Bankruptcy offers filers a chance to get back on their feet financially, paying off some debts and erasing others, though not all debts can be erased through a bankruptcy case. Federal law governs most aspects of bankruptcy, but a few rules and standards are state-specific, such as rules about exemptions. Exemptions allow you to protect certain property from your creditors.
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Chapter 13 bankruptcy is a form of personal bankruptcy in which a debtor pays off all or some of his eligible debt over a three- to five-year period. Unlike a Chapter 7 bankruptcy, Chapter 13 requires debtors to have a regular source of income that they can contribute toward their debts. Once a debtor’s repayment plan is approved by the bankruptcy court, the debtor sends payments to his court-appointed trustee, who then pays the debtor’s creditors.
A Chapter 13 filer must fulfill certain requirements before he can begin his repayment plan. First, he must complete an approved credit counseling course. He must also fill out required filing forms, including a list of his assets, income and expenditures and file these forms with the United States Bankruptcy Court for the District of New Jersey, located in Camden, Newark and Trenton. The court-appointed trustee will hold a 341 meeting, or creditors' meeting, to ask the filer any questions he may have and allow the filer’s creditors to ask questions. If the filer has met all these requirements and has submitted a reasonable payment plan that meets the trustee’s approval, he can then begin his repayment period.
Bankruptcy exemptions determine how much property a debtor can protect from creditors during a bankruptcy. Though Chapter 13 is governed by the federal bankruptcy code rather than New Jersey law, New Jersey has its own exemptions that may be applied in bankruptcy cases. New Jersey allows debtors to choose between New Jersey’s list of exemptions and the federal exemption list. Exemptions apply to a variety of property types, such as real estate, pensions, insurance proceeds and personal property.
If a Chapter 13 debtor completes all the filing requirements and makes all his required payments, he is eligible for a discharge, or elimination, of certain remaining debts. Some debts, like certain tax debts and debts for child support, are not eligible for discharge, but debts like credit cards are dischargeable. If a debt is discharged by the bankruptcy court, the debtor no longer has any legal responsibility to pay that debt.