Through more than three decades of legal practice, Attorney Steven N. Taieb has helped clients in Burlington County, New Jersey navigate the bankruptcy process. As one of the few lawyers in New Jersey who is board certified in consumer bankruptcy law by the American Board of Certification, Steven helps clients decide which type of bankruptcy is right for their situation. Whether it is chapter 7 or chapter 13, Taieb Law develops the best possible solution for your financial difficulties.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy helps people reorganize when they are behind on their mortgage, rent, car payments or if they need to restructure for any other reason. It is helpful because it lets people retain most of their property in exchange for setting up a repayment plan that settles some or all of their debts within three to five years. In addition, many people are forced to declare chapter 13 instead of chapter 7 if their current income exceeds the state’s median income for a household of their size.
Advantages of Chapter 13 Bankruptcy Over Chapter 7
The main advantage of filing chapter 13 instead of chapter 7 is that a person can save valuable property if he or she complies with the terms of the confirmed chapter 13 plan. For instance, he can catch up on missed mortgage payments, pay down an auto loan to get a lower payment, or try for a loan modification. It is also possible to sell property to pay off debt.
Another reason why someone might file chapter 13 instead of chapter 7 is that they have too much disposable income if they no longer have to make large credit card payments, or they stand to lose property in chapter 7 because they have non-exempt property that a chapter 7 trustee would sell.
Your Credit Report After a Chapter 13 Bankruptcy
A chapter 13 bankruptcy will hurt your credit as it may stay on your credit report for as long as ten years. It also means the loss of your credit cards, and it will make it very tough to get a mortgage if you don’t already have one.
Chapter 7 Bankruptcy
A chapter 7 bankruptcy is better suited to people with limited means and income. If you cannot stay current on your mortgage, credit card payments, or car loans, a chapter 7 filing can help you discharge those debts. Essentially, the debtor gets a new financial start. Most people who file chapter 7 have minimal property since they must also be below the median income or beat the means test to qualify. As a result, someone in a higher income bracket will usually have to declare for chapter 13.
Pros and Cons of a Chapter 7 Bankruptcy
Chapter 7 is usually referred to as a liquidation bankruptcy since property that is declared not exempt will be sold to settle your debts. Most of our clients who file chapter 7 do not lose property because the property they own is exempt or protected.
Property exemptions from congress are not unlimited, however. Thus, a large amount of property will not be exempt, and a chapter 7 trustee will sell the non-exempt portion to satisfy creditors.
In addition to being under the median income, it helps to find out if all your property would be exempt or protected under a chapter 7 bankruptcy.
Unsecured debts such as credit card balances can, however, be dismissed through a chapter 7 filing. On the other hand, there are some debts that cannot be wiped away such as student loans, recent tax debt and alimony and child support.
Your Credit Report After Chapter 7
Similar to chapter 13, a chapter 7 filing will take its toll on your credit rating. You will have to say goodbye to your credit cards, and this bankruptcy may also stay on your credit report for up to ten years.
The good news is that you can start rebuilding soon after bankruptcy with new lines of credit, albeit at higher interest rates. And it is always possible to raise your credit score regardless of whether your credit report still shows the bankruptcy.
While anyone in this kind of financial difficulty should do their own research, it is equally important to consult an experienced bankruptcy attorney prior to any filings. If you live in or near Burlington County, attorney Steven Taieb can guide you through the process. Whether you are interested in chapter 7 or chapter 13, Taieb Law has both the knowledge and the expertise to figure out which bankruptcy is right for your situation. He not only helps his clients manage their financial problems, but he also steers them towards a healthier, bankruptcy-free financial future.