The Bankruptcy Process – How to File for Bankruptcy in New Jersey
As you may be aware, there are two core types of bankruptcy; chapter 7 and chapter 13. Each class provides a wide array of options and protections that may come in handy in ensuring that you get your discharge. This section takes a deeper dive into the bankruptcy process, plus how our legal experts can help you decide a suitable option for your situation and hold your hand through the whole litigation. Let’s get to it!
Chapter 7 Bankruptcy
Chapter 7 bankruptcy, aka, “liquidation” is recommended for individuals looking for a fresh beginning. When you file for this bankruptcy, you’re asking the court to do away with all debts that qualify for discharge. In exchange, you must give the bankruptcy trustee the permission to collect, distribute, and sell any of your assets but those exempted from the collection. After the assets’ proceeds get distributed to your debtors, the court will give a discharge of the remaining debts, relieving you of any further liability.
However, there’s a small catch; chapter 7 bankruptcy is not a preserve for everyone as you must pass a means test. That is, your total assets and monthly earnings must be assessed to determine whether you qualify to file this type of bankruptcy.
You’re probably wondering: what types of property can you be eligible to keep following the liquidation of your assets? Whereas they may vary based on your circumstances, here are some untouchable assets in chapter 7 bankruptcy:
- Insurance. More often than not, you may be allowed to keep your employer-provided insurance benefits plus cash values from your policies.
- Home equity. This is better known as homestead exemption in legal terms, and it protects a colossal chunk or all the equity in your home.
- Automobile. If your vehicle’s present market value doesn’t exceed thousands of dollars, you may qualify to keep it, more so if you use it to go to work or take your kids to school.
- Retirement Plans. Have you invested in insurance benefits such as pensions, IRAs, 401k plans, stock bonus plans, and profit-sharing? If Yes, you can rest assured of a stress-free retirement because such plans are protected from liquidation.
- Work-related Tools. If you work in any profession that requires you to use tools, e.g., construction, you may keep the work equipment.
- Personal Property. You may qualify to keep personal items such as furniture, books, musical instruments, antiques, electronics, and jewelry valued below $1000.
- Public Benefits. Your creditors are not eligible to collect any state-given benefits, including unemployment insurance, Social Security, and Welfare.
- Others. In some instances, you may qualify to apply to keep at least $1000 worth of additional property.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy is a bit more sophisticated and may be challenging to explore without a qualified attorney’s professional input. Whereas chapter 7 allows you to start afresh by liquidating part of your assets to clear your obligations, chapter 13 will enable you to create a rock-solid plan for repaying your debts. As such, the filing is perfect if you have consistent earnings and would love to retain all your property after the litigation – no wonder it’s also called the wage earner’s plan.
You need a chapter 13 bankruptcy lawyer to help you develop a repayment plan that fulfills the court’s bare minimums. That’s true because your plan must be based on the amount of property you own, your salary, plus the amount and type of debt you owe. An attorney can help you strike the perfect balance by reorganizing your debts over a period of time to ensure that you’re still left with a substantial amount to sustain yourself after the whole process.
After developing an open repayment plan, you’ll be expected to make monthly payments to the trustee, who then distributes the funds to your debtors. The best part about chapter 13 bankruptcy is that you may not be obligated to pay unsecured debts like hospital bills and credit card charges – they may be discharged after completing the regular payments. This makes chapter 13 an excellent option for those looking to sort their long-term obligations, e.g., mortgage and car loans, while also buying time to catch up on other debts.