Chapter 7 bankruptcy involves the selling off of assets (except for those that qualify for exemption) in order to pay back debtors. Under Chapter 7, your creditors will receive as much money as they can from the proceeds of your assets being sold. Any debts left over will be dissolved. Clearly, Chapter 7 is a useful tool for resolving toxic debt; however, some people may want to review their options before they agree to liquidate their assets like this.
For example, if you have a business — like a corporation, sole proprietorship or partnership — you might not want to liquidate that business. Rather than liquidate your business, you might be able to file for bankruptcy through Chapter 11 proceedings. Through Chapter 11, you can ask for an adjustment to your debts. Such adjustments might include reducing the debts, getting more time to pay them off or some other debt reorganization strategy.
If you are a sole proprietor of your business, or if you have a reliable and steady income, Chapter 13 could also be a good option. Through Chapter 13, you could obtain a reduction or adjustment to your debts and stop foreclosure proceedings while creating an affordable repayment plan during a set period of time. After making regular payments as a part of the payment plan, any amount of debt left over will be dissolved.
As you can see, New Jersey debtors have a number of options available to them outside of Chapter 7 liquidation. They may also be able to reach out to creditors and establish an out-of-court settlement agreement to resolve their debts. Regardless what your debt situation is, a New Jersey bankruptcy attorney can help you navigate and examine your options.
Source: United States Courts, “Chapter 7 – Bankruptcy Basics,” accessed Jan. 29, 2016