Chapter 7 refers to a section of the United States Code which states the eligibility and requirements for bankruptcy filing. Bankruptcy is a legal process that gives individuals with debt relief when they are financially unable to pay. Typically, there are two types of bankruptcy, Chapter 13 and Chapter 7.
Understanding the Differences Between Chapter 13 and 7 Bankruptcies
The U.S. court recognizes two types of personal bankruptcies. In a Chapter 13 bankruptcy, you can expect debt relief with the existence of a repayment plan. Debtors combine each of their loans into one consolidated payment. Then, they make those payments for a period of time, usually between three and five years.
Chapter 7 Bankruptcy, however, is different, with its own set of rules and regulations. Chapter 7 Bankruptcy is often referred to as a Liquidation Bankruptcy. This comes from the fact that following the successful filing of a Chapter 7, all of the debt is forgiven, or discharged. The individual does not continue to make payments in a Chapter 7 Bankruptcy.
Important Factors of a Chapter 7 Bankruptcy
Chapter 7 Bankruptcy includes the following benefits:
- Faster filing and debt reduction process: You can complete the entire bankruptcy process in three to four months.
- Is inclusive of most types of debt: It includes many types of debt including credit card, medical, and personal loan debt.
- Common filing method: Because debtors are not forced to give up assets, Chapter 7 is one of the most common types of debt relief.
- Allowed to keep assets: Individuals are often allowed to keep many of their personal assets, despite filing bankruptcy.
Of course, both types of bankruptcies have their cons. Not all types of debt will qualify for Chapter 7 Bankruptcy including back taxes, medical, alimony, or student loan debt. Depending on your financial situation and amount of debt owed, you might also be forced to give up certain assets, like a vacation house or second vehicle. In some cases, you’ll be required to convert to a Chapter 13 Bankruptcy, which does require repayment of debt.
How to Apply for Chapter 7 Bankruptcy
If you feel that you would benefit from a Chapter 7 Bankruptcy filing, you can do so with the following steps:
- Discuss your case with a bankruptcy lawyer: It can be helpful to discuss your case with a bankruptcy lawyer. Not only can a lawyer ensure that you submit all the required paperwork within the time limit, but by following their guidelines, you are more likely to be approved on the first filing.
- Take the means test: Chapter 7 Bankruptcy is reserved for certain individuals in certain financial situations. Just a few factors considered include the amount of debt, the amount of time it would take to pay off your debt, how your debt is affecting your life, and whether or not you have any extra income. Click the link to learn more about the Chapter 7 bankruptcy means test.
- Consider your assets: It is also important to consider your assets. In some cases, you will be required to sell off certain assets in order to cover an existing debt you have.
Keep in mind, both types of bankruptcy will leave a mark on your credit for a set amount of time. Chapter 7 Bankruptcies, in particular, will stay on your credit for up to 10 years. However, for some individuals, it is the preferable option when they are unable to catch up with debt payments. Filing bankruptcy does prevent lenders from constantly reaching out to you to collect owed payments.
Wondering which type of bankruptcy is best for you? Click the link to learn more in one of our previous blogs.
Contact a Wayne Bankruptcy Attorney for a Consultation About Chapter 7 Bankruptcy in New Jersey Today
If you are struggling with debt, you may need a fresh start financially. An experienced bankruptcy and debt relief attorney can help you explore your options and determine the best course of action for you, your family, and/or your business. The experienced New Jersey bankruptcy lawyers at the Law Office of Silverman and Roedel, LLC understand the nuances of New Jersey and federal bankruptcy laws, so we can help you protect your interests. Call us anytime at (973) 772-6411 or fill out the online contact form to schedule a confidential consultation. We have an office conveniently located at 1187 Main Avenue, Suite 2C, Clifton, NJ 07011.
The articles on this blog are for informative purposes only and are no substitute for legal advice or an attorney-client relationship. If you are seeking legal advice, please contact our law firm directly.