More New Jersey Bankruptcy Basics

In plain terms, personal bankruptcy is a legal tool used to provide relief to people who can’t meet their financial obligations. It’s a way for them to wipe the proverbial slate clean of debt and start fresh – or gain some breathing room to repay their debts.

If you’re struggling with debt, or you’ve lent money, or you’re providing goods or services on credit, Attorney Douglas Mitchell wants to make sure you understand the basic concepts of personal bankruptcy in New Jersey.

The most common types of bankruptcy for individuals are Chapter 7 and Chapter 13.

Chapter 7 Bankruptcy

In a Chapter 7 bankruptcy, debtors have all or part of their debts discharged after the bankruptcy trustee sells off liquid assets (those that can be converted easily to cash) and uses the proceeds to repay some of the debt. Not all of a debtor’s assets need be sold, however; some can be kept by the debtor as “exempted” property.

To determine what of their property is exempt, debtors can choose between the exemptions set out either in New Jersey state law or in federal bankruptcy law.

Generally, New Jersey’s bankruptcy exemptions protect household furnishings, clothing, and retirement accounts. If debtors own a home or vehicle, they’ll often choose to avail themselves of the federal exemptions, because New Jersey’s exemptions do not exempt homesteads or motor vehicles.


Not everyone can file for Chapter 7 bankruptcy. To be eligible for a Chapter 7, debtors must either (1) earn less than the median income for their state and family size or (2) pass the “Means Test,” which considers gross income and expenses.

Chapter 13 Bankruptcy

In a Chapter 13 bankruptcy, debtors repay all or part of their debt through a 3 to 5 year repayment plan. If the bankruptcy court approves the plan, the debtor makes planned payments to the bankruptcy trustee, who distributes funds.

It’s important to note that a Chapter 13 bankruptcy does allow the debtor to keep non-exempt property. Also important, during the course of the repayment plan, creditors generally cannot garnish wages, real estate, or property.

Chapter 7 versus Chapter 13: Which Bankruptcy Is Right for Me?

If you’re considering bankruptcy in New Jersey, experienced bankruptcy attorney Douglas Mitchell can help assess your situation, explore your options, and create an action plan to help you get control of your financial future. Contact Mitchell Law Offices today.