Law Office of Joel R. Spivack
Bankruptcy can be a complex but viable solution for individuals overwhelmed by debt. In New Jersey and Pennsylvania, understanding the differences between Chapter 7 and Chapter 13 bankruptcy is crucial to making an informed decision about which path to take.
Types of Debts in New Jersey & Pennsylvania
Debts are categorized into three main types, each with its own implications in bankruptcy:
- Priority Debt: Includes recent taxes and domestic support obligations like alimony and child support. These debts are typically not dischargeable in bankruptcy.
- Secured Debt: Involves debts where collateral is pledged, such as mortgages and car loans. In Chapter 7, these debts can be discharged, but the creditor can take possession of the collateral unless you continue making payments to keep it.
- General Unsecured Debt: Includes credit cards, medical bills, and personal loans. Chapter 7 discharges most of these debts, providing relief from financial obligations.
Chapter 7 Bankruptcy: Overview and Considerations
Chapter 7 bankruptcy, often referred to as liquidation or straight bankruptcy, offers several key benefits:
- Speed: Typically resolved within 3 to 4 months from filing to discharge.
- Debt Discharge: Most general unsecured debts are discharged, giving a fresh financial start.
- No Repayment Plan: No structured repayment plan required, although non-exempt assets may be liquidated to pay creditors.
Chapter 13 Bankruptcy: Benefits and Considerations
Chapter 13 bankruptcy, also known as bankruptcy reorganization, may be preferable for individuals who have a regular income and want to keep their assets. Here’s why you might consider Chapter 13:
- Asset Retention: You can keep all your assets while restructuring your debts through a court-approved repayment plan.
- Debt Repayment: Allows you to consolidate and repay debts over 3 to 5 years, often at reduced amounts.
- Stopping Foreclosure or Repossession: Chapter 13 can halt foreclosure proceedings and allow you to catch up on missed mortgage or car payments over time.
Choosing Between Chapter 7 and Chapter 13
The decision between Chapter 7 and Chapter 13 largely depends on your specific financial situation and goals:
- Income Level: Chapter 7 is typically for individuals with lower income and few assets, or assets which are exempt, whereas Chapter 13 is suitable for those with regular income who can afford a repayment plan.
- Asset Concerns: If you want to keep valuable assets that may be at risk in Chapter 7, Chapter 13 allows you to retain them.
- Debt Types: Consider the types of debts you owe. While Chapter 7 discharges most unsecured debts, Chapter 13 allows you to restructure and potentially reduce debts.
Consult with a Bankruptcy Attorney
Navigating bankruptcy law requires guidance tailored to your specific circumstances. Consulting with a knowledgeable bankruptcy attorney in New Jersey and Pennsylvania, is essential to understanding your options fully. They can assess your financial situation, explain the pros and cons of each chapter, and guide you through the entire bankruptcy process.
Whether you choose Chapter 7 or Chapter 13 bankruptcy depends on factors such as your income, assets, and the types of debts you owe. Both chapters offer distinct advantages, and a skilled attorney can help you choose the best path to achieve financial stability and a fresh start. Contact the Law Office of Joel R. Spivack today at 856-488-1200.