Making the Right Decision about Filing for Bankruptcy Protection
When you’re struggling to make ends meet, whether you’ve lost your job, incurred substantial medical bills or gone through a divorce, the relief available through a personal bankruptcy filing can be attractive. Before you file, though, you want to consider the following factors, so that you make the right decision about your future:
- A bankruptcy filing won’t necessarily relieve you of the obligation to pay creditors—There are two common types of personal bankruptcy filings—Chapter 7 and Chapter 13. Only Chapter 7 allows you to permanently discharge debt. Under Chapter 13, all debt is renegotiated. You may be able to reduce some payments, but you’ll still have a legal responsibility to repay creditors.
- Some debts may not be dischargeable in a Chapter 7 filing—Child support and spousal support payments are excluded from Chapter 7 discharge by law. Furthermore, student loan arrearages and tax debts are extremely difficult to discharge.
- You must qualify to file for protection under Chapter 7—Before you can file a petition under Chapter 7, you must submit to a “means test,” in which you have to show that you lack the resources to repay your creditors over a three-to-five-year period. If the test shows that repayment is viable, then your only option is to reorganize your debt under Chapter 13.
- Underlying liens are not discharged by bankruptcy—If you have debts that are secured by collateral (a home or a car, for example), you may be able to eliminate some payment obligations, but your creditor can still enforce any existing liens.
- Retirement plans typically are not affected by a bankruptcy filing—IRAs, 401(k)s, 403(b)s, and other qualified retirement plans are typically exempt from attachment in a bankruptcy proceeding.
- Cosigners may have liability if you file under Chapter 7—A Chapter 7 petition may discharge your obligation to repay debt, but it won’t affect a cosigner (unless it’s your spouse). Friends or family who have cosigned any legal obligation might end up paying your debt.
Contact Attorney Howard N. Sobel
At the office of Howard N. Sobel, we work closely with people in New Jersey in personal bankruptcy filings. Contact our office online or call us at 856-424-6400 to set up a free initial consultation. We are currently available by phone, text message, or videoconference only. Evening and weekend appointments can be arranged upon request. We accept all major credit cards.
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