People encounter financial hardships due to various reasons. This might include medical bills, job loss or overwhelming credit card debt. Bankruptcy can provide a legal and structured path to financial recovery when these challenges become insurmountable.
In New Jersey, bankruptcy options primarily fall under three chapters: Chapter 7, Chapter 13 and Chapter 11.
Chapter 7 bankruptcy
Chapter 7 bankruptcy is often referred to as a “liquidation bankruptcy”. It allows individuals to discharge most of their unsecured debts and get a fresh start. This can be especially beneficial for those with credit card debt, medical bills and personal loans.
Chapter 7 bankruptcy typically does not require a repayment plan. In some cases, individuals can retain essential assets through exemptions outlined in state laws.
Chapter 13 bankruptcy
Chapter 13 bankruptcy is sometimes called “reorganization bankruptcy”. It involves creating a manageable repayment plan to address debts while allowing individuals to keep their assets, like a home or car. This allows people to catch up on missed mortgage or auto loan payments and reduces the risk of foreclosure or repossession. This type of bankruptcy applies only to unsecured debts that total less than $2,750,000.
Chapter 11 bankruptcy
Chapter 11 bankruptcy is a legal process that allows financially distressed companies to reorganize their debts while continuing their operations. This chapter provides a way for businesses to develop a plan to repay creditors over time. Chapter 11 is typically used by large corporations, but it can also apply to smaller businesses and individuals with substantial debts.
Bankruptcy may not be the best solution for everyone and it is best to consult with a qualified professional about individual circumstances. However, filing for bankruptcy in New Jersey does bring an automatic stay to debt collection, creditor harassment and legal actions. This can give individuals the time and space needed to regain financial stability.