What are the Differences Between Chapter 7 ​Bankruptcy and Chapter 13 Bankruptcy  in New Jersey?

by | Mar 24, 2024 | Bankruptcy

Understanding the nuances between liquidation bankruptcy (Chapter 7) and restructuring bankruptcy (Chapter 13) is pivotal for New Jersey residents grappling with financial distress. 

In fact, many people and families are dealing with financial distress during these challenging economic times. According to data from the American Bankruptcy Institute (ABI), nearly 10,000 petitioners filed for personal bankruptcy protection in New Jersey in 2021 alone. There are actually two separate types of personal bankruptcy: Chapter 7 bankruptcy and Chapter 13 bankruptcy. Both paths aim to restore financial stability, yet navigating their complexities necessitates professional guidance.

If you are considering filing for bankruptcy protection, it is crucial that you know which option is the best choice for your financial situation. In this article, our New Jersey personal bankruptcy attorney provides an overview of the key differences (and similarities) between Chapter 7 bankruptcy and Chapter 13 bankruptcy.

Difference: Liquidation Bankruptcy (Chapter 7) vs. Restructuring Bankruptcy (Chapter 13)

A Chapter 7 bankruptcy is a liquidation bankruptcy. Through a successful Chapter 7 bankruptcy filing in New Jersey, you can eliminate many personal debts outright—including credit cards and medical bills. In contrast, Chapter 13 is a form of reorganization bankruptcy. Through Chapter 13, you can get onto an affordable repayment plan to resolve debts within 2 to 5 years.

Difference: Chapter 7 Bankruptcy is Means-Tested, Chapter 13 Bankruptcy is Not

Another key difference between Chapter 7 and Chapter 13 is the means test. Not everyone in New Jersey can file for Chapter 7 bankruptcy. To be eligible, you must have an income level that is below the state’s median based on your household size. The strict means test does not apply to Chapter 13 bankruptcy. Individuals eligible for Chapter 7 due to their income can still file for Chapter 13.

Difference: Chapter 13 Bankruptcy Rolls Over Your Credit Report Sooner

A Chapter 7 bankruptcy filing will remain on your credit report for ten years. Chapter 13 bankruptcy will only remain on your credit report for seven years. The earlier deletion of the personal bankruptcy filing can be an advantage to filing for Chapter 13 bankruptcy protection.

Similarly, The Goal is to Get You Back into a Financially Stable Position

Although there are differences, the ultimate goal of Chapter 7 bankruptcy and Chapter 13 bankruptcy is the same: Help you get back into a secure and stable financial position. You should come out of the bankruptcy process solvent.

Similarly, Filing for Personal Bankruptcy Protection is Complicated

Both Chapter 7 bankruptcy and Chapter 13 bankruptcy are complex, document-intensive processes. You do not have to try to navigate the system alone. An experienced New Jersey consumer bankruptcy lawyer will protect your rights.

Call Our Bankruptcy Lawyer in New Jersey for Immediate Assistance

At the Law Offices of Wenarsky & Goldstein LLC, our New Jersey personal bankruptcy lawyer has the skills and legal expertise to handle both Chapter 7 and Chapter 13 bankruptcy filings. If you have any questions about your options, we can help. Contact us today to set up a free, fully confidential review of your case. With a law office in Ledgewood, our law firm provides bankruptcy representation throughout North Jersey, including in Morris County, Essex County, and Union County. 

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