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Should I choose Chapter 7 or Chapter 13 bankruptcy?

When you decide to file bankruptcy in New Jersey, you must first decide whether you will file Chapter 7 or Chapter 13. This choice will affect many aspects of your case. You could preserve your assets or lose them all. You could wipe your debt clean quickly or have to make repayments and not end your case for years. This decision needs to be made carefully, so you ensure you make the correct move.

The American Bar Association explains that Chapter 7 is the quickest option. Plus, it allows you to remove your debts without having to repay them, but your assets may be taken to repay your creditors. However, you must meet a means test, which means you cannot have a significant amount of income. You also cannot have filed a Chapter 7 bankruptcy within the last eight years.

With Chapter 13, you are going to have to repay debts because this is a repayment plan. That can take years to complete and have your bankruptcy discharged. However, you do not have to take the means test and you can often save many of your assets. You cannot file if you have had a Chapter 7, 11 or 12 in the last four years or a Chapter 13 in the last two years.

When making your decision, it is smart to first consider your income. You may end up having no choice since Chapter 7 income limits are strict. If you do still have a choice after taking the means test, it is best to next consider your assets. While there are exempt assets, in many cases, you may still lose your home and your vehicle when filing Chapter 7, whereas with Chapter 13, you could keep them. This information is for education and is not legal advice.

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