Explaining Chapter 13 Bankruptcy

When many people think of bankruptcy, they imagine something extreme: their property confiscated, their bank accounts emptied, their rooms left bare. And while that can happen to some people in rare and unusual circumstances, there are two primary forms of bankruptcy available to individuals. The more common version, where your non-exempt property may be sold off to satisfy as much of your debt as possible, is known as Chapter 7 bankruptcy. However, Chapter 13 bankruptcy is an alternative option and is more appropriate for particular situations.

In Chapter 13 bankruptcy, you create a reorganization plan to help you pay off your debt over a certain period, usually between three to five years. This plan is put together in concert with a bankruptcy attorney and a credit advisor as necessary, and must be confirmed by the bankruptcy court. Once the plan is in place, it ensures your debts will be satisfied, provided you follow the confirmed plan with any modifications ordered by the bankruptcy court.  The plan will require that you make one monthly payment to the Chapter 13 Trustee, and the Trustee then makes proportional distributions to your creditors in accordance with the confirmed plan.

There are a few caveats to be aware of, however. First, there is a limit to how much debt you can have and still qualify for Chapter 13 bankruptcy. Second, certain kinds of debt, such as child support, tax liens, or student loans, cannot be discharged through bankruptcy. And finally, the plan you put in place to pay back your debt is not optional, and if you fail to adhere to the plan, you may not receive the benefits of bankruptcy protection.  If plan payments are not made, the Chapter 13 Trustee will normally make an application to the court to have your case converted from Chapter 13 to Chapter 7, which may not be advantageous to you.

If you are experiencing financial distress, contact an experienced New Jersey bankruptcy attorney to discuss your options. The Law Offices of Hunziker, Jones & Sweeney are experienced in helping families and individuals deal with the devastating effects of financial distress and in mapping out potential strategies, including the possibility of filing for bankruptcy, to help them cope and to see the light at the end of the tunnel. If you are experiencing severe financial distress and may be considering bankruptcy as an option or want to learn more about what a bankruptcy filing may do to help you, call The Law Offices of Hunziker, Jones & Sweeney at (973) 256-0456 or fill out our contact form for a consultation.