Joel R. Glucksman
Partner
201-896-7095 jglucksman@sh-law.comFirm Insights
Options in Bankruptcy Protection: Chapter 7 & 13
Author: Joel R. Glucksman
Date: June 3, 2015
Key Contacts
Back
Bankruptcy Protection Options
Individuals who need to seek bankruptcy protection generally have two alternatives: “wage earner” bankruptcy under Chapter 13 or liquidation under Chapter 7. There are important differences between the two. Most notably, in a Chapter 7 liquidation the debtor essentially piles their assets into a heap, turns them over to the appointed trustee and walks away with a discharge of all remaining debts. By contrast, in a Chapter 13, the debtor is required — for up to five years — to deposit all of their net disposable income into the trustee’s hands, who then distributes them to creditors.
For this reason, in a Chapter 13, the debtor’s post-bankruptcy earnings during the five-year period are considered available to fund creditor payments. By contrast, in a Chapter 7, anything that the debtor earns from the moment they have filed their bankruptcy petition stays with them and is not distributed to creditors.
Chapter 7 & 13 Conversion
An issue has arisen from the fact that many debtors elect to try Chapter 13 but ultimately prove unable to continue with the required payments. Their cases therefore convert to Chapter 7 liquidations. The lower courts have disagreed as to what happens to any excess funds that remain in the Chapter 13 trustee’s hands when a Chapter 13 is converted to a Chapter 7.
In a May 18, 2015 decision, Harris v. Viegelahn, the United States Supreme Court has definitively ruled that, to the extent that the funds in the Chapter 13 trustee’s hand came to the trustee from the debtor’s post-bankruptcy earnings, they are to be returned to the debtor should a Chapter 13 case convert to a Chapter 7.
This is not all good news, however. One must remember that Chapter 7 is specifically limited to debtors below very specific income levels. It is not generally available to anybody.
Are you a creditor in a bankruptcy? Have you been sued by a bankrupt? If you have any questions about your rights, please contact me, Joel Glucksman, at 201-806-3364.
- Practices: Bankruptcy & Creditors' Rights, Corporate Transactions & Business, Bankruptcy Litigation
- Locations: Red Bank, NJ, New York City, Little Falls, NJ
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Related Posts
See all
Are Your Conversations with AI Shielded from Discovery? Courts Are Split
Whether a client’s prompts to a generative AI tool and the documents it produces are protected from disclosure depends on the case type, who claims protection, and whether counsel was involved. In United States v. Heppner, a New York federal judge ruled that a criminal defendant’s communications with an AI platform were protected by neither […]
Author: Chris Seelinger
Guardianships in New Jersey: When a Loved One Can No Longer Manage Personal or Financial Affairs
When a family member can no longer make important decisions for themself, the question is often not whether the family will step in, but whether they have the legal authority to do so. A spouse may manage household finances, or an adult child may arrange medical care and pay bills. Still, informal assistance does not […]
Author: Marc J. Comer
New Jersey’s Revised UHAC Regulations: What Residential Developers Need to Know About Affordable Housing Commitments
New Jersey residential developers with affordable housing obligations should carefully review their existing approvals, development agreements, and proposed deed restrictions in light of the State’s revised UHAC regulations (Uniform Housing Affordability Controls). The regulations, which took effect on November 6, 2025, significantly change the administration and physical requirements for affordable housing units. For developers with […]
Author: Wendy Rubinstein Quiroga
“No Comment” Culture: Why Silence Is Often the Riskiest Legal Strategy
A “no comment” response is sometimes the right call when a legal problem arises. As a blanket policy, however, it lets allegations go unanswered, deadlines pass, evidence disappear, and manageable disputes grow into expensive litigation. The businesses that fare best are usually the ones that say little publicly while acting decisively behind the scenes. When […]
Author: Sean M. Pena
Utility-Scale Battery Storage Projects: A Legal Roadmap for Developers, Property Owners and Other Stakeholders
Utility-scale battery energy storage systems (BESS) are becoming an increasingly important component of the electric grid throughout New Jersey, New York, and Pennsylvania. As renewable generation expands, electricity demand increases and grid operators seek greater flexibility, battery storage can help balance supply and demand while providing additional capacity and reliability. For developers, battery storage presents […]
Author: Nicholas Wall
Navigating Disputes: Hire a Partnership Dispute Lawyer
A falling out between partners can be disastrous for any business. In many cases, the partnership will not survive. If you are in an unworkable situation with your partners, it may be time to consult a partnership dispute lawyer experienced in handling partnership breakups and dissolutions before the situation deteriorates any further. It is easy […]
Author: Jay McDaniel
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.