When personal finances become unmanageable, there are several options available to ease the load. A debt reduction strategy can help you to restructure your monthly income and debt payments in a way that will reduce your overall level of debt over time. However, it is not always a quick fix, and it can take many years to see a significant improvement. Another option for New Jersey residents is a personal bankruptcy filing, which can reduce or eliminate the majority of your debt in a very short timeframe.
Personal bankruptcy comes in two main forms: Chapter 7 and Chapter 13. Each offers a different set of pros and cons, and individuals should carefully consider which version is best for their specific financial standing. Chapter 13 is a good option for people who have high levels of debt, but who make a regular and steady income. These people are often seriously behind in their debt payments, but want to keep the equity that they have built in their homes and other property. Filing for Chapter 13 bankruptcy will allow them to retain their property and typically give them a 3- to 5-year payment plan to catch up on their outstanding obligations.
For people who do not own much property but still have a high level of debt, Chapter 7 bankruptcy may be the best solution. The first step is to undergo a means test to determine if your income is low enough to qualify for this form of bankruptcy. If you qualify, a Chapter 7 filing can lead to the majority of your debt being discharged, or wiped out completely. Not all debt may be cleared, however, and you will still be responsible for tax debt, most student loans, alimony and child support.
If you have found yourself deep in debt, bankruptcy may be a viable option for finding relief. It can stop wage garnishment, credit collection and mounting late fees. However, bankruptcy will have consequences on your credit rating, but steps can be taken to begin rebuilding your credit once the petition has been filed. For residents in New Jersey who are facing a seemingly insurmountable level of debt, filing for personal bankruptcy may provide a chance to start anew and build a more stable and secure financial scenario.
Source: Chicago Tribune, "The pros and cons of bankruptcy," Elliot Raphaelson, July 17, 2012