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Essex County Bankruptcy Law Blog

Chapter 13 may be right for many New Jersey residents

A New Jersey resident can quickly become overwhelmed by debt after a divorce, job loss, accident or illness. Under these circumstances, filing for bankruptcy may be an easy decision. However, deciding whether to file a Chapter 13 or Chapter 7 bankruptcy -- the most commonly filed by individuals -- may not be quite as easy.

Each type of bankruptcy has its own filing requirements and benefits for the petitioner. A Chapter 7 is a liquidation of the petitioner's assets to pay his or her debts. In a Chapter 13, however, an individual's debts are restructured. Payments are made each month for anywhere from three to five years under court supervision.

Divorce and other issues led to David Cassidy's bankruptcy

Divorce alone can have a devastating effect on anyone's finances -- even those of celebrities. When divorce is coupled with other challenges, filing for bankruptcy may be able to help New Jersey residents get back on their feet financially. For instance, David Cassidy -- who starred in the 1970s television series "The Partridge Family" -- recently filed for bankruptcy after his divorce and after spending some time in rehab.

According to court documents, Cassidy has $10 million in debt and $10 million in assets. He has filed a Chapter 11 bankruptcy in order to reorganize his finances. His situation reportedly stems from credit card debt, attorneys' fees and other debts, including a line of credit that appears to be for a mortgage loan. In addition, there seems to be a dispute regarding some horses that he co-owns.

Despite low unemployment claims, many still face bankruptcy

Recent reports indicate that the week ending on Jan. 24 saw the fewest unemployment applications since April 2000. However, the data may be skewed by the fact that the Martin Luther King holiday occurred at the beginning of that week. Even though claims dropped to 265,000 across the country, many of those people -- some of which may be here in New Jersey -- may be considering bankruptcy due to unemployment.

An economist from RBS Securities, Inc. expressed his opinion that,based on the data, there is nothing wrong with the economy at present. In fact, he argues that nearly everything is going right. Those people in New Jersey who are out of work and struggling to support their families may disagree. Considering that the data focuses on new unemployment claims, it fails to account for people who are still unemployed or underemployed across the United States.

Millions are filing for bankruptcy due to medical debt

Medical expenses are often due to unexpected accidents or illnesses. As any New Jersey resident who has experienced a sudden illness or injury can attest, the costs quickly run into the thousands of dollars and higher -- even with medical insurance. By 2013, the rising costs of health care resulted in medical debt being the number one reason why people are filing for bankruptcy.

In 2014, nearly 64 million people in the United States were burdened with medical bills they struggled to pay -- if they could pay at all. Even though some people are optimistic that this number is down approximately 10 million from 2012, the reasons the number dropped are unclear. As experts sift through the relevant data, insurance deductibles continue to rise, which could send the number of those owing thousands of dollars out-of-pocket to rise above past numbers.

Many New Jersey homeowners unable to stop foreclosure in 2014

Between the Great Recession and Super Storm Sandy, the New Jersey housing market was hit particularly hard in comparison to the rest of the country. While foreclosures dropped in 2014 for the nation as a whole, they rose to 71 percent in the state. That means that an abundance of homeowners were unable to stop foreclosure proceedings from being filed by their lenders.

New Jersey is ranked number two for all foreclosure filings across the nation. It came in number five on the list of states with the most completed foreclosures. This means that lenders repossessed 34 percent of the homes in the state.

It may not be enough to stop harassing phone calls from creditors

Debt collectors will do just about anything to convince consumers to pay a debt -- even if it does not belong to them, but, instead, to a deceased relative. Many New Jersey residents do well just to stop harassing phone calls from creditors, but, now that one company has gone digital with its collection efforts, it may become more difficult to escape the harassment. A consumer alert in another state brings attention to a fraudulent email being sent to its residents that makes threats that may be in violation of the law.

The email threatens legal action if the recipient fails to pay an old debt. The company, ACS Incorporation Collection, does not have a good reputation. In fact, the Better Business Bureau gives the company an "F" rating and an alert to stay away from it due to hundreds of consumer complaints.

Credit card pitfalls could signal the need to file bankruptcy

Every single day, some New Jersey residents looking to buy their first home are turned down by lenders. The reasons for the denials could be a warning sign that they are in -- or headed for -- serious financial trouble. These individuals could be at a tipping point where bankruptcy protection may offer an effective means for regaining financial stability.

Many believe that because they are able to manage the minimum monthly payments on their credit cards, they do not have financial issues. Even if some of those payments are late, or an occasional payment is missed, an individual may not see what the mortgage lender apparently saw with regard to his or her financial situation. When a budget is stretched thin and a person is forced to eliminate luxuries and cut corners wherever possible, it may be time for corrective action.

Chapter 13 bankruptcy could eliminate a second mortgage

Most of the attention during the housing crisis rightly went to first mortgages. However, numerous New Jersey homeowners also took out second mortgages in better economic times. In the aftermath of the Great Recession, those second mortgages add to the overwhelming amount of debt threatening to consume some residents. Fortunately, Chapter 13 bankruptcy could eliminate that second mortgage, along with residents' other debt.

Lien stripping is how the process of eliminating a second mortgage in a Chapter 13 is described. When the outstanding balance of a filer's first mortgage lien is more than the appraised value of the home, a second mortgage loan -- and any additional mortgage loans on the home -- are considered by the Bankruptcy Court to be unsecured debt. This changes the nature of the debt and how it is handled by the court.

Mortgage debt still a problem for New Jersey homeowners

Regardless of the fact that most information shows the economy is steadily recovering, foreclosure and mortgage delinquency numbers do not paint as optimistic a picture. Between Oct. 2014 and Nov. 2014, delinquent mortgage debt rose approximately 11.8 percent. That percentage equates to nearly 400,000 mortgage loans, which makes the total about 3.9 million nationwide. Many of the homes that are in jeopardy of being foreclosed are here in New Jersey.

The percentage of loans that are at least 30 days delinquent, but have yet to enter foreclosure, was above 6 percent in Nov. 2014. The last time the percentage was that high was in Feb. 2014. The bottom line is that there are still millions of homeowners struggling to keep pay their mortgage loans and keep their homes. However, the numbers are still better than they were in Nov. 2013.

Misconceptions New Jersey residents have about filing bankruptcy

Every day, New Jersey residents struggle to make ends meet and pay their bills. Yet, many of them do not think about filing bankruptcy because they have misconceptions about the process and may fear what it means for their futures. Some people even think that filing means they are not trying hard enough to pay their bills.

In most cases, people end up with an overwhelming amount of debt due to a catastrophic event such as a medical event, divorce or a job loss. Here in New Jersey, Superstorm Sandy caused many people to lose everything. Bankruptcy is there to protect you from the financial devastation that follows these types of life events.