Are you feeling overwhelmed by your debts and struggling to make payments? If so, you’re not alone. Many individuals and families in New Jersey are facing financial challenges and are not sure where to turn for help. Bankruptcy may be an option worth considering, but it can be difficult to know where to start.

If you’re considering bankruptcy, you’ve likely heard of both Chapter 7 and Chapter 13. But what are the differences between these two options, and which one is right for you? In this blog post, we’ll take a closer look at the basics of both types of bankruptcy and help you determine which one may be the better choice for your unique situation.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy, also known as a “liquidation bankruptcy,” is often the best option for individuals who have a significant amount of unsecured debt, such as credit card debt or medical bills. In a Chapter 7 bankruptcy, the bankruptcy court will appoint a trustee who will sell off any of your nonexempt property in order to repay your creditors. Most types of unsecured debt, including credit card debt and medical bills, will be discharged, meaning you will no longer be legally responsible for it.

To qualify for Chapter 7 bankruptcy, you must pass the “means test,” which is a calculation of your income compared to the state median. If your income falls below the state median, you may be eligible for Chapter 7 bankruptcy. If not, you may still qualify based on your expenses and other factors.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy, often called a “reorganization bankruptcy,” is a better option for individuals who are facing foreclosure or repossession but who have a regular income. In a Chapter 13 bankruptcy, you will work with the bankruptcy court and your creditors to develop a repayment plan that allows you to pay off your creditors over a period of three to five years. This plan may involve reducing the interest rate on some of your debts, extending the repayment period, or both.

To be eligible for Chapter 13 bankruptcy, you must have a regular income and your secured and unsecured debts must fall below certain limits. Additionally, you will need to demonstrate to the court that you will be able to make all necessary payments under your repayment plan.

Who Should File for Which Type of Bankruptcy?

Determining which type of bankruptcy is right for you will depend on several factors, including your income, debt, and goals for the future. Chapter 7 bankruptcy is typically better for those with low incomes and significant unsecured debt. It is also a faster process, typically taking only a few months to complete. However, if you own a home or other valuable assets, you may lose them in a Chapter 7 bankruptcy.

Chapter 13 bankruptcy, on the other hand, is better for those with a regular income and secured debts, such as a mortgage or car loan. It can also be a better option if you want to keep your home or other assets, as it allows you to develop a repayment plan that will allow you to catch up on any missed payments.

At Robert H Johnson, Bankruptcy Attorney, we understand that financial difficulties can be overwhelming and difficult to deal with. That’s why we’re dedicated to helping North Carolina residents navigate the bankruptcy process, from determining eligibility and choosing between Chapter 7 and Chapter 13 to developing a repayment plan that works for you.

Bankruptcy can be an effective tool for eliminating or managing debt, but it’s important to understand the differences between Chapter 7 and Chapter 13 before deciding which one is right for you. If you’re considering bankruptcy, consulting with an experienced bankruptcy attorney can help you understand your options and make an informed decision. Contact Robert H Johnson, Bankruptcy Attorney today to schedule a free consultation and learn more about how we can help you get back on track.