When Might You Want to Reorganize Debt Even Though You Qualify for Discharge Under Chapter 7?
As a consumer, you have two general options when filing for bankruptcy protection. If you qualify, you can seek to permanently discharge your debts in a Chapter 7 proceeding. If not, your only option is to restructure or reorganize your debt through Chapter 13. If you meet the test for Chapter 7, should you automatically go that route? Are there situations where you might want to work out new payment arrangements with your creditors even though you’re eligible to permanently rid yourself of debt?
Use a Chapter 13 Filing to Keep Assets
In New Jersey, as in most states, when you file for protection under Chapter 7, you’ll have the opportunity to permanently eliminate most of your debts. (Even then, though, child support can never be discharged, and student loan arrearages and tax debts are difficult to get rid of.) In exchange for the right to permanently discharge your obligations, you may be required to relinquish some of your property to the trustee. There are exemptions to protect some of the value of your property, but you may risk losing substantial assets in a Chapter 7 proceeding, including your interest in real estate.
With a Chapter 13 petition, you’ll generally get to keep all of your property, provided you honor the commitments you make to repay creditors over a three-to-five-year period. Accordingly, even though you may be eligible to permanently discharge debts through Chapter 7, you may opt to file under Chapter 13 in order to keep your property.
Contact Attorney Howard N. Sobel
At the office of Howard N. Sobel, we provide personal bankruptcy counsel to men and women throughout the state of New Jersey. Contact our office online or call us at 856-424-6400 to set up a free initial consultation. Evening and weekend appointments can be arranged upon request. We accept all major credit cards.
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