Many New Jersey residents find themselves facing seemingly insurmountable debt, which might be due to unexpected medical expenses, mounting credit card bills or other factors. If you count yourself among those struggling to stay afloat, you may be wondering whether bankruptcy might help you get things back under control.
Per Rocket HQ, when you file for personal bankruptcy, you typically do so through either a Chapter 7 or a Chapter 13 format. There are many important distinctions between the two types, including who is eligible for each.
The basics of Chapter 7 bankruptcy
Many people who file for consumer bankruptcy do so through a Chapter 7 filing. However, you must have limited income and pass a bankruptcy means test in order to file for Chapter 7. This type of bankruptcy is a liquidation bankruptcy. This means you may, depending on the specifics of your situation, have to give up your home or other assets to pay off your unsecured debts. Once you file for Chapter 7, your credit report is going to show as much for up to 10 years.
The basics of Chapter 13 bankruptcy
You may want to consider Chapter 13 if you fail to qualify for Chapter 7 or do not want to put your home and other assets at risk. Should you file for Chapter 13, you must come up with a payback plan and keep up with the payments associated with it for between three and five years. At the conclusion of your payback period, your unsecured debts undergo discharge. This type of bankruptcy filing impacts your credit for up to seven years.
There are many variables involved in deciding whether to file bankruptcy. If you see no way to pay off debts within the next five years, bankruptcy may be a viable option.