What Is Chapter 13 Bankruptcy?
Many people believe that when a person files for bankruptcy, they must liquidate all their assets to pay off their creditors. This claim may be valid to a large extent for a Chapter 7 bankruptcy. But Chapter 13 bankruptcy is different.
If you’re struggling with a mountain of debt and you desire a fresh start, Chapter 13 bankruptcy allows you to restructure your debts and repay them through a long-term repayment plan if you have a steady monthly income. You get to keep your assets in the process.
But even though Chapter 13 bankruptcy is a viable way for you to get debt relief without losing your precious assets, it is important that you understand the intricacies surrounding the process before committing to it.
This guide explains how Chapter 13 bankruptcy works to help you make an informed decision and avoid some of the common Mistakes Made Before Filing for Bankruptcy as you prepare for your case.
Benefits of Filing Chapter 13 Bankruptcy
Chapter 13 bankruptcy offers you a chance to take charge of your financial situation by allowing you to repay your debts over a 3-5-year period in monthly installments that your income can support. It eliminates the pressure of knowing that past due bills, car payments, or mortgage arrears are hanging over your head, leaving you free to restrategize and work harder to better your finances.
Once you file a Chapter 13 bankruptcy petition, several things happen;
There is an “automatic stay” against your creditors. They cannot take any action against you to recover the amount you owe or repossess any asset used as collateral. They’ll need to wait to get their payment when the funds become available under the approved repayment plan.
Your family or anyone who co-signed your outstanding loan is protected from creditors.
If there are any unsecured debts, such as credit card debt or medical bills left unpaid at the end of the period, they’ll be discharged by the bankruptcy court. Which means you don’t have to pay them.
But there are some downsides. Chapter 13 bankruptcy can affect your credit score. It will stay on your credit report for about seven years from when you file your petition.
Also, certain types of debts, usually those imposed by the government or court, such as spousal and child support, cannot be eliminated. You’ll need to continue paying those debts even if all other debts are discharged at the end of the bankruptcy.
What Are the Eligibility Requirements for a Chapter 13 Bankruptcy in NJ?
You can file Chapter 13 bankruptcy in New Jersey if you meet the following requirements as stipulated by the U.S. Bankruptcy Code:
You have a regular income and enough disposable income after deducting your living expenses.
Your total secured and unsecured debts are less than $2,750,000.
You have not filed a previous bankruptcy petition that was dismissed within 180 days before filing the current petition.
You have received credit counseling within 180 days before filing your petition.
Filing for Chapter 13 Bankruptcy in New Jersey
The bankruptcy process begins when you file your petition at the bankruptcy court clerk’s office that covers your location. The petition must be accompanied by certain documents, including the following:
A schedule of your assets and liabilities
A copy of your credit counseling certificate
A schedule of your current income and expenditures.
You also need to file a copy of your proposed repayment plan when you file your petition or up to 14 days after.
It is important that you file all the required documents at the appropriate time; otherwise, you risk your petition being dismissed. If you have issues identifying the documents needed, these Chapter 13 Bankruptcy Resources may help. You can also seek help from an experienced bankruptcy attorney in New Jersey. They can help you prepare your petition and the relevant documents so your case can proceed without hitches.
Remember that you also need to pay a $313 filing fee to the court. This fee cannot be waived, but you can apply for permission to pay it in installments if you can’t afford the total amount at the point of filing.
What Happens After Filing the Chapter 13 Bankruptcy Petition?
After filing your petition, a bankruptcy trustee will be appointed to oversee your case. The trustee will notify all your creditors that you have filed for bankruptcy and arrange for the compulsory First Meeting of Creditors.
The First Meeting of Creditors
The First Meeting of Creditors is between you, your creditors, and the bankruptcy trustee assigned to your case.
At the meeting, the trustee will ask you questions about your finances and repayment plan to ensure that your plan is suitable and complies with the provisions of the law.
Contents of the Debt Repayment Plan
Your Chapter 13 plan must meet certain standards to be acceptable;
It must provide for regular monthly payments to be made to the trustee for between 3 to 5 years.
It must consider priority claims, such as taxes and child support payments, and provide for their full payment.
If you have secured debts (that is, debts backed by collateral ), the plan must ensure that all secured creditors receive equal payment each month.
The plan must make provision for your unsecured creditors to receive some payment. They do not have to be paid in full, but a part of your disposable income must be used to repay them during the bankruptcy.
There are other statutory requirements that a valid repayment plan must fulfill. It may not be easy to completely understand these requirements or how to comply with them. But you don’t have to bear the burden alone. A skilled bankruptcy attorney can help prepare a solid, personalized plan that meets the required standards. Consider asking one for help.
The Confirmation Hearing
After the creditor’s meeting, the bankruptcy court will hold a hearing to determine whether the repayment plan is feasible and complies with all the requirements.
Generally, you must begin making periodic payments to the trustee within one month after filing your petition. Once the court confirms your plan at the hearing, the trustee will begin the distribution of the funds already collected (if any) to the creditors. You’ll also continue to make the payments to the trustee as scheduled under the plan until the end of the repayment period.
The biggest challenge many people face when they Choose Chapter 13 bankruptcy is staying committed to their periodic payments throughout the bankruptcy. But if you hope to achieve debt freedom and enjoy bankruptcy protection, you must stick to the plan until you reach your goal.
Contact the Law Offices of Scott J. Goldstein, LLC, for Help With Your Chapter 13 Case in New Jersey
Chapter 13 bankruptcy offers you a chance to relieve the weight of your money issues and chart a steady course toward debt relief. However, the process is innately complex because of all the conditions and documentation required. Non-compliance with these requirements could adversely affect the outcome of your case and prevent you from reaching your goal.
Understandably, you may need professional help to scale through the proceedings successfully. That’s where we come in.
At the Law Offices of Scott J. Goldstein, LLC, we are committed to helping our clients find their way out of overwhelming debt through bankruptcy. Our experienced bankruptcy lawyers understand the fine points of the Chapter 13 process, and you can trust us to clarify any issues you might have, help you get started, and guide your case toward a positive outcome.
So, if you have further questions about your Chapter 13 Case or need any kind of New Jersey Bankruptcy help, contact us immediately to set up a free consultation and share your concerns. Let us help you as you work your way toward a fresh start.
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