A person can feel an overwhelming sense of doom when he or she can't make financial ends meet. There comes a point when the debt may become so deep that one may need a helping hand to get out. If a New Jersey resident feels that he or she may never make it out of debt, filing for Chapter 7 bankruptcy could be the perfect solution to get one's financial life back on the right track.
Filing for Chapter 7 bankruptcy is a way to wipe out nearly all of the debt clean and start again, but there are some disadvantages. The person's credit score will drop significantly for up to 10 years, and he or she will have to wait quite a while before getting a good interest rate or qualifying for a loan. The good news is that an automatic stay will go into effect, which means that the creditors can no longer harass or threaten the debtor.
Many people worry about filing for this type of bankruptcy because they are afraid that many of their favorite possessions will be liquidated to help pay the debt. There are exemptions to what can be sold and the allowances vary from state to state. If a person is caught up on their mortgage payments or can get caught up on them quickly, he or she may be able to keep their home. The rules for homes also vary by state. When someone is too far behind on making payments or has a lot of equity in property, it may be recommended to file for Chapter 13 instead.
If a New Jersey resident can simply not make payments on their bills, he or she can file for Chapter 7, but the filer must past a means test before proceeding. If the person/family makes more than the median income, a a liquidation proceeding may not be possible. This helps to ensure that only those that truly need the help are able to file. However, a Chapter 13 debt reorganization may be a good alternative in those circumstances. There is hope in personal bankruptcy protection for people who are trapped under a large amount of debt so that they can reclaim their financial security.
Source: investopedia.com, "File Chapter 7 Bankruptcy", Daniel Kurt, Oct. 1, 2014