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Chapter 7 or Chapter 13: Which is best for you?

If you are struggling with overwhelming debt in New Jersey, you may be considering bankruptcy as the only way out. If so, you likely have many questions about Chapter 7 versus Chapter 13 so you can make an informed decision as to which one is right for you.

As FindLaw explains, both Chapter 7 and Chapter 13 have their own advantages and disadvantages. Determining which one best suits your purposes depends on your own financial situation and what you wish to accomplish with your bankruptcy.

Chapter 7 advantages and disadvantages

Chapter 7 accounts for up to 71 percent of all bankruptcy filings, mainly because it is the simplest and quickest form. Its other major popularity is the fact that it discharges virtually of your consumer debt, including your credit card debt. In addition, you can exempt many of your personal assets from a Chapter 7.

On the other hand, you must meet New Jersey income requirements in order to file Chapter 7. The other thing you should realize is that if you are a homeowner facing foreclosure, Chapter 7 likely can only forestall it, not entirely prevent it.

Chapter 13 advantages and disadvantages

Unlike Chapter 7 which is a discharge proceeding, Chapter 13 is a reorganization proceeding whereby you get the opportunity to renegotiate the terms and amounts of many of your secured debts and then substantially pay them off over time, usually three or five years. As a homeowner, this gives you a great deal of time to get caught up with your mortgage payments and reduce your remaining mortgage balance.

Some people see the extended time period of a Chapter 13 bankruptcy as a negative since it puts you on a very strict budget for a very long time. If you do not, however, find this impossible to live with, the only other possible negative to Chapter 13 is that you must use only “disposable” income to pay your debts under it. You must pay all your necessity bills first, such as those for food, medical care, etc.

This is general educational informtion and not intended to provide legal advice.

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