When you start investigating bankruptcy as an option, you’ll quickly discover that there are two distinct approaches—a liquidation under Chapter 7 and a reorganization under Chapter 13. Let’s look at Chapter 7 filings. What is unique about a Chapter 7 petition? What will it help you accomplish? What are its limitations?
When you file for protection under Chapter 7 of the federal bankruptcy laws, you have the right to have some of your debts discharged, or permanently extinguished. In exchange for that right, you will be required to give some of your property to the bankruptcy trustee. That property will then be sold, with the proceeds being distributed among your creditors.
You must qualify, however, to file a petition under Chapter 7. The law requires that you submit to “means test,” demonstrating that you lack the resources to repay creditors over a three-to-five-year period. If you qualify, you may be able to discharge many debts, but some, such as child support and other family law obligations, may be exempt from discharge. In addition, student loan and most tax arrearages are difficult to discharge.
You won’t have to give up all of your property, though. There are exemptions under either state or federal laws, allowing you to keep some value in your home, vehicle and other personal assets.
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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