If you've been turning bankruptcy over in your mind, you're far from alone. Individual Chapter 13 filings across the country climbed from 17,226 cases in August 2025 to 18,335 cases in August 2026, and individual Chapter 7 filings rose even faster, up 10% over the same twelve months, according to data the American Bankruptcy Institute released in September.
We've written before about why more New Jersey households are filing this year. This time we want to slow down and walk through what happens once you choose Chapter 13: how the repayment plan gets built, how long you'll be in it, and what you get at the end. The short version is that Chapter 13 isn't a punishment. It's a structured way to keep what you own, catch up on what you've fallen behind on, and come out the other side with a clean discharge.
Chapter 7 bankruptcy wipes out most unsecured debt fairly quickly, but it can require giving up property that isn't protected by an exemption, and it isn't available to everyone. Chapter 13 works differently. Instead of liquidating assets, you propose a repayment plan that stretches your payments to creditors over three to five years, based on what you can realistically afford out of your income.
In NJ, the percentage you pay will depend on two major factors: the amount of money you have in non-exempt assets and your income. Our job as attorneys is to do that analysis for you and try to make sure you are paying the correct percentage, and no more.
That structure is what makes Chapter 13 useful for homeowners behind on their mortgage, drivers behind on a car loan, or anyone with too much income to qualify for Chapter 7 but still drowning in debt. You keep the house or the car, you catch up on the arrears through the plan instead of all at once, and the debts the plan doesn't require you to pay in full are typically discharged when you finish.
Picture a homeowner in Bergen County who's three months behind on a mortgage after a layoff but has since found steady work again. Chapter 7 wouldn't necessarily stop a sheriff's sale that's already scheduled, and it wouldn't spread out those missed payments. A Chapter 13 plan can do both: the automatic stay halts the sale the day the case is filed, and the past-due amount gets folded into monthly plan payments over several years instead of being due all at once.
The basic requirements are federal, so they apply the same way in Newark, Trenton, or Camden as anywhere else:
On that second point: Congress has been moving legislation that would raise the dollar limits on who can use Chapter 13, which matters for small business owners and anyone with debt loads near the current ceiling. We covered what that bill could mean for New Jersey filers in an earlier post on the proposed debt limit changes, and it's worth a read if your debt is anywhere close to the line.
The moment your Chapter 13 petition is filed, an automatic stay goes into effect. It stops a sheriff's sale on your house, halts a repossession, pauses wage garnishments, and generally tells your creditors to stop contacting you directly. That protection is immediate and doesn't wait for a judge to sign anything. It's often the most urgent reason people file when a foreclosure date or a repossession is bearing down on them.
Federal bankruptcy law sets the length of a Chapter 13 plan by comparing your current monthly income, annualized, to the median family income for a household your size in New Jersey. This comparison, sometimes called the applicable commitment period, decides whether your plan runs three years or five years.
Your plan generally runs three years, though a court can approve a longer period, up to five years, for cause if that's what it takes to make the plan work.
Your plan has to run a full five years. This isn't optional and it isn't about how much you owe. It's a fixed rule under 11 U.S.C. § 1322(d), and New Jersey's bankruptcy court has treated it as a strict time requirement rather than something that can be shortened just because you've paid your unsecured creditors back in full ahead of schedule.
A Chapter 13 plan isn't just a number you pick. It has to meet several requirements before a judge will confirm it:
In the District of New Jersey, a standing Chapter 13 trustee reviews every proposed plan, collects your plan payments, and distributes them to creditors for the life of the case. Shortly after filing, you'll attend a meeting of creditors (often called a 341 meeting), which the court has increasingly scheduled by video or phone rather than in person. The trustee and any creditors who object get a chance to raise issues before a bankruptcy judge holds a confirmation hearing and decides whether to approve the plan.
A Chapter 13 case isn't something you file and forget about for years. Many plans are funded through a wage order, meaning your employer sends a set amount directly to the trustee each pay period, which some filers actually find easier than having to remember to make a payment themselves. You'll need to stay current on any ongoing bills the plan doesn't cover, keep the trustee updated if your income changes significantly, and get court approval before taking on new debt like a car loan in most cases. None of that is meant to be punitive. It exists so the plan keeps working the way it was designed to, and so you're not blindsided by a modification or dismissal down the road.
Neither chapter is universally better. The right choice depends on what you own, what you owe, and what you're trying to protect.
Once you've made every payment the plan requires, the court is supposed to grant your discharge as soon as practicable. Before that happens, federal law requires you to complete an approved personal financial management course after you file (there's a separate credit counseling step required before you file, which is a different requirement). That course requirement, along with the discharge rule itself, comes from 11 U.S.C. § 1328. A handful of debts, such as certain long-term secured obligations, specific tax claims, and debts tied to willful or malicious injury, aren't wiped out even by a completed Chapter 13 plan.
Our firm’s founder served as the Standing Chapter 13 Bankruptcy Trustee for 24 years, helping shape the administration of Chapter 13 cases throughout New Jersey. The systems and procedures he established continue to influence how these cases are administered today. Contact our New Jersey bankruptcy attorneys to discuss your financial circumstances and explore your available options.