Under a NJ chapter 13 bankruptcy, debtors propose a three to five year repayment plan to their creditors providing for the payment of all or part of their debts from the debtor’s future income. Chapter 13 can be used to prevent loss of your home to foreclosure; make up delinquent car or mortgage payments; pay back taxes; stop interest from accumulating on your tax debt (state or federal); and keep valuable non-exempt property. If you complete all payments required by your plan, all of your remaining dischargeable debt will be released at the end of the plan (typically three to five years). The amount to be repaid is controlled by the amount of the debtor’s disposable income determined by the New Jersey means test, and other factors. The total amount paid to creditors under the Chapter 13 plan must also be at least as much as creditors would have received if the debtor filed a Chapter 7 bankruptcy. To file Chapter 13 bankruptcy you must have a “regular source of income”. You must also prove that you have some disposable income to apply towards your Chapter 13 payment plan.
Chapter 13 bankruptcy is generally used by debtors who want to keep secured assets, such as a home or car, when they have more equity in the secured assets than they can protect with their New Jersey bankruptcy exemptions.
A chapter 13 bankruptcy allows debtors to pay up their overdue payments over time and to reinstate their original loan agreements. Where a debtor has valuable nonexempt property and wants to keep it, a chapter 13 may be the best option. For example, if your home is in foreclosure, if you can show enough income through paystubs, self employment income or other sources to resume your regular mortgage payments to your lender, and to pay your mortgage arrears in full over the three to five year plan period, Chapter 13 will allow you to keep your home, while discharging all or part of your unsecured debt.