Should I File Chapter 7 or Chapter 13 in NJ?

Choosing between Chapter 7 and Chapter 13 is one of the most important decisions in a bankruptcy case. Each chapter serves a different purpose under federal law and works differently within the U.S. Bankruptcy Court for the District of New Jersey. The right answer depends on income, property, secured debt like mortgages or car loans, and long-term goals. This guide compares both chapters clearly so you can make a decision based on criteria — not guesswork.

Chapter 7 vs Chapter 13 — Side-by-Side Comparison

How the Means Test Impacts Chapter 7 Eligibility

To qualify for Chapter 7 in New Jersey, you must pass the Chapter 7 means test. The test compares your income to NJ median income figures and analyzes allowable expenses using official forms published by the U.S. Trustee Program.

If you do not qualify for Chapter 7 based on the means test, Chapter 13 may still be available. For a deeper explanation, visit NJ Bankruptcy Means Test.

Which Bankruptcy Is Better for My House?

Behind on Mortgage Payments
Chapter 13 is commonly used to catch up on mortgage arrears over a structured 3–5 year plan while the automatic stay pauses foreclosure.

Current on Mortgage but Overwhelmed by Other Debt
Chapter 7 may discharge qualifying unsecured debt, potentially freeing up income to maintain ongoing mortgage payments.

If foreclosure is already scheduled, review Stop Foreclosure With Bankruptcy for timeline-specific guidance.

Which Bankruptcy Is Better for My Car?

Need Time to Catch Up on Payments
Chapter 13 may allow repayment of missed car payments through a court-approved plan.

Vehicle Has Little or No Equity
Chapter 7 may allow you to keep a vehicle if equity falls within exemption limits and payments remain current.

If repossession is threatened, visit Stop Repossession.

Speed vs. Structure — What Matters More to You?

Fastest Path to Relief

Chapter 7 often provides a quicker discharge of unsecured debt.

Long-Term Asset Protection

Chapter 13 provides structure for protecting homes and vehicles while reorganizing debt.

Income Stability

Regular income is required for Chapter 13, while Chapter 7 depends more heavily on means test qualification.

The better chapter is the one aligned with your financial reality and long-term stability.

When Chapter 7 May Be a Better Fit

• Primarily unsecured debt (credit cards, medical bills)
  
• Income below NJ median or passes means test
  
• Minimal non-exempt property
  
• No need to cure significant mortgage or vehicle arrears
  
  

Learn more at Chapter 7 Bankruptcy.

When Chapter 13 May Be a Better Fit

• Behind on mortgage or car payments
  
• Need to prevent foreclosure or repossession
  
• Income too high for Chapter 7 qualification
  
• Desire for structured repayment over time
  
  

Learn more at Chapter 13 Bankruptcy.