If you have a retirement account, mortgage or car in New Jersey, you may hesitate when considering bankruptcy. You might worry that you could lose everything. Fortunately, state and federal laws recognize that you cannot lose everything and remain independent. Contrary to myths, you can keep certain assets. Depending on your unique situation, this could mean keeping your home and car.
The U.S. Bankruptcy Courts state that bankruptcy provides debt relief by wiping out or modifying what you owe creditors.
Fresh start plan
Chapter 7 is also known as the “fresh start” bankruptcy. During this process, a court-appointed trustee inventories and sells nonexempt assets. The proceeds go towards settling creditor accounts, which may be the total due or an agreed-upon amount. Exempt property includes assets detailed in the bankruptcy code, including social security and retirement accounts.
The means test determines whether you qualify for Chapter 7. If your household income puts below the median income of the state, bankruptcy proceedings could be behind you in six months. After creditors discharge your debts, your liability for them ends.
Chapter 13, known as the wage-earners bankruptcy, enables individuals with a steady income to qualify for bankruptcy. If you struggle with underemployment or overwhelming debt, you might be eligible for this debt relief option. You develop a bankruptcy plan, then make payments to the court for up to five years.
The trustee assigned to your case negotiates with creditors and pays them as needed. If you have any remaining debt at the end of the repayment period, the court may discharge it.
If a looming divorce or overwhelming debt due to unemployment makes your expenses unmanageable, it’s essential that you understand which option is right for you.