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Essex County Bankruptcy Law Blog

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.

You can stop harassing phone calls from creditors

Many New Jersey residents find themselves dealing with more debt than they can handle through no fault of their own. For some reason, debt collectors seem to think that harassing people who are already stressed -- and whose finances are stretched to the limit -- will get those debts paid. Fortunately, it is possible to stop harassing phone calls from creditors.

When people are being hit with a constant barrage of harassing and sometimes even intimidating calls, letters and other communications from creditors and debt collection agencies, they may not realize that they do have rights. It is not necessary to fear a ringing phone or threatening letters being in your mailbox. It may be beneficial to discuss your situation with a debt relief attorney to understand your rights, but there is relief.

How to complete credit counseling after bankruptcy

Now that you have decided to file for bankruptcy in New Jersey, there are certain requirements that must be met before you can receive a discharge. One of these requirements is credit counseling. This may sound complicated, but, fortunately, the procss can be made easy with help from a bankruptcy law firm.

Credit counseling is in two parts. The first part must be completed prior to filing for bankruptcy. The credit counseling course informs potential debtors about all of the debt relief options from which an individual can choose. The certificate received after completing the course is filed with the court.

How does the automatic stay help someone who filed bankruptcy?

When a New Jersey resident files for bankruptcy, something called an automatic stay is instituted. This means that as soon as the person filing for bankruptcy receives a case number, all creditor activity to collect a debt is required to stop.

Notification of creditors is made pursuant to court order. This is one of the biggest advantages to filing since it gives the filer breathing room to make some decisions regarding his or her finances without harassing phone calls from creditors or the risk of immediate eviction from a home -- whether owned or rented.

The automatic stay will also stop any garnishment attached to a paycheck (child support is a notable exception). Harassing phone calls from creditors must also stop. Vehicles and other personal property cannot be repossessed. Any levies on bank accounts must also stop.

What does bankruptcy mean for New Jersey consumers?

Simply put, bankruptcy is the federal court procedure designed to assist individuals and businesses with eliminating debt and paying creditors. New Jersey residents file two types of bankruptcy most often. The first is liquidation (Chapter 7), and the second is reorganization (Chapter 13).

In Chapter 7 bankruptcy, some of an individual's assets may be sold to pay his or her debts. Fortunately, an individual might be surprised that he or she does get to keep certain property that will not be sold. The major benefit of a Chapter 7 is that any debts that do not secure a piece of collateral -- such as a credit card debt -- are erased. The filer also gets to choose whether to keep property that is secured by a loan. There are some debts that cannot be discharged, however, such as taxes, alimony and child support.

There are numerous benefits to filing for Chapter 13 bankruptcy

Since the United States Bankruptcy Code changed, not as many New Jersey residents qualify to file for Chapter 7 bankruptcy because they have disposable income, which is the money an individual has left after paying for necessities such as shelter, food and health care -- just to name a few. As an alternative, these individuals may file for Chapter 13 bankruptcy, which is a reorganization of a person's debts through a payment plan overseen by a trustee who works for the bankruptcy court. The benefits to filing a Chapter 13 bankruptcy are numerous.

The trustee in a Chapter 13 filing has some latitude when it comes to the amount of an individual's payments. It can take up to five years to complete a repayment plan, but in the end, creditors are not allowed to request that the filer repay any remaining balance on the account. In addition, secured property can be surrendered if the filer no longer wants to make payments on it. On the other hand, any property an individual makes payments on can be kept during the course of the bankruptcy.

Unemployment rate could lead to more bankruptcy filings

The most recent data is showing that the number of people filing unemployment claims for the first time is down nationwide. However, here in New Jersey, that number rose an alarming 70 percent in one week. This influx of unemployed people in our state could cause a corresponding rise in bankruptcy filings over the next few months as it becomes more difficult for some people to pay their bills.

Between June 21 and June 28, 20,624 people in New Jersey filed for unemployment benefits for the first time. This is considered the largest increase in filings in the country. The previous week, that number was 12,045.