In consumer bankruptcy, there are two major facets. One is chapter 7, in which debts are essentially forgiven. The other is chapter 13, in which the consumer must pay back the debts in a restructured payment plan. Within this, there are three different forms of debt. These each have different time tables and stipulations for New Jersey residents who are filing for chapter 13 bankruptcy.
The first kind of debt is priority debt. These include the cost of the bankruptcy proceedings, taxes and the like. No matter how other debt is handled, these must be paid off in full by the time the repayment plan is over. The only exception is if the creditor themselves makes arrangements otherwise.
The next kind of debt is secured debt. For these claims, the creditor has the right to collateral if the debt is not paid off according to the restructuring. If it seems the debt will not be made under the current timeline and the collateral is not enough to fully cover it, the creditor has the right to restructure the payment plan to make sure they are paid in full.
The final type of debt is unsecured. These are the most “lenient” of the three types of debt. Essentially, an agreement is made in which the debtor will pay off as much as he can over the repayment time, based on their disposable income. Whatever is left at the end of the period is typically forgiven.
Filing for chapter 13 bankruptcy can be a complex process, and it may not be wise to go at it alone. A bankruptcy law attorney may be able to provide advice and representation during the proceedings.