What is a Chapter 13 Case?

by | Mar 27, 2024 | Bankruptcy

Many families in New Jersey are dealing with economic hardship. The American Bankruptcy Institute (ABI) reports that 9,977 people filed for personal bankruptcy protection in New Jersey in 2021. Most of these personal bankruptcies are Chapter 7 cases—but 25 percent of personal bankruptcy filers in New Jersey filed for Chapter 13 bankruptcy protection in 2021. 

What’s the difference between Chapter 7 and Chapter 13?

Chapter 13 bankruptcy offers a lifeline for individuals with regular income who find themselves battling overwhelming debt. Unlike Chapter 7’s liquidation approach, Chapter 13 enables debtors to manage their financial obligations through a structured repayment plan over three to five years, without stringent income limitations. 

In this article, we explore the elements of Chapter 13 bankruptcy, including the process, eligibility requirements, and the mechanics of repayment plans. If you’re considering this route to financial recovery, this guide by our New Jersey personal bankruptcy attorney is for you. Explore how Chapter 13 can offer a sustainable solution to regain financial stability.

Chapter 13 Bankruptcy Cases: Understanding the Basics

In contrast to a Chapter 7 liquidation bankruptcy, a Chapter 13 bankruptcy involves a repayment plan. As a general rule, the Chapter 13 bankruptcy process exists for those who have regular income but who are currently overwhelmed by a burdensome and unsustainable level of debt. 

Chapter 13 bankruptcy allows for debts to be rolled into a repayment plan through which the debtor can resolve the matter over a reasonable period of time—usually three to five years. However, the specific circumstances of the case always matter. 

Chapter 13 is available to more people and families than Chapter 7. Unlike with Chapter 7 bankruptcy, there is no income limit for Chapter 13 bankruptcy. You can file a Chapter 13 case even if your income is too high to file for Chapter 7 bankruptcy protection. 

An Overview of Chapter 13 Repayment Plans

When you exit the Chapter 13 bankruptcy process, you will end up with a repayment plan. Indeed, the first month after a Chapter 13 case is accepted, the debtor is required to make their initial payment. Chapter 13 repayment plans must conform to certain legal standards. As explained by the United States Bankruptcy Court for the District of New Jersey, a Chapter 13 bankruptcy repayment plan must: 

  1. Provide for the payment of fixed amounts on a regular (usually monthly) basis; 
  2. Ensure that certain types of debts—child support, back taxes, etc—are paid in full; and
  3. Treat all claims fairly across the different classes of creditors. 

A Chapter 13 repayment plan invariably results in a lower monthly payment for the filer. This may be achieved in several ways—including the elimination of interest, waiver of fees/penalties, and potentially even the forgiveness of principle. The longest a Chapter 13 repayment plan can last in New Jersey is five years. If all payments are made in a timely manner, the debts covered by the Chapter 13 repayment plan will be fully resolved. 

Call Our New Jersey Chapter 13 Bankruptcy Attorney for Immediate Help 

At the Law Offices of Wenarsky & Goldstein LLC, our personal bankruptcy lawyer has extensive experience handling Chapter 13 cases. If you have questions or concerns about the Chapter 13 bankruptcy process, we are here to help. Call us to arrange your strictly private consultation. With law offices in Ledgewood, NJ, and New York City, we provide personal bankruptcy representation in New Jersey and New York.

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