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Chapter 13 Bankruptcy Process

Bankruptcy has become more common, with over 1 million people and companies filing for bankruptcy in 2012. Most New Jersey individuals choose chapter 7, a type of bankruptcy that allows them to get rid of their debts but leaves them with little or no property. Some people with overwhelming debt choose to go with chapter 13 bankruptcy, a type of bankruptcy in which debtors are able to keep most of their property. They need to pay off their debts through a budget plan over five years. Many of the individuals who choose chapter 13 bankruptcy live in Southern states such as Alabama, Georgia, Texas, Tennessee and Louisiana. Debtors who choose chapter 13 could end up paying a portion or all of what they owe for debts over the five year period.

Certain states have exemptions for property that filers can keep. In New Jersey, certain items, such as a home or car, can be exempted from a chapter 13 bankruptcy case if debtors have a loan on them and are paying on that loan. New Jersey law also allows certain types of insurance, pensions, personal property or wages to be exempt in bankruptcy cases for individuals or companies. If property isn’t exempt, filers have to pay the value of the property to be able to keep retain it.

Debtors need to attend credit counseling before they can consider filing for chapter 13 or 7 bankruptcy. During credit counseling, they are asked a number of questions about their assets, debts and bills. Debtors’ ability to file for bankruptcy is measured by a means test, which is based upon the average income in their states. If people are eligible for bankruptcy, they need to consider their situations, as people who have families often opt for chapter 13 over chapter 7. Chapter 13 serves as a better choice for people who have steady jobs who can repay their debts and finish the bankruptcy process. With any type of bankruptcy, a person’s credit score will be negatively impacted.

Filing for bankruptcy is a lengthy process that involves a number of different steps and a lot of paperwork. Many individuals need assistance from lawyers to ensure they go through the process the correct way. Bankruptcy lawyers can also help debtors make sure they choose the right types of bankruptcy for their situations and don’t have problems with creditors after going through the bankruptcy process.

Source: New Jersey Bankruptcy Law, ‘New Jersey Exemptions,” 2012,

Source: Fox Business, “Chapter 13 Bankruptcy: How it Works“, Susan Ladika, May 09, 2013

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