You may be struggling to address your debt and have creditors who keep contacting you, while being unsure of the best way to solve it. There are some advantages and disadvantages of Chapter 13 bankruptcy in New Jersey which may influence your decision. Gillman, Bruton & Capone has experienced Chapter 13 bankruptcy attorneys who can provide more insight into what will be required of you.
One of the primary benefits of filing for Chapter 13 bankruptcy would be the automatic stay, which stops your creditors from proceeding against you with collections attempts/correspondence, lawsuits, and other means of collecting on your debts. The goal is to discharge some or all your unsecure debt like credit cards, medical bills, and personal loans.
Another primary benefit is that you can keep your assets. In a Chapter 13, you are a debtor in possession, which means you keep possession of all your assets and they will not have to be sold or liquidated. In return, you will file a plan of reorganization, which factors in your income and assets.
You have the benefit of being able to cure arrears on the liens on those assets. For example, if you fall behind on your mortgage payments, Chapter 13 gives you the ability to catch up, while also keeping your house and your vehicle. The same applies with your tax liens. You can pay those back and keep all your assets without creditors levying your bank accounts, garnishing your wages, foreclosing on your house, or repossessing your car. They cannot take any of those actions when you are in Chapter 13, so it gives you that breathing room to reorganize and come back financially.
Under a Chapter 13 bankruptcy, you would still pay your utility bills, your insurance payments, and all your regular ongoing household expenses. If you own a home and you want to keep your home, you will continue to make your mortgage payments. If you have a car lease, you will keep making those payments as well.
The only downside for an individual would be that the bankruptcy gets reported on your credit report. Some clients have a good credit score when they come in for a consultation because they are still paying all their bills on time. They come in proactively because they know something is about to happen where they will not be able to stay current and they are living paycheck to paycheck.
When you file for bankruptcy, someone with a good credit score will be hit about 100-150 points, depending on what the credit bureau factors in. The flip side of that is most people who talk about filing a bankruptcy have already had a reduction in their credit score, so the impact is going to be minimal.
The other disadvantage is that you could be in Chapter 13 for anywhere from three to five years. You most likely will not get approved for a mortgage while you are in Chapter 13, so it would be difficult to refinance or buy a new home. A person in New Jersey who is in Chapter 13 bankruptcy will also have to make payments over a period of time, which could be a disadvantage. This is different from a Chapter 7 where you file and get a discharge of all your debt within four to five months after filing your petition.
It costs $339 to file for Chapter 13 bankruptcy and sometimes we may need to pay to pull an appraisal. These would be your out-of-pocket expenses. When it comes to attorney fees, there will be about $3,000 fees and costs upfront, and then we bill hourly. The court allows you to pay attorney’s fees through the plan of reorganization.
There is no aid for Chapter 13. There are legal services available for people who are under the poverty level for a Chapter 7. They can get approved for the pro bono programs but that is not available for Chapter 13 because you need to have regular income for this filing.
Filing for bankruptcy is ultimately your decision. Our New Jersey attorneys can talk with you about the advantages and disadvantages of filing for Chapter 13 bankruptcy and determine your best course of action. Reach out to us and schedule a time for a free case evaluation.