If you’re contemplating filing consumer bankruptcy you’ll usually have to choose between Chapter 7 and Chapter 13. Bankruptcy is based on the federal law under the US Constitution Article I Section 8 and laws enacted by our legislative branch and signed by the president. Title 11 of the US Code is entitled Bankruptcy and it consists of chapters–that’s why we call bankruptcy Chapter 7 and/or Chapter 13. The United States District Court for the District of New Jersey has three different court houses. The current fees for filing bankruptcy in New Jersey are listed here.
Chapter 7
Sometimes referred to as a “fresh start” bankruptcy this is the legal process that enables you to wipe out credit card debt and medical bills in one fell swoop. Notice I didn’t mention auto loans or mortgages–secured loans can only be wiped out if you’re willing to part with the “collateral”–your car and/or your home (but see below). Student loans and various types of income taxes usually can’t be eliminated either. Many clients have been able to secure an auto loan and/or mortgage a few years after they are discharged in bankruptcy.
Chapter 13
This is the four to five year repayment process that may enable you to save your home from foreclosure. We pool all your debts into a “plan” which you pay back monthly–so you need to be earning money to file. The difficult part is that you still need to make your current mortgage and car payments on time or the creditor can eventually proceed to foreclose/repo by legally maneuvering around your “stay” in bankruptcy. This type of bankruptcy can work if you can discipline yourself to make payments every month.
More Information
It’s always a good idea to get a free credit report to double check your creditors. You are entitled to one every year.
Here is a list of materials to gather when you come to see us.
The law now requires you to take an online debtor education course before you can file bankruptcy, and a second program while you are “in” bankruptcy. You’ll need to set aside a few hours. Remember to take the classes in the proper order–you can’t take the second class first or visa versa. There are many companies that offer these courses and the prices vary. You can easily google “credit counseling bankruptcy” or you can go to the approved list from the US Bankruptcy Court.
Richard F. Fried, Esq.