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What can I expect when filing Chapter 13?

If you’re having difficulty paying off outstanding debt in New Jersey, bankruptcy may be an option for you. In this case, chapter 13 may be helpful depending on your unique financial situation. But what can you expect from the process? USCourts.gov offers insight into what chapter 13 entails and what you need to know when filing.

How It Works

Unlike chapter 7, chapter 13 allows a debtor to repay debts using a scheduled payment plan. The process kicks off with a petition, which is accompanied by backing information. This can include proof of current income, a listing of expenses, a statement regarding financials status, previous years’ tax returns, and many other documents. Once the court receives these documents all creditors must cease collecting on debt until a decision is made (this is known as an automatic stay).

How to Determine Eligibility

In order to be approved to file you'll need to meet the eligibility requirements. Unsecured debt must be less than $394,725, while secured debt can’t equal more than $1,184,200. Debtors must also seek out credit counseling within the 180 days prior to filing and can’t have filed for bankruptcy and been denied in the same time period.

How Debts Can Be Paid

If found eligible, the debtor will then be given a payment plan. This means all payments must be made in full and on time. Additionally, new debt should not be taken on until past debt has been satisfied (as this can disrupt the payment schedule). If payments are not made the case could be converted to chapter 7, which carries a risk of property loss to cover remaining expenses (which is referred to as liquidation bankruptcy).  

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