The Difference between Chapter 7 and Chapter 13 Bankruptcy

When filing for bankruptcy, it is important to understand all options available to you. Filing for bankruptcy can sometimes lead an individual to a better financial situation than before. There are two different types of bankruptcy that someone can file for: Chapter 7 and Chapter 13 Bankruptcy. It is crucial to have an experienced attorney at your side when filing for bankruptcy.

Chapter 7 Bankruptcy

One goal in filing for Chapter 7 Bankruptcy is to give someone a fresh start. In order to file for Chapter 7 Bankruptcy, an individual’s income must fall below the average income within the county that you live. Typically, those who file for Chapter 7 are relieved of their debts without having to lose their belongings. Such belongings may include bank accounts, pension plans, automobiles, IRA’s and your house. This means you may not have to pay credit card debt, personal debt, medical bills, automobile repossessions, and foreclosures.

Certain debts are not forgiven under Chapter 7 Bankruptcy. Those may include but are not limited to:

  • Spousal and child support
  • Debts as a result of fraud or dishonesty
  • Civil Judgements for intentional torts
  • Federal and State Income Taxes
  • Payroll and sales taxes
  • Majority of student loans

Chapter 13 Bankruptcy

Chapter 13 Bankruptcy exists for those that earn above the average income in their county. Filing for Chapter 13 allows an individual to keep their assets while setting up a payment plan to repay their debts. This “plan” allows you to pay back any incurred debts over the course of 3-5 years. This system allows you to catch up on payments without creditors collecting your possessions. Once the plan is completed, the outstanding debt is forgiven. In order to be eligible for Chapter 13 Bankruptcy, you must have a regular income to be able to continue monthly payments.

There are certain debts that may not be forgiven under Chapter 13 Bankruptcy. These debts may include but are not limited to:

  • Spousal and child support
  • Home mortgages
  • Student loans
  • Criminal restitution
  • Outstanding payments for injuries or death of another

Automatic Stay

When filing for bankruptcy, the Bankruptcy Court enforces the “Automatic Stay.” This forbids creditors from any collection activities, thus giving debtors a little bit of breathing room to pay back their debts. This may include lawsuits, collection calls/letters, bank restraints, foreclosures or repossessions. Benefits of the Automatic Stay are:

  • It is filed immediately
  • Collectors cannot pursue debts
  • Prevents harassment
  • Gives you room to breathe while recovering stability

Contact our Firm

If you or a family member is considering filing for bankruptcy and need the help of a skilled attorney, contact Detzky, Hunter & DeFillippo, LLC. today.

Detzky, Hunter & DeFillippo, LLC is an experienced law firm that has proudly served clients across New Jersey for decades from their convenient locations in Freehold and Somerville. If you need strong legal guidance, contact us today to schedule a consultation. We are lawyers who listen, counselors who care.

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