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Essex County Bankruptcy Law Blog

Is debt settlement an alternative to bankruptcy?

At the end of last year, Americans carried nearly $11.63 trillion in personal debt. Sources indicate that the average amount of credit card debt is over $7,000. When the debt becomes overwhelming for New Jersey residents, several debt relief methods are available, such as debt settlement or bankruptcy.

For some people, debt settlement may be the appropriate remedy. Before making the decision, however, a consumer should take the time to weigh out whether it is actually a viable solution. Since the Federal Trade Commission (FTC) strengthened the rules imposed on debt relief services, it may be easier for consumers to locate a reputable service. Beyond that, the pros and cons of their use must be explored before any agreements are signed.

Bankruptcy could be a solution for overwhelming debt

In 2012, the Network Branded Prepaid Card Association and the National Foundation for Credit Card Counseling conducted a survey that revealed that nearly four out of every 10 people in this country have credit card debt. Many of them struggle just to keep up with the minimum payments, if they can pay at all. For New Jersey residents who are drowning in credit card debt, a multitude of advice is available for paying off that debt, which may work for some people. However, others may need to find relief in the Bankruptcy Court.

Some people recommend that a consumer should pay off the card with the highest rate of interest first, but this can take a significant amount of time. Another recommendation is to start with the smallest debt, which would give an individual a sense of accomplishment as each successively larger debt is paid off. It may also work to spread any extra money over each card. Someone who is already struggling just to meet the monthly bills may not be able to sustain extra payments required for these plans to work.

New Jersey residents lured with promises to stop foreclosure

Years after the official end of the recession, many New Jersey residents are still facing the threat of losing their homes. Some homeowners became desperate enough between 2006 and 2009 to believe a company's promises to stop foreclosure. Recently, the architects of what federal officials believe was a lease buyback scam were arrested, which may leave many homeowners wondering what happens next.

The alleged scam involved homeowners signing over the equity in their homes to the company, which was supposed to be kept in an escrow account used to make payments on a new mortgage. The home would remain in the owner's name but would essentially be leased from the "investors" who supposedly provided the funds to refinance the home. The owner would then be eligible to "repurchase" the home the following year.

Soaring medical debt may lead to more bankruptcy filings

Even as New Jersey residents continue to recover from the recession, the cost of living continues to rise. Even with the new health insurance policy, many people are still unable to pay for the rising cost of medical care. As the amount of medical debt increases, so may the number of bankruptcy filings.

Estimates indicate that somewhere in the neighborhood of 51 million people nationwide have medical debts in collections. This number equates to approximately one out of every five Americans. A study done regarding the cost of 100 of the most commonly performed procedures at hospitals across the country revealed that New Jersey is one of two states where the debt is the highest.

Knowing the law can stop harassing phone calls from creditors

Being behind on the payment of debts can be overwhelming and stressful for any New Jersey resident. It does not help that debt collectors will use any number of tactics in addition to the numerous phone calls they make. Knowing the law can stop harassing phone calls from creditors.

Some debt collectors will threaten to contact family members or an employer.  These threats are designed to shame a person into paying the debt. Under the law, creditors and debt collectors are not allowed to disclose any information regarding an individual's debts to family members, friends or employers. In fact, debt collectors may not make contact at a person's work if he or she relays that phone calls at work are prohibited.

New Jersey's poverty rate may lead to more bankruptcy filings

Newly released census data indicates that 998,549 people in New Jersey are living at or below the poverty rate last year.  The 11.4 percent poverty rate makes the state one of three that experienced an increase.  This could mean more people will file for bankruptcy.

Even as the economy improves for the rest of the country, people in New Jersey are struggling.  Between Hurricane Sandy and a rise in foreclosures, there are concerns that the numbers from the new census are actually an underestimate.  It is surmised that even as the unemployment level in New Jersey decreases, even newly employed people are still living at poverty level.  

Credit card issues that can lead to bankruptcy

It can be easy to get into trouble with credit cards.  In many cases, the recession put many New Jersey residents in the position of having to use their credit cards in order to stay afloat.  Even if your financial situation has improved, the debts created during a difficult time can still be overwhelming.  Bankruptcy may be a way to eliminate those debts and obtain a fresh financial start.

If you are only able to make minimum payments, and even making those payments is a struggle, that could be a sign that your budget it stretched to its limit.  Even making payments on time -- if at all -- can become difficult.  Meanwhile, the interest rates you may have enjoyed may have gone up, only adding to the balances. 

Qualifying for a Chapter 13 bankruptcy

When a New Jersey resident decides to file for bankruptcy, the next step is to determine what type of bankruptcy to file. Consumers most often file either Chapter 7 or Chapter 13. Both chapters have certain requirements, which often help make the decision of which to file for the consumer.

Businesses cannot file under Chapter 13, along with commodity brokers and stockbrokers. However, if you are a sole proprietor or a partner in a business, those debts that you are responsible for can qualify you for this type of bankruptcy. If you have a prior bankruptcy, timing is also an issue since there are restrictions on how often a person can file.

New Jersey residents still dealing with unpaid mortgage debt

Even though it has been several years since the housing market crashed, new foreclosures are still being filed here in New Jersey. Homeowners who may still be dealing with unpaid mortgage debt and facing foreclosure are filing some papers of their own. Homeowners seem to be fighting back by filing complaints aimed at debt collectors and mortgage companies.

One of the complaints being asserted is that mortgage lenders, such as Bank of America and loan servicers such as Green Tree Servicing, forged documentation regarding ownership of homeowners' mortgages. One homeowner who filed a complaint in federal court in New Jersey claims that Bank of America has yet to prove he owes them money or that the bank can legally collect the debt. That lawsuit was filed in May.

Filing for Chapter 7 bankruptcy in New Jersey

Having a rudimentary understanding of what will happen during a Chapter 7 bankruptcy can help eliminate any hesitation or discomfort New Jersey residents may have with the process. Filing for bankruptcy can be unsettling enough, but not knowing how it works can make the process even more intimidating. Therefore, below is a broad outline of the Chapter 7 process.

Filing the petition initiates a New Jersey bankruptcy and activates the automatic stay requiring all collection activities to cease during the bankruptcy. However, much more information is required in order to provide the court and the trustee with a complete overview of the filer's financial situation. Therefore, several "schedules" must be filed with the court, outlining the filer's assets, liabilities and income. The trustee will also need to review tax returns, but they are not filed with the court.