are fearful about potentially losing your home, you may want to consider filing for Chapter 13. Doing so involves restructuring your debts and coming up with a new payback plan that is more manageable for you. If you stick to the terms of the plan and do not miss mortgage payments, you may typically keep your home when filing for Chapter 13.
Whether filing for bankruptcy is the right move depends on several factors. If there is no reasonable way to pay back your outstanding debts within the next five years, bankruptcy may be well worth considering.