Chapter 7 Vs Chapter 13 Bankruptcy NJ
Understanding the difference between Chapter 7 & 13 bankruptcies is vital for knowing your rights and how this will affect your future.
Unless you are very lucky, the majority of adults will go through some kind of financial hardship in their life. In today’s day and age, an average person can find themselves in debt from a number of items including credit cards, mortgages, or student loans. Many people are able to work themselves out of debt or at least get themselves to a point where the debt is not controlling their every move. There are many more, however, who are stuck in a bottomless pit and need a way to be able to have their slate whipped clean and be able to start again. This is where the option of bankruptcy comes into play.
Most people view bankruptcy as a scary option. Not to be mistaken, it is certainly not a consideration that should be taken lightly. However, in certain situations, it may become a necessity to be able to afford someone the ability to get out of debt so that they are able to maintain some kind of quality of life. What many people are not aware of is the fact that there are different type of bankruptcy depending on your situation.
When attempting to pursue personal bankruptcy, the most common types are those known as ‘Chapter 7’ and ‘Chapter 13’ bankruptcy. Which Chapter you qualify for will largely depend on your income. Each Chapter has certain advantages and disadvantages which should always be considered. Realistically, however, when you are trying to file for bankruptcy, you cannot go into the process expecting every part of it to be pretty. A person much realize that they are essentially admitting that they need a strong lifeline to get themselves out of the trouble that they find themselves in and therefore they will have to concede to the standards of the Chapter that they fall under.
When a person files for Chapter 7 bankruptcy, they are filing for what is more commonly known as ‘straight bankruptcy’. Individuals who have places of business, own property or live in the United States may file for Chapter 7. Under the Chapter guidelines, the person filing is allowed to keep certain exempt property. Exempt property is property that cannot be claimed by creditors in certain situations and the calculations of exempt property is put together on a state-by-state basis. All other assets are liquidated to repay your creditors.
Chapter 13 bankruptcy, on the other hand, is essentially a payment plan that is put into place to pay off your debts in a reasonable manner instead of all of your creditors hitting you at once. The debtor will propose a plan to their creditors to be able to pay back their debt over a 3-5 year period. This type of bankruptcy will take a good amount of negotiation as typically a creditor will end up with less money than original owed.
While filing for bankruptcy will allow a debtor to be able to get out of debt in time, it can also have many disadvantages as well which should not be taken lightly. The primary disadvantage is the impact of bankruptcy on one’s credit report. The bankruptcy judgment will stay with a person anywhere from 7-10 years and could obviously make any potential creditor weary of extending any line of credit to that person.
Bankruptcy could be a potentially life change decision and it is one that needs to be discussed with an attorney as soon as possible. The Law Office of Marc A. Futterweit understands the stressful situation that the idea and process of bankruptcy can bring to a client and are dedicated to working with you through every step of these extremely sensitive process. Please call our office today at (973) 442-0200 or visit our website at www.futterweit.com so that we can begin to help you with these important decisions.