Chapter 13 Bankruptcy
in NJ
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Chapter 13 is the second most popular
form of bankruptcy in America. In 2009
there were just over 370,000 cases
filed, which is a little under half that
of chapter 7. Chapter 13 is all about
reorganization. It allows individuals to
go through a financial reorganization
supervised by the federal bankruptcy
court. Chapter 13 is written to assist
debtors that receive income
rehabilitation via a court approved
plan. This is not an immediate fix like
in Chapter 7, but a long term plan to
alleviate debt.
In order to file for chapter 13, you
need to have sufficient disposable
income to fund a realistic plan or
reorganization. Also, as of April 2010,
you must have unsecured debts of less
than $360,475.00 and secured debts of
less than $1,081,400.00. The debtor
proposes their plan to pay his creditors
over a 3 to 5 year period. The plan lays
out all of the payments and when they
will occur. In most cases the debtor
gets to keep their property, and the
creditors receive less money than they
are owed.
After filing for chapter 13, a record
does stay on the debtor’s credit report
for 10 years. During the case they may
not receive additional credit without
approval from the bankruptcy court.
While these disadvantages to filing for
chapter 13 may seem daunting, there are
some key advantages when filing chapter
13.
Debts that cannot be discharged in a
chapter 7 case may be eligible to be
discharged. Foreclosures may be stopped,
or at least halted for the length of the
case. For non-primary properties where
creditors are charging too much, the
debtor may be eligible for a cram down
modification of debt. This involves
reducing the principle amount, a change
in the interest rate, or a change of
other terms.
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