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What is Chapter 13 and how does it work?

Throughout the United States, a significant number of people have fallen into the credit card debt and feel that they have no way out. Creditor harassment can pile additional stress onto New Jersey families, only making matters worse. There are several different bankruptcy options for people who are confronting unmanageable financial obligations. Chapter 7 is one option, though it may not be the right option for everyone because it is not as effective at protecting property. Filing for Chapter 13 is another option that potentially allows more flexibility in maintaining certain assets.

Once a bankruptcy petition is filed, creditors are prohibited from continuing attempts to collect a debt from the filer. Under a Chapter 13 reorganization, a plan is created for approval by the Bankruptcy Court. If approved, the person makes regularly scheduled payments which are managed by a court appointed trustee. The trustee then remits payments to the creditors. Under this plan, some of the creditors will get all of the money they are owed, and others will only receive partial payment.

Creditors who do not like the plan can object to the court, and the issues must be resolved before the court approves the plan. A successfully completed Chapter 13 proceeding can take upwards of five years, based upon the individual's unique circumstances. Once the plan is honored, the filer is able to emerge from bankruptcy protection.

When debt gets out of hand, it can be difficult for a New Jersey resident to deal with all of the stress, including struggles to find the money to pay creditors. A Chapter 13 bankruptcy proceeding can result in a clearly defined plan to pay off debt and keep the creditors at bay. In a few short years, the plan can be completed and give the filer a renewed opportunity to achieve financial stability.

Source: msue.anr.msu.edu, "Should you file bankruptcy? Part 4", William Hendrian, July 15, 2014

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