Bankruptcy Attorney Fees: Why They’re Worth Paying

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One common misconception about filing for bankruptcy is that the entire process is simply filling out a bunch of forms. This erroneous information leads some people to believe that hiring a bankruptcy attorney is a waste of money.

“Why should I pay an attorney when I can easily do it myself?”

We’d like to help you better understand the New Jersey bankruptcy process and some of the things your bankruptcy attorney does that make their legal fees totally worth it.

First and foremost, a bankruptcy attorney will determine when is the best time for you to file for bankruptcy. Timing can be very important in some cases. Filing for bankruptcy does involve a significant amount of paperwork, much of which can be quite complicated and confusing, and everything must be filled out 100% correctly. If there are any errors anywhere in your bankruptcy papers, your case can be dismissed.

Your NJ bankruptcy attorney knows exactly what forms need to be filed and when. He will be able to consult with you about what type of bankruptcy would be best for your unique circumstances. Many people who file without an attorney end up filing for the wrong bankruptcy chapter.  Another thing you may not have considered is that there may be bankruptcy alternatives that would work for you. You might not even need to file for bankruptcy! Your attorney will educate you about all of your options so that you make the right choice.

A bankruptcy attorney knows bankruptcy laws inside and out. This means that you won’t have to worry about committing bankruptcy fraud accidentally. Understanding the definitions of exempt and non-exempt assets and how they relate to your case is imperative. There are different exemptions for each state as well as federal exemptions. Listing your assets incorrectly can result in significant property loss that you weren’t expecting.

As your case progresses, your attorney will constantly review things to make sure that nothing is missed. There are local bankruptcy procedures and rules, as well as trustee requirements, that must be followed. By working with an experienced bankruptcy attorney, you can rest assured knowing you won’t break any rules that could seriously delay or even ruin your entire case.

If one of your creditors feels that a particular debt shouldn’t qualify for a bankruptcy discharge, your attorney will defend you against any claims that they may file against you. Additionally, most bankruptcy attorneys try to stay on good terms with the local court employees, which means the court staff won’t give you a hard time. Without an attorney, you may not have such a pleasant experience, especially if you make any mistakes in your paperwork.

In addition to all that your bankruptcy lawyer will do for you throughout the duration of your case, he will also work with you after it has ended. After you’ve received a discharge of many of your debts, you’ll be able to start rebuilding your credit score. Your attorney will give you specific directions on how to keep your credit score moving in the right direction.

Last, but certainly not least, bankruptcy attorneys understand that you are struggling financially and they have made it their life’s work to help you. As a rule, you’ll be able to  pay your attorney’s fees on a payment plan that works for you. To learn more about this New Jersey bankruptcy attorney’s fees, schedule a free consultation. We’re confident that you will be pleasantly surprised.

Image credit: Got Credit

What to do After the Death of a Loved One

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Although you’ve grown into a fully-functioning, educated, well-adjusted adult, it’s never easy to lose someone you love. The passing of those closest to you – especially close family members like your parents – can quite literally be devastating.

Along with the heavy emotional toll that the death of a loved one takes on you, there may be other pressures on you during this time that extend beyond grieving. This is true especially if you are named estate executor or executrix. You will be expected to make a number of important decisions regarding the deceased’s finances in the weeks and months immediately following their death.

Because bereavement can be very emotionally taxing, consider hiring an attorney to help you make decisions regarding the terms of the Estate Plan (including the Last Will and Testament). Even simply consulting with an estate planning attorney can ensure that you fully understand your responsibilities as administrator of the estate.

If you are having difficulty dealing with your emotions, an estate planning attorney can relieve some of the pressure you are feeling. We all make less-than-optimal decisions when our emotions aren’t stable. An attorney can steer you in the right direction and can even help you handle all of your duties surrounding the will. This will keep you from making mistakes that can lead to you being fined later on. You have a significant responsibility as executor/executrix of the will, and asking for help is a wise choice.

Immediately after your loved one passes away, your duties will range from preparing the funeral arrangements to notifying government and financial institutions of the death and managing all of the financial details associated with the deceased’s estate. The main agencies/companies you’ll need to inform are listed here. The reasons for contacting each of them are different – some are self-explanatory and others are explained:

  • The deceased person’s employer (if applicable)
  • County or state vital records office – Request at least 25 copies of the death certificate so that you will have enough certified copies for all involved parties.
  • SSA (Social Security Administration) – Notifying them of the death will eliminate the possibility of scammers collecting the deceased’s SS benefits or using their SS number in a variety of identity theft acts. Remember to ask the SSA about the one-time death benefit (currently $255) and any survivor benefits that you may qualify for.
  • Utility companies
  • Credit card companies
  • The deceased’s bank – You’ll need to close any open accounts and cancel any automatic payments that come into or out of those accounts.
  • Insurance companies
  • The Post Office
  • The deceased person’s creditors (if they had any)
  • Three main credit bureaus – Equifax, Experian and TransUnion
  • Funeral home
  • Newspaper (for obituary)
  • The IRS – They will give you a tax identification number for the deceased’s estate. This will enable you to open a bank account for the estate. Use only this account to pay for all expenses surrounding the death of your loved one.
  • Subscription or membership services – Cancel any subscriptions and memberships your loved one may have held at the time of their passing. Failure to cancel recurring charges will deplete the estate’s funds.

Your attorney and (if you choose to hire one) accountant will save you a lot of headaches as you handle the business end of someone close to you dying. An accountant will be able to deal with any taxes that need to be paid – something you might not have otherwise thought about.

Even though some people hesitate to hire an accountant or an attorney when they lose a loved one, their fees will give you a great return on investment. You’ll avoid making costly mistakes, and the burden won’t rest solely on your shoulders. After your duties as executor are satisfied, work with your attorney to set up your own estate plan. In doing so, you’ll be setting out a plan that will make things easier on your heirs after you pass away.

Image credit: Paul Bica

Can I Change my Mind After I File for Bankruptcy?

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It doesn’t happen often, but there are times when debtors file for bankruptcy and then want to back out of it at the last minute. This usually occurs when the most immediate and frightening financial threat has been resolved – whether it was the fear of foreclosure or a particularly aggressive debt collector. When people file for bankruptcy in order to put a stop to a particular crisis – once that crisis has been averted, sometimes bankruptcy doesn’t seem so desirable anymore.

The thing about filing for bankruptcy is that it is not something you should ever enter into casually or without seriously consulting with an experienced bankruptcy attorney first. Your decision to file for bankruptcy will affect many different people/creditors – not to mention: YOU! Even if you are able to have your bankruptcy case dismissed, your credit report will show that you have at one point at least filed for bankruptcy. This will not look good to future lenders, banks and potentially even employers.

Let’s say that you (hopefully with the help of your well-trained and seasoned NJ bankruptcy lawyer) have decided to file for Chapter 13 bankruptcy. This means that you’ve decided that you will be able to repay your debts as long as they are reorganized so that they are in line with your financial situation. In this type of bankruptcy proceeding, the filer can make a formal request to the bankruptcy judge for voluntary dismissal of their case, should they decide not to go forward with it. The judge is the only person or entity who is able to dismiss your Chapter 13 bankruptcy.

A Chapter 7 bankruptcy is even harder to have dismissed. As the filer, you cannot request a voluntary dismissal. You and your attorney can file a Motion to Dismiss your case, which will be reviewed carefully by the bankruptcy court and your trustee. If it is found that your wish to cancel your bankruptcy is due to fraudulent reasons, you will not only be forced to stay in bankruptcy court, but you may also be held in contempt.

Keep in mind that if your financial situation has reached the point where you have taken the steps to actually file for bankruptcy, there is a very real possibility that you will experience similar problems again in the future. Remember that the dismissal of a bankruptcy case (even if voluntary) does not mean there will be no evidence of the bankruptcy. It will remain listed on your credit report for all future potential lenders and employers to see, and will cause your credit score to drop.

We are big proponents of using bankruptcy to get your life back on track. If you’ve gone so far as to find a bankruptcy attorney in NJ and have filed the bankruptcy paperwork, we urge you to reconsider turning back now. Take a good hard look at what choices got you to this point in the first place. The bankruptcy will be noted on your credit report either way, and going through with the bankruptcy will give you a (likely) much needed fresh start.

 

Image credit: Raquel Baranow

Should I Settle my Debts or File for Bankruptcy?

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When you’ve fallen behind on paying back borrowed money, you’re said to be in default. As soon as you fall into default, your credit score will go down, down, down until the debt is either brought current or becomes discharged.

So: if you’re late on paying some of your creditors, the longer you wait to come up with a plan, the worse off you’re going to be. Your main choices are: debt settlement or bankruptcy.

Unfortunately, many people don’t fully understand the term ‘debt settlement,’ and assume it has something to do with bankruptcy. In reality, debt settlement is the opposite of filing for bankruptcy, even though they both have the same end goal: getting out of debt.

Both debt settlement and bankruptcy will (as long as you qualify) help you eradicate many debts that you have defaulted on. The steps involved in each process are very different, however, and each will be right for different people.

What is ‘Debt Settlement’?

You and your debt relief attorney will work together to determine how much you need to “settle up” with all of your creditors. Naturally, this will involve having access to a significant sum of money in order to make the necessary payment(s).

The benefit of paying your creditors without entering into a Chapter 13 bankruptcy reorganization plan is that your credit score will bounce back a lot faster. The drawback, however, is that debt negotiations can be messy, stress-filled, and expensive.

How does Bankruptcy differ from ‘Debt Settlement’?

In all honesty, most debtors who are in default on one or more loans typically don’t have the kind of money necessary to settle up with their creditors. When you’re unable to pay your creditors back, whether due to unforeseen life circumstances or some poor financial decisions, filing for bankruptcy is a great option.

If you would potentially be able to repay your debts if they were reorganized, you might consider filing for a Chapter 13 bankruptcy. A Chapter 13 will allow you to continue paying your current debts, but at lower payments that may be stretched out over a longer period of time. You may also be given a reprieve period wherein you can skip a payment or two in order to get back on your feet. The missed payments may be tacked on to the end of your loan.

In order to have any debt completely wiped out, you’ll need to file for a Chapter 7 bankruptcy. With some exceptions, (student loan debt, court ordered child support, alimony and taxes) it is possible for all of your defaulted debt to be eradicated through a Chapter 7 bankruptcy.

Filing for either Chapter 7 or Chapter 13 will affect your credit score negatively; however, they are both excellent tools that can enable you to turn your finances around over the next few years. After filing for bankruptcy, you should still work closely with your bankruptcy attorney so that he can help you boost your credit score back up, up, up!

All in all, if you are in default on a loan, you have many different possible solutions. By taking the first step and reading about your options here, you’ve already shown that you’re ready to change. For a free consultation about the option that best fits your situation, call or write to us today! (732) 852-7295

 

Image credit: Sera

Will a Gainful Job Offer Affect My Bankruptcy Case?

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So, you’ve found yourself way over your head in debt. You’re certainly not alone. If the fact that you aren’t alone in your financial distress doesn’t buoy your spirits, try this: Help is available.

Maybe you’re just able to keep paying your rent, utilities and living expenses. Anything above and beyond those payments has likely been put off repeatedly, like student loan debt, quickly compounding credit card bills, personal loans and medical bills.

It may appear to the untrained eye that you are doing ‘ok’ since you are able to remain in your home, pay your utility bills, and put food on your table. However, only you know exactly just how ‘not ok‘ your financial situation is, and with every credit card bill that you toss (unpaid) into the trash, your stress level is bound to increase. Your mental and physical health have undoubtedly begun to suffer due to a nearly constant feeling of worry.

Some people are in this or a very similar situation due to a lack of information about debt resolution. Oftentimes, we talk to people who (falsely) believe that filing for bankruptcy is only an option if you’re chronically unemployed and have essentially already lost everything, including your home. We are happy to rectify this misinformation!

If your income allows you to pay rent (or your mortgage) and feed your family but you have thousands of dollars of unpaid debt, you have a very solvable problem. Bankruptcy law focuses on helping struggling debtors just like you repay money and/or wipe out debts in order to get them back on track.

Don’t assume that you wouldn’t qualify for bankruptcy just because you have maintained a place to live and haven’t had your electricity shut off. If you have significant debts that you are simply unable to even make a dent in, bankruptcy is very likely a good option for you.

What if my job situation may improve in the near future?

First of all, congratulations on your perseverance! Secondly, a Chapter 7 bankruptcy would focus on your financial situation at the time of filing. If you successfully file for bankruptcy and subsequently obtain better employment or receive a raise, you don’t have to worry about losing any of that money to your bankruptcy trustee.

With that being said, there are strict laws in place that help prevent bankruptcy fraud. For example, you cannot legally accept a large sum of money (for example an inheritance) within a year after filing for bankruptcy. Debtors are also prohibited from repaying only  selective lenders prior to filing for either a Chapter 7 or Chapter 13 bankruptcy. This ensures that all of your creditors are paid back equally with none of them receiving preferential treatment.

However, as long as you are acting in good faith, you have the right to accept a better job or even a pretty significant raise after your bankruptcy has been filed. After all, the primary goal of bankruptcy laws is to eradicate your debts and see you on your way to a brighter financial future.

 

Image credit: S. Mann

Why is My Home Being Photographed?

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Assuming your last name isn’t Kardashian and you’re not a member of The Real Housewives of New Jersey, having your house photographed every day probably isn’t something you’re accustomed to. If you’ve recently felt like you’re being hounded by the paparazzi, there’s probably a very simply explanation.

Anytime you fall behind on their mortgage payments (even if only one or two payments have been missed), your mortgage lender or bank may start the process of filing for foreclosure. This is possible even if you haven’t caught wind of the news yet. While your lender is required to notify any homeowner on whom they plan to foreclose, you may not have gotten the notice yet if it’s very early in the process.

If you’re aware that you have indeed missed some mortgage loan payments, or if you have already received the foreclosure notice in the mail – you have the answer to why your home is being photographed.

When mortgagees start missing payments, lenders start losing money. As soon as one of their loans goes into default, lenders know that a foreclosure may be their only way to recoup any money out of the situation.

Lenders also know that some people are so fearful of the potential embarrassment of being forced out of their home that they voluntarily move out prematurely. In reality, homeowners who are behind on their mortgage payments are allowed to continue living in the home until the very end of the foreclosure process. In New Jersey, foreclosure timelines are still remarkably long because there are so many foreclosures clogging up the court system.

Although you have the right to remain in your home until it has been sold at Sheriff’s Sale (if you choose to go forward with foreclosure), your lender is acutely aware of the fact that you may abandon the home before then. Many people also leave their foreclosed homes prematurely due to divorce or other life circumstances that have changed. If your home is left vacant, your lender lawfully has the right to sell the property at any time.

Because lenders know that they legally have the rights to any vacant home that is in default, they regularly check to see if any of their defaulted mortgage properties have been abandoned. Thus, the photographer that has been giving you the creeps is simply making a photographic record of whether the home is still occupied or not.

Sadly, some mortgage companies will purposely photograph your home when they know you won’t be there. This gives them the ability to paint the picture of an empty home (no cars in the driveway, no lights on, etc). Although it may be clear that the home is still quite lived-in, some unscrupulous lenders will attempt to declare it as unoccupied so that they can attempt to take possession of the property early.

If you’re in a similar situation, your best move is to stay in contact with your lender even though you are in default on your loan. You can do this yourself or with the help of a real estate attorney, but keep record of your communications with your lender either way. A good way to avoid any miscommunication with your lender is to have your attorney draft a letter explaining that you will be living in the home throughout the duration of the foreclosure.

 

Image credit: Philip Male

My Home has a Short Sale Offer; Can the Bank Still Foreclose?

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Making your way through the short sale process can be a long and tedious operation, but seeing the light at the end of the tunnel is incentive enough for most people to soldier on. How frustrating, then, to discover that your bank went ahead with foreclosure, even while you were negotiating (with the bank) for the sale of your home via short sale.

It’s true: even if your home is in short sale negotiations and has a solid offer on the table, your lender can still move forward with the foreclosure process. Naturally, the big question here is: Why would they do that? After all, there is generally a lot less paperwork involved in a short sale vs a foreclosure, and the bank will likely make more money, too. Bonus: no court involvement.

The short answer is that there are several reasons why this situation may present itself. Often, even if a lender approves a home for short sale, they still keep the foreclosure process moving forward in order to keep pressure on the seller. Sometimes, short sales repeatedly fall through, in which case the bank can simply say they’ve waited long enough, and – BAM – foreclosure.

Another reason this happens in big banks is a lack of communication between its thousands of employees. Larger lenders have offices all around the country, with departments and sub-departments at each location. While it would seem like a good idea to keep communication lines open – the reality is that many times the short sale department doesn’t talk to the foreclosure department and your property can simply slip through the cracks.

Many sellers hit the panic button when they receive news that their home has been foreclosed upon when they are so close to selling it via short sale. Luckily, as long as you are working with a competent attorney who is familiar with both short sales and foreclosures, your short sale will usually still be able to go through.

Fact: Even if your lender officially forecloses on your home, it still needs to be sold to someone in order for them to make any money. Experienced listing agents and attorneys will be able to talk to the right branches of a large lending corporation in order to postpone the foreclosure sale date (aka Sheriff’s Sale). As long as they know you are in negotiations with a qualified buyer, most lenders will put off the Sheriff’s Sale long enough for the short sale to take place.

The short sale process is one of the most complicated in all of real estate. It is more than likely that you will hit many bumps along your route to seeing your house sold through short sale, but for those who persist, it can happen. If your short sale end game looks significantly better than a foreclosure, the lesson you should heed is: “If at first you don’t succeed – try, try again.” – T.H. Palmer.

Image credit: Mike Licht

A Realistic Look at Purchasing a Home in New Jersey

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Purchasing a home is a significant life event, and one that should be taken very seriously. Because the process can be overwhelming, we’ve broken it down into easy-to-understand steps. Your home-buying experience may vary slightly, but all-in-all, these are the items you’ll have to tick off your list before you get the key to the front door.

  1. You finally find the perfect home. With the help of your real estate agent, you’ll make an offer to the seller and/or their agent. If your offer is below asking price, the seller may make a counter-offer. Once both buyer and seller agree on a price, an initial contract will be drawn up.
  2. It’s time to apply for a home loan. As soon as you and the seller reach the initial contract phase of the process, you’ll need to apply for a loan/mortgage. When you are approved for a loan, you or your lender must notify the sellers to keep them in the loop.
  3. Attorney review begins. This ‘due diligence’ period is a safety net. By law, a 3- day attorney review period is required, but can be extended if both parties agree. During this time frame, you as the buyer have the option of walking away from the contract without any repercussions.
  4. Home inspection takes place. During the due diligence period, a home inspector is hired by the buyer to ensure that there are no major structural problems with the home. If any significant issues are found, you may ask the seller to address them before moving forward with the purchase. You may also choose to back out of the contract if the results of the home inspection are not to your liking and the seller’s response is also less than optimal.
  5. Lender will request that the home value be appraised. Assuming you’ve made it through the home inspection and still want to move forward with purchasing the home, your lender will now ask you to have the value of the home appraised. You, the buyer, are usually responsible for any costs associated with the appraisal, but it is negotiable. If the home is appraised at a much lower value than the amount of the loan, the lender may not approve the loan.
  6. Your loan has been approved! Congratulations; if you’ve made it this far in the process, you’re just a few steps away from making your new house a home.
  7. A real estate attorney reviews all of the paperwork involved in your real estate transaction. It is very important that you select an attorney with significant real estate experience. Your attorney should be extremely familiar and comfortable with the closing process. He will be responsible for checking title on the property and will attend the closing with you.
  8. Final check of any required repairs. If, during the home inspection, any major structural problems were discovered, the seller typically agrees to have the repairs made. These repairs will then be inspected prior to closing.

Also, before the official real estate closing can take place, the seller will need to show that the property is not infested with termites. Any termite inspection and/or repairs are usually paid for buy the buyer, but can be negotiated like everything else in real estate.

You’ll need to show proof of a homeowner’s insurance policy at the closing, assuming you took out a mortgage loan to make the purchase. The “closing” – also called “settlement” – is the meeting at which you and the seller essentially make the official transfer of property and funds to complete the sale/purchase of the home. It is an extremely good idea to have your attorney attend the closing with you, to ensure that everything goes as planned.

To learn more about the real estate process, or to consult with a NJ real estate attorney, click here. You can also visit our legal blog, which you can search for a variety of topics relating to real estate sales, purchases and even renting. If you’d like to have us look over your real estate paperwork, give us a call today!

Image credit: Mark Moz

Renters’ Insurance: Do You Really Need It?

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According to Zillow, more than $440 billion was shelled out for rent payments in the United States in 2014. That figure is concurrent with the fact that the number of homeowners is steadily declining while the number of renters is consistently climbing. In fact, in the 10 year time period between 2004 – 2014, this country has seen its peak number of renters since the 1980s (NYT.com).

Given the huge number of Americans who are currently living in a rental (whether an apartment, duplex or single family home), the concept of renters’ insurance has automatically jumped into the hot-seat.

Historically, too many renters made assumptions about the protection of their belongings that ended up costing them large sums of money. For example, a common belief is that renters will be protected under their landlord’s property insurance policies.

Unfortunately that is a misconception that is all too often not clarified when the lease is signed. Typical homeowners’ insurance policies specifically state that any property belonging to a tenant will not be covered in the event of a fire, flood, or other natural disaster.

Additionally, should you or any of your guests be the cause of an accident in your rental that causes harm or injury – your landlord’s liability policy will not have you covered. This could end very badly with you being sued for damages, which could end up costing thousands of dollars.

Although some landlords require their renters to have their own renter’s insurance policy before signing the lease, not all landlords follow this practice. This means the decision is left up to the renter in many cases. Plenty of renters, when faced with the rising cost of rent coupled with the rest of their monthly bills, decide against renters’ insurance.

This is a very bad decision, for many reasons.

  1. Renters’ insurance is very affordable. It is a falsehood believed by many that renters’ insurance is expensive. Naturally, everyone’s policy and costs will vary, but on average you’ll pay a few hundred bucks per year – and that gets you half a million dollars in coverage!
  2. Medical bills can be astronomical. If one of your friends gets injured in your apartment and requires medical attention, s/he can sue you for the costs they incur. Your landlord’s policy will not help you out here, either.
  3. Your landlord may not have a security system in place, and they aren’t required too, either. This may mean that you’re at risk for break-ins and theft. Burglaries are common in big apartment complexes due to the large number of people and high activity that can act as a distraction. If you lose any expensive items to theft or vandalism, renters’ insurance will help you recover the cost.
  4. Natural disasters can destroy all of your property. While your landlord’s insurance policy will take care of the cost of repairing the structure of the building, your personal items inside your apartment will only be protected under renters’ insurance coverage.
  5. Accidents happen. Think about it: have you ever accidentally broken a window or left the bathtub water running too long? Any damage to your rental that is deemed to be your “fault” will be your responsibility.

When you consider the benefits of paying around $20/month, renters’ insurance is a no-brainer! Don’t pass on it just to save a few dollars. If you have an extremely tight budget, look for something less important that you can drop. Consider lowering your cable subscription, getting rid of your landline (as long as you have dependable cell service), cancelling satellite radio, or eating out less often. If you end up in one of the above situations, you’ll be extremely glad you decided to go for the renters’ policy.

 

Image credit: Scott Wylie

Collection Agency vs Original Creditor: Who Should You Pay?

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Without a doubt, it can be extremely stressful to have an old debt following you. Fielding endless calls from creditors or collection agents is always headache-inducing.

Unpaid debts that linger on your credit report will drag your credit score down, down, down. How quickly your score will tank depends on the size of the debt and how overdue it is. Being mindful of your credit rating and what is listed on your credit report(s) is important to your overall financial stability.

Even if one of your older debts becomes marked as ‘charged off‘ on your credit report, that in no way indicates that you don’t have to pay back the money, and will actually cause your credit score to fall even lower.

Additionally, if you’re trying to wait out the statute of limitations on your debt, be prepared to watch your credit score do a nose-dive in the interim, which could be up to 15 years! Each state has a different statute of limitations time period for different types of debt; you can view the chart here.

New Jersey’s statute of limitations on unpaid debt is six years across the board, but there are many ways to inadvertently ‘reset’ the debt clock, which means you may double or even triple the waiting period. You can imagine what might happen to your credit score in that amount of time.

What, then, is the best way to get out from under an old debt in order to improve your credit score? If the money owed is a legitimate debt that you are responsible for, your best move is to pay it off if you can. Given the fact that we’re discussing old debts, it’s highly likely that your original creditor no longer ‘owns’ the debt. At minimum, they have likely written the debt off of their books (charged off) and have hired a collection agency (also known as a debt collector).

Collection agencies work for creditors and lenders by attempting to recover unpaid debts for them. In return, the original creditor pays the agency a fee or a percentage of the amount recovered. If your debt is over six months old, you are likely receiving calls and letters from a collection agency rather than the creditor to whom you originally owed money.

The fact that you are attempting to pay off old debts in order to clean up your credit score is a sign that you are taking steps in the right direction. Kudos! However, you may run into some difficulty when you decide to officially make payment.

Who should you pay?

If you’ve been getting calls from a collection agency, should you make payment directly to them? What if the original creditor is still operating an active business?

Before making any payments on your old debt(s), you must verify who ‘owns’ the debt. Contact the original creditor and ask them if they are working with the collection agency that has been calling you. They should be able to tell you if you should pay the collection agency, or if you can pay them directly.

Paying the original creditor directly can cause potential problems, though, so be careful. Carefully check your credit report to see who is listed as currently owning the debt. Your creditor may have also sold your old debt to a debt buyer, in which case, you may see an unfamiliar listing on your report. Anything unfamiliar on your credit report needs to be closely examined.

The bottom line: If you’re making good on old debts so that you can watch your credit score rebound, good on you. To ensure that the debt will be marked as ‘satisfied’ on your credit report, do your due diligence so that you pay the right company.

On the other hand, if you want to pay off your old debts but simply do not have the means to make that happen, filing for bankruptcy can erase many (if not all) of the money you owe. Debt reorganization and/or negotiation may also be the answer to your money problems.

 

Image credit: Pictures of Money