Decide Whether the Problem Requires a Court Filing
The balances keep growing, the collection calls keep coming, and no budget you draw up makes the numbers work. Bankruptcy exists for exactly this point. It is a federal court process that lets individuals and businesses eliminate or restructure debt under the court's protection -- and from the moment you file, it halts most collection activity. For people overwhelmed by financial obligations, bankruptcy provides a structured path to relief and a chance to rebuild.
Choose Between Elimination and Repayment
Chapter 7: Debt Elimination
Chapter 7 bankruptcy allows the elimination of most unsecured debts, including credit card balances, medical bills, and personal loans. The process is relatively quick, typically concluding within three to six months. Eligibility is determined by the means test, which compares your household income to the state median.
Chapter 13: Debt Repayment
Chapter 13 bankruptcy enables individuals with regular income to repay debts over a three- to five-year period while retaining assets like homes and vehicles. This option is particularly valuable for homeowners facing foreclosure or individuals who do not qualify for Chapter 7 under the means test.
Follow the Filing Timeline
Step 1: Credit Counseling
Before filing, you must complete a credit counseling course from an approved agency. This requirement ensures that you have explored alternatives to bankruptcy.
Step 2: Filing the Petition
Your attorney prepares and files a bankruptcy petition with the court, along with detailed schedules of your assets, liabilities, income, expenses, and recent financial transactions.
Step 3: Automatic Stay
Upon filing, an automatic stay takes effect immediately, halting all collection activities, wage garnishments, lawsuits, and foreclosure proceedings.
Step 4: Trustee Review
A court-appointed trustee reviews your financial disclosures and conducts a meeting of creditors (the 341 meeting) where you answer questions about your finances under oath.
Step 5: Debt Resolution
In Chapter 7, qualifying debts are discharged within months. In Chapter 13, you follow a court-approved repayment plan for three to five years, after which remaining eligible debts are discharged.
Check the Petition Before It Is Filed
The petition and schedules should reconcile assets, debts, income, expenses, and recent transactions. Missing or inconsistent information can delay the case and affect exemptions, trustee review, or discharge, so compare the filing against source records before signing it under oath.
Check the Consequences That Matter Most
Will Everyone Know I Filed for Bankruptcy?
Bankruptcy filings are public records, but in practice, they are not widely published or easily found by casual observers.
Will I Lose My Home?
In many cases, no. New Jersey's exemptions protect home equity up to specified limits, and Chapter 13 specifically allows you to keep your home while catching up on missed payments.
How Long Does Bankruptcy Stay on My Credit Report?
A Chapter 7 bankruptcy remains on your credit report for 10 years. A Chapter 13 bankruptcy remains for 7 years. However, many filers begin rebuilding credit successfully well before these periods expire.