Bankruptcy is a legal process that allows individuals or businesses to eliminate or restructure their debts. In New Jersey, bankruptcy is governed by federal law, specifically the United States Bankruptcy Code. If you are struggling with debt, bankruptcy may be an option to consider. In this blog, we will discuss the bankruptcy process, the types of bankruptcy, its consequences, and how to avoid it in New Jersey.
The Bankruptcy Process in New Jersey
The bankruptcy process in New Jersey begins with the filing of a bankruptcy petition with the United States Bankruptcy Court for the District of New Jersey. The petition must include detailed information about the debtor’s financial situation, including a list of all debts and assets. Once the petition is filed, an automatic stay goes into effect, which stops all collection activities, including foreclosures, wage garnishments, and creditor harassment.
After the petition is filed, the debtor must attend a meeting of creditors, also known as a 341 hearing. At the hearing, the debtor will be asked questions by the bankruptcy trustee and any creditors who choose to attend. In most cases, the debtor will be able to keep most or all of their property, but certain assets may be sold to pay off creditors.
Types of Bankruptcy in New Jersey
There are two main types of bankruptcy available to individuals in New Jersey: Chapter 7 and Chapter 13.
Chapter 7 bankruptcy is also known as “liquidation” bankruptcy. It involves the sale of the debtor’s non-exempt assets to pay off creditors. Most unsecured debts, such as credit card debt and medical bills, are discharged at the end of the process, meaning the debtor is no longer legally responsible for them.
Chapter 13 bankruptcy is also known as a “reorganization” bankruptcy. It allows the debtor to keep their property while they pay back their debts over a period of three to five years. At the end of the repayment period, most remaining unsecured debts are discharged.
Consequences of Bankruptcy in New Jersey
Bankruptcy can have serious consequences on a person’s credit score and financial future. A bankruptcy filing will remain on a person’s credit report for up to 10 years, making it difficult to obtain credit or loans in the future. However, it is also a chance for a fresh start and to rebuild credit over time.
How to Avoid Bankruptcy in New Jersey
If you are struggling with debt, there are steps you can take to avoid bankruptcy in New Jersey. One option is to work with a credit counseling agency to create a debt management plan. This involves negotiating with creditors to lower interest rates and payments and can help you pay off your debts over time. Another option is to consider debt settlement, which involves negotiating with creditors to settle debts for less than what is owed.
Helpful Government Links
- United States Bankruptcy Court for the District of New Jersey
- United States Bankruptcy Code
- New Jersey Department of Banking and Insurance
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