How to Discharge Your Debts Through Bankruptcy in New Jersey

How to Discharge Your Debts Through Bankruptcy in New Jersey

Bankruptcy can be a viable option for individuals seeking a fresh financial start, especially in New Jersey. Understanding the process is essential for making informed decisions regarding debt relief. This article will guide you through how to discharge your debts through bankruptcy in New Jersey.

Understanding Bankruptcy Chapters

In New Jersey, the two most common types of bankruptcy for individuals are Chapter 7 and Chapter 13. Chapter 7 bankruptcy allows for the liquidation of non-exempt assets to pay off debts while discharging most of your unsecured debts. Conversely, Chapter 13 bankruptcy enables you to create a repayment plan to pay off your debts over three to five years.

Eligibility Criteria

To qualify for Chapter 7 bankruptcy, you must pass the means test, which compares your income to the median income for a similar household in New Jersey. If your income is below this threshold, you may qualify for Chapter 7. For Chapter 13, you must have a regular income and your unsecured debts must be less than $419,275 while secured debts should not exceed $1,257,850.

The Bankruptcy Process

Discharging your debts through bankruptcy involves several steps:

  1. Credit Counseling: Before filing for bankruptcy, you must complete a credit counseling session through an approved agency.
  2. Filing the Petition: After counseling, you can file a bankruptcy petition in the U.S. Bankruptcy Court for the District of New Jersey. This includes submitting a variety of schedules detailing your debts, assets, income, and expenses.
  3. Automatic Stay: Upon filing, an automatic stay goes into effect, preventing creditors from pursuing collection efforts against you.
  4. 341 Meeting: Approximately 20-40 days after filing, you will attend a 341 Meeting of Creditors, where you’ll answer questions about your financial status.
  5. Discharge: If all goes well, you’ll receive a discharge of eligible debts approximately 3-6 months after filing for Chapter 7 or once you've completed your payment plan in Chapter 13.

What Debts Can Be Discharged?

In Chapter 7 bankruptcy, unsecured debts like credit card debt, medical bills, and personal loans can typically be discharged. However, not all debts qualify; student loans, child support, and certain taxes are commonly non-dischargeable. In Chapter 13, you can also catch up on secured debts, such as mortgages, to prevent foreclosure.

Considerations and Alternatives

While bankruptcy can provide significant relief, it also has long-term implications for your credit. It can remain on your credit report for up to ten years. Therefore, it's crucial to consider all alternatives before filing. Options such as debt settlement, credit counseling, or debt management plans may be viable, depending on your situation.

Consulting a Bankruptcy Attorney

Navigating the bankruptcy process can be complex and stressful. Consulting a qualified bankruptcy attorney in New Jersey can help ensure that you understand your rights, obligations, and the most suitable bankruptcy chapter for your circumstances.

Conclusion

Discharging debts through bankruptcy can offer a path to financial recovery. By understanding the types of bankruptcy, eligibility criteria, the process involved, and possible alternatives, you can make a well-informed decision. If you are overwhelmed with debt in New Jersey, bankruptcy may be the relief you need to regain control of your financial future.