You earn a steady paycheck, but the mortgage arrears keep growing and a foreclosure notice may already be in the mail. Maybe you make too much to qualify for Chapter 7, or you own property you cannot afford to lose in a liquidation. Chapter 13 bankruptcy exists for exactly this situation: it can stop the foreclosure, protect your assets, and let you catch up on what you owe through a court-approved repayment plan.
What Is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy is a legal option for individuals with regular income who are unable to file for Chapter 7 due to income or asset limitations. It's also a powerful tool for stopping foreclosure on your home and catching up on missed mortgage payments through a court-approved repayment plan.
Benefits of Filing Chapter 13 in New Jersey
- Halt foreclosure proceedings
- Keep valuable property you might lose under Chapter 7
- Consolidate debts into one affordable monthly payment
- Protect co-signers from liability on consumer debts
How Chapter 13 Bankruptcy Works
1. Filing the Petition
The process starts with filing a bankruptcy petition with the New Jersey Bankruptcy Court. You'll list all of your assets, liabilities, income, and expenses. Once filed, an automatic stay goes into effect, which stops most collection actions--creditor calls, wage garnishments, and foreclosure proceedings.
2. Creating a Repayment Plan
You must submit a Chapter 13 repayment plan within 14 days of filing. This plan outlines how you will use your disposable income to pay off certain debts over a period of three to five years, depending on your income level.
3. Payments to the Trustee
Plan payments are made monthly or biweekly to a court-appointed trustee, who distributes those payments to your creditors. Even if your plan hasn't yet been approved, you must begin payments within 30 days of filing.
Required Meetings
The 341 Meeting (Meeting of Creditors)
You must attend a brief hearing where a bankruptcy trustee reviews your petition. You'll answer questions about your finances under oath. Creditors may attend, but they rarely do.
Confirmation Hearing
The court holds a second hearing to confirm whether your plan is feasible and meets all legal requirements. Creditors can object, but many Chapter 13 plans are confirmed with minimal issues, especially when prepared by an experienced bankruptcy attorney.
Life After Plan Confirmation
Once your plan is confirmed, you must:
- Make regular payments on time
- Avoid taking on new debt without trustee approval
What Debts Are Discharged in Chapter 13?
After successfully completing your plan, the court issues a Chapter 13 discharge, wiping out many of your remaining debts. However, certain obligations remain.
Debts not discharged include:
- Most student loans
- Certain taxes
- DUI-related injury claims
- Criminal restitution or fines
- Long-term mortgage debt (if not fully paid)
Is Chapter 13 Right for You?
Chapter 13 may be your best option if you:
- Are behind on mortgage payments
- Want to avoid foreclosure or repossession
- Have significant assets you want to protect
- Don't qualify for Chapter 7 bankruptcy
The New Jersey Chapter 13 guide follows plan calculation, confirmation, payments, and discharge in greater detail.