Reduce Debt NOW Rather than Later and Save Thousands

reduce debt

The average American household is leveraged with $137,000 of debt. That’s a crushing number. No matter what your debt looks like, you can (and should) take steps now to eliminate years of payments – potentially saving you thousands of dollars. Following are four of the most common kinds of debt weighing Americans down, along with debt-reduction tips for each type of debt.

Mortgage:

A mortgage is one of the largest debts most people will take on in a lifetime. With a minimum down payment, you will pay thousands of dollars in mortgage insurance (PMI), which is basically wasted money. If you can’t put down 20% to avoid PMI, you should refinance as soon as your home value increases enough that your equity is the equivalent of 20% or more.

Pay attention to comparable home values in your neighborhood and refinance your mortgage as long as the interest rate is low. If you began with a 30-year mortgage, try to refinance to a shorter term. You will pay much less interest over the course of the loan. Choose a 20 or 15-year mortgage and spend your later years without a mortgage payment!

Another effective way to reduce mortgage debt is by making bi-weekly payments instead of monthly payments. This means you will make 13 payments per year instead of 12 and most people won’t even notice the difference.

If you are unable to pay your mortgage or are behind on payments, address it before it gets out of control and you lose your home.


Student Loans:

One of the worst kinds of debt is student loan debt. It will often survive even if you declare bankruptcy. Your wages can even be garnished if you fail to pay your student loans back. Look to consolidate your loans into a low interest rate. Refinancing federal loans with a lower interest private student loan lender is another great option. Veitengruber Law can help you reduce your student loan debts once we meet with you to discuss the specific details of your debt(s).

 

Medical:

Debt from medical bills is one of the “best” kinds of debt to have. You can often negotiate an interest-free payment plan with the provider. Be careful not to ignore these bills and let them go to collections, though. Having any kind of debt in collections can ruin your credit and prevent you from making future important purchases.

 

Credit Cards:

If your credit card debt is out of control, you need to stop adding to the problem and put away the cards. Don’t close the accounts – this will negatively impact your credit score. Put the cards in safe place where you won’t be tempted to use them, and start using a debit card or cash only.

Because the interest rates of most credit cards are so high, repaying significant credit card debt can take years. Always make more than the minimum payment so you are impacting the balance and accruing less interest.

If your credit score is still good, transfer your high-interest card balances to low or no interest introductory period credit cards with no balance transfer fees.*

*IMPORTANT NOTE: Read the fine print before you do this. Credit card companies are cracking down on consumers moving money from card to card to avoid paying interest. You could be hit with a very high rate at the end of the introductory period, or with retroactive interest fees if you move the debt a second time.


There are several strategies you can use to pay down your debt; read our blog post entitled “Snowball vs Avalanche: Digging Your Way Out of Debt” to find the strategy that works best for you and stick to it.


Allowing any type of debt to get out of control can have disastrous effects on your life. The stress of debt can lead to depression, anxiety, physical health problems, relationship problems and more. You may also find yourself in small claims court, civil suits, foreclosure proceedings and bankruptcy court. Your assets like televisions, computers, phones, and cars could be liquidated (sold) in order to pay your creditors.

Take steps now to gain control before your debt becomes an insurmountable mountain. Need help getting started? Call Veitengruber Law for a free consultation.

 

 

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Seeking Legal Counsel When You’re Out of Money and Out of Time

nj bankruptcy attorney

 

You have reached that critical point; you can no longer keep up with your bills. You might have a mountain of credit card debt, a house going into foreclosure, a looming sheriff sale on your property, shut off notices for services, a garnishment or repossession on a vehicle, or all of the above! Perhaps you are considering bankruptcy. The point is that you need the help of a legal professional. You need it done well, you need it now, AND you need to find a way to pay for it.

 

How Can You Afford It? (How Can You Not??)

You’re going to have to spend money to save money.  HOWEVER, you’re going to save your peace of mind and hopefully some assets too.

 

  1. Take advantage of a free consultation. A qualified attorney can give you your options. Is bankruptcy right for you? Is your situation ripe for credit consolidation or negotiation? How far along are you in the foreclosure process? Is it possible to stop a pending sheriff sale? Be honest and you’ll receive realistic expectations for your individual circumstances.

 

  1. Use Your Tax Refund. Uncle Sam has been holding on to your money, but now it’s the perfect nugget of cash infusion to save you bigger money in the long run.

 

  1. Ask family and friends. It’s difficult to swallow your pride, but you never know what your support net is until you ask. If it’s a gift, then that’s great. If it’s a loan you can let your loved one know that he or she will be listed as a creditor if you file bankruptcy. For other situations; set up a plan of when and how much you can realistically repay. It’s much easier to keep your job if you have stable housing and a solid financial plan under your belt.

 

  1. Stop Paying Your Unsecured Debt. If, after your consultation, bankruptcy is in your future, stop making payments on credit cards or other unsecured debt. The total owed will be dealt with as part of the bankruptcy, so those monthly minimums can now finance your legal fund.

 

  1. Reduce your expenses and minimize outgoing expenses. Fancy coffee every morning, premium cable channels, gym membership, daily lunches “out” – all gone. It adds up fast!

 

  1. Try to earn some extra money aside from your primary occupation. Sell old electronics or find a temporary part time job. Go through your attic or basement and have a yard sale, or hit eBay. Lighten your load while filling your wallet.

 

  1. Request a payment plan. Your bankruptcy attorney may allow you to list them as a creditor in a Chapter 13 filing, thus allowing you to pay them over a period of months. Chapter 7 fees can be paid over time as well, although without the federal court supervising. (Keep in mind that you must be paid in full before your attorney will file the case.)

 

  1. Withdraw from your retirement account. Only do this as a last resort. Those funds are otherwise protected, but you could be facing a large tax consequence if you withdraw early. That being said, in some circumstances it may be the best option. Also, consider options where you essentially “borrow” the funds from yourself and replace them with a payroll reduction each pay period going forward.
    IMPORTANT NOTE: Always discuss this option with your credit repair attorney BEFORE taking any money from your retirement fund(s).

nj bankruptcy attorney

How to Find the Right Attorney

You want someone with a proven record of results who can and will act in a timely manner. You could call your local bar association or attorney referral number. You could get a referral from a friend. Or, you could count one problem solved and realize that you already know a top legal representative for all types of financial duress – Veitengruber Law.

 

Don’t represent yourself.

This isn’t small claims court, or a traffic ticket. This is your entire financial future. Your chance of successfully completing a Chapter 13 bankruptcy without legal counsel is less than 1%; the chances of completing a solo Chapter 7 is less than 50%. Besides, you might end up losing more money trying to navigate your financial issues alone than you would have spent on legal counsel in the first place.

 

You wouldn’t ask a podiatrist to work on your car, or the babysitter to fix your plumbing. You need the right person for the job – you need an expert! When you’re looking for a NJ lawyer with experience who you can trust, you need Veitengruber Law.

What to do When Your Client Files for Bankruptcy

NJ collections attorney

From the perspective of a company owner doing business with a client (or company) who files for bankruptcy: how can you go about getting (even some of) the money you’re owed?

The second someone files for bankruptcy of any type, the Automatic Stay slams down like a sledgehammer – coming between the bankruptcy filer and anyone they owe money to. The Automatic Stay protects debtors during the bankruptcy process by making it illegal for any creditor to make contact asking for money.

Why can’t I contact my client?

After all, you and your client likely signed a working contract wherein you agreed to provide services and they agreed to pay you X amount of dollars for said services. Even though you continued to provide your end of the deal, your client filed for bankruptcy and now you aren’t even allowed to contact them. This can be very frustrating for a business owner who is owed payment(s) – money that may very well be making or breaking the creditor’s own business.

The reason you can’t contact a bankruptcy client is because the Automatic Stay is a protective measure put into place by the bankruptcy court to protect struggling debtors. It gives them enough time and breathing room to gather their financial information and meet with their bankruptcy attorney and/or a potential NJ credit counselor to come up with a plan that makes sense for getting them back on their feet again.

Chapter 11 and 13 bankruptcies are filed with the intention of reorganizing monies owed into a more feasible and achievable payment plan. As soon as these bankruptcy cases are complete – you will once again begin receiving payment from your client. According to their debt reorganization plan, you may not receive the full amount due, but you will get paid.

That’s the good news.

The bad news is that the vast majority of bankruptcies filed today are chapter 7, which entails debtors liquidating assets and discharging many of their debts altogether. If your client files for chapter 7 bankruptcy, you may have to write off their past due amount as a loss. In any case, remember NOT to contact them at all until you receive notice that their bankruptcy case is no longer active in the NJ Courts system.


To contact a debtor while they are actively going through the bankruptcy process (if an Automatic Stay is in place) means that you risk being sued. You will have broken the bankruptcy code if you even attempt to contact a bankruptcy client.


 

What You Can Do:

  • File a Proof of Claim – Downloadable from the USCourts online and easy to fill out.
  • Attend the Meeting of the Creditors; also known as the 341 Hearing – At this meeting, you will be able to question your client. You’ll also be permitted to object to the repayment or reorganization plan if you deem it unfair.
  • Thoroughly review any plan that is formulated by the debtor and their trustee. If less than half of their creditors do not consent with the plan, it won’t be approved by the bankruptcy court.
  • Make sure you are listed on the Creditor Matrix.
  • Wait and see. Truthfully, most of your time will be spent waiting to find out the outcome of your client’s case. If the case is dismissed, or “thrown out,” you will once again be allowed to attempt collection. If an agreement or repayment plan was formulated, you will receive a notice about how much you can collect. Be sure that all of your contact information is correct with the bankruptcy court and your client’s bankruptcy attorney to ensure you will receive any and all payments.

 

Collection Defense vs NJ Bankruptcy

If you have been sued by a collections company or “debt collector,” and the debt truly belongs to you, the most important piece of advice is: Do not ignore the lawsuit.

With that being said, people in your position naturally wonder if they have options. Being sued for a debt that perhaps you thought had been forgiven, or that had reached its statute of limitations, can come as a surprise. Many times we put these things out of our minds because it is easier than focusing on it and worrying about it.

Unfortunately, by putting a large debt that you failed to repay out of your mind, you are now faced with a lawsuit that asks you for the entire lump sum that you owe. This sum may even be larger than you remember due to late fees, attorney fees for the collections agency, and interest.

Is filing for bankruptcy your only option?

While it is impossible to give a blanket answer to this question (as everyone’s case will vary wildly) – the general answer is that no, bankruptcy is not your only option when you are being sued for an unpaid debt.

There are several things your NJ bankruptcy attorney will ask when you meet with him or her. Is this your only significant debt? What is your income? Can you repay this debt if it is broken down into payments?

If you have other debts along with the one in the lawsuit, and your income doesn’t allow you to get ahead on paying them back, it may be that bankruptcy is right for your situation.

Can you negotiate with the debt collector?

On the flip side, if the debt in this lawsuit is literally your only debt (outside of your mortgage and car payment), and your income is steady, you might want to have your bankruptcy/debt resolution attorney negotiate with the collection company.

For example, if your unpaid debt amount is $15,000, you may be able to talk the debt collector down several thousand if you pay in a lump sum. It is also possible to negotiate a payment schedule if you wish to avoid bankruptcy.

Is collection defense an option for you?

Collection defense is only appropriate if the debt in the lawsuit doesn’t belong to you, or if the lawsuit contains errors. So, if you are being sued in error, then collection defense is an option, but the reason many people opt for a different resolution is that collection defense representation can get expensive. Regardless of how much you pay your attorney, you can still end up losing the case, even if the debt collector is in the wrong. This is because NJ law doesn’t require strict proof of signed agreements when it comes to credit cards. Therefore, you may end up owing hefty attorney’s fees and still have to repay the debt in full when all is said and done if you go this route.

The only way to know for sure which direction you should go is to sit down with a NJ bankruptcy lawyer or debt resolution attorney. Often, bankruptcy attorneys also specialize in credit repair and debt resolution strategies other than bankruptcy, so look for an attorney who is well-versed in all areas in which you need assistance.

How to Dispute a Debt and Win!

We’ve talked a lot on our blog about how to handle your unpaid debts so that your credit score doesn’t tank, because a low credit score makes it much harder for you to borrow money, buy a house, and purchase a vehicle. Even potential employers today have the ability to find out how you handle money before deciding whether or not to hire you. For the aforementioned reasons, keeping a decent credit score is something that rightfully demands your attention.

Keeping tabs on your ever-shifting credit score and the details contained within your credit report(s) is the easiest way to ensure that you don’t have any long-lost debts doing serious damage without your knowledge. If and when you discover an unpaid debt that belongs to you, it’s important to pay the debt ASAP to avoid losing valuable credit score points. Working with your credit repair attorney in NJ, you can negotiate a debt pay-off schedule that works for you. Remember to check back in with the credit reporting bureaus as soon as you’ve paid off said debt to make sure it has been removed from your credit report.

What happens if you receive a notice from a collection agency for a debt that you have no recollection of owing? While your first instinct may be to toss it in the trash with the rest of the “junk mail,” slow down for a minute. There are two very good reasons why you should NOT ignore any letter from a debt collector.

  1. Everyone makes mistakes. It’s possible that you do owe an original creditor money. Bills are be misplaced, mis-sent, and lost every day. The original creditor may have also made a billing error when they originally charged you. The bottom line is that it is possible that you owe money that you forgot about or didn’t know about.
  2. Debt collectors can continue to attempt to collect on a debt, even if it was never your debt to begin with, unless you respond to them, in writing, within 30 days. Therefore, even if a collection agency is completely falsifying information in the hopes that you will simply send them some money, do not ignore it.

If you are being held responsible for a debt that you don’t recognize or remember, you can dispute the debt by sending the collection agent a letter via Certified Mail, with return receipt requested. In your letter, state that you are writing to dispute the alleged debt, and that all collection attempts should cease unless they can provide you with all of the following:

  • The full amount of the alleged debt
  • The name and address of the original creditor
  • Proof that you are responsible for the alleged debt
  • Documentation showing that the collection agency is licensed to collect debts in New Jersey

If the person attempting to collect money is doing so fraudulently, you should never hear from them again once they receive this letter from you. On the other hand, if there is a legitimate debt that you’re responsible for, you will receive the information you requested. Either way it is advisable to contact a credit repair attorney and/or a consumer fraud attorney in order to get your desired results and to keep your good credit score safe.

Image: “Credit Dispute” by Cafe Credit – licensed under CC 2.0

Are You Committing Financial Child Abuse?

Although it may be something you’ve never considered, there have been many reports of what is now being called “financial child abuse.” One of the easiest ways to commit financial child abuse is to use your child’s Social Security number instead of your own.

Why would anyone use their child’s Social Security number?

Typically, the perpetrator has found himself with a significant amount of debt that may include wage garnishment. What this means is that any time the adult in question attempts to get a job, his debts follow him and his creditors will be able to take a portion of his paycheck.

Because of this, the adult decides to use his child’s Social Security number when applying for a new job. Oftentimes, the father and the child in question have the same name, making this kind of activity slightly more difficult to detect by law enforcement.

Is it a crime to use your child’s Social Security number?

Not only is it illegal, but to do so would be committing a number of serious crimes including:

  • Identity theft
  • Fraud
  • Tax fraud
  • Social Security fraud
  • Theft

These crimes will almost certainly prevent the adult in question from ever discharging any of his debts in a bankruptcy in the future, and in addition, he may face prison time and thousands of dollars in fines.

Why is it a crime? Who is it really hurting?

The reason it is a crime to use a child’s Social Security number to obtain employment or a loan, etc. is because regardless of whose Social Security number is being “borrowed,” it is illegal to do so. End of story. A Social Security number is not something that can be borrowed, shared, or changed.

It can affect the child in question by tacking on Social Security wages to his SSN that he may have to answer for later in life if the activity is not stopped and reversed. This can cause the child serious legal problems involving Social Security fraud, even though he had no knowledge of the crime being carried out.

What is a better solution to my debt-related problems?

It is always a good idea to avoid committing a crime in order to get out of paying your debts. The reasons? You’re going to end up getting in serious trouble, you may go to jail, you will owe more money in the end, you will cause conflict within your family, and most importantly: There is a better solution!

You can erase the debts that you have. You do not have to borrow someone else’s Social Security number to get around your creditors. It is understandable and admirable that you want to get a job to support your family. Just don’t resort to committing a crime that you will regret later in order to do so.

Filing for NJ bankruptcy will wipe out most or all of the debts that you have racked up (with some exclusions) – allowing you to have a relatively clean credit report and no debts that will be taken from your wages.

Will a bankruptcy appear on my credit report?

It is impossible to avoid a bankruptcy showing up on your credit history, however, taking the responsibility for your debts and doing the right thing is viewed much more favorably by employers and lenders. You will have a much easier time getting a job with a bankruptcy on your record than if you had been convicted of fraud and identity theft.

The bankruptcy will disappear off of your credit report within seven to ten years depending on which chapter you file. Committing a crime like identity theft or Social Security fraud will remain on your criminal history record for the rest of your life. Which sounds more desirable to you? Do the right thing – file for bankruptcy and get rid of your debts so that you can move forward with getting that job and supporting your family the right way.

Disclaiming Your NJ Inheritance to Avoid Creditors

The news that you have been named a beneficiary in someone’s will is generally considered a positive thing; although you (hopefully) aren’t looking forward to the passing of your loved one, it usually feels good to know that they cared enough to bequeath part of their estate to you. There are times, however, when you may not wish to receive your New Jersey inheritance. Do you have the ability to say “thanks but no thanks?”

In New Jersey, estate law says that you can refuse to accept a gift, which in this case is your inheritance. This right to refusal is known as a disclaimer.

While it may seem strange that someone would choose to turn away inheritance money or life insurance proceeds, there are a few reasons for doing so. One of these reasons is avoiding creditors.

Do you have a lot of debt? Are creditors constantly calling? If so, you may worry that all of your inheritance money will go directly to paying off your debts. This is a very valid worry, because that is precisely what would happen if you accepted any kind of windfall while swimming in debt.

If you are attempting to disclaim your inheritance so that your creditors don’t have access to it, you may be hoping to divert that money to your children or other beneficiaries. Unfortunately, in New Jersey, it is illegal to use a disclaimer to get out of paying your creditors. If you choose to disclaim your inheritance under these circumstances, it is highly likely that your creditors will still be able to access the funds due to the Uniform Fraudulent Transfer Act.

Discussing your situation ahead of time with your loved one will give them a chance to protect the money that you are hoping to avoid giving directly over to your creditors. One way to do this is to set up a protective trust or to simply leave you out of the will altogether and instead name your children or other family members as beneficiaries. Your creditors have zero claims to any money that is inherited directly by your children.

Going to these lengths to avoid paying your creditors signals that you are significantly deep in debt. While we understand the desire to keep from handing a large windfall directly to creditors, we also must note that there are steps you should take to get out of debt, and the sooner, the better.

Your options for debt relief in New Jersey depend a lot on the specific details of your situation.

  • How much debt are you carrying in comparison to your income?
  • Are you living beyond your means?
  • What is your credit score?
  • Do you own a home that you wish to keep?
  • How many different kinds of debt are you carrying?

NJ debt negotiation and relief is available to you. Beyond refusing windfalls, disclaiming your inheritance and any other steps you’re taking to avoid paying your creditors, imagine if you didn’t have to worry about those creditors at all anymore. Ridding yourself of a large chunk (or potentially all) of your debt is very possible; your financial future can look anyway you want it to as long as you take the right steps, now.

 

 

I Received a Bankruptcy Discharge – Why am I Being Sued?

Filing for bankruptcy can be a momentous decision for many people, and it usually isn’t a decision that is made lightly. Most people don’t want to have to file for bankruptcy and have genuinely tried in earnest to reduce their debts on their own.

Once you’ve decided to move forward with a bankruptcy filing, you’re likely to feel a certain sense of relief – especially as the case progresses and everything is going as planned. After your debts have been successfully discharged by your bankruptcy court judge, all of your dischargeable debts will be erased, lifting a heavy weight off your shoulders.

After a debtor receives a bankruptcy discharge, every creditor listed on their bankruptcy paperwork will receive notification of the bankruptcy. Creditors are no longer allowed to contact you to collect on debts that have been discharged. Just knowing that those aggressive phone calls are going to stop is a huge relief.

That being said, sometimes you may receive the unpleasant surprise of being sued by one of the creditors you thought you had seen the last of. This is a scary moment for anyone! Thinking that you’ve gotten out from under your debts only to discover that one of them is still after you for money is disheartening.

Can a creditor really sue me after my debts have been discharged?

Oftentimes, if a creditor is still trying to get you to repay a discharged debt, it means they didn’t receive proper notice of your bankruptcy. It’s also possible that your bankruptcy information was not shared through the right channels within the company – even if they did receive notice. Attempting to collect on a debt that has been discharged via bankruptcy is against the law.

Do I have to respond to a post-bankruptcy debt-related lawsuit?

This is where is gets kind of tricky. Even if you are no longer responsible for the debt in question, if a creditor has initiated a lawsuit against you, it cannot be ignored. Doing so will only prolong the lawsuit’s life.

Your bankruptcy attorney will be able to advise you on how to respond to any creditors who attempt to contact you after your discharge, including any that attempt to sue you for money you no longer owe. It is important to consult with your bankruptcy attorney to ensure that the debt(s) in question were actually discharged and you truly are no longer responsible for them.

An answer to any lawsuits should state the fact that you filed for bankruptcy, including a copy of your discharge and a list of all creditors. In doing so, virtually all lawsuits of this type will immediately dismissed by the court. Even if you inadvertently left a creditor off of your bankruptcy paperwork, generally all dischargeable debts will be forgiven as long as the creditor knows you’ve filed for bankruptcy.

Although you will almost never be responsible for any debt that was discharged, it is important to notify your lawyer if you are sued by one of your creditors after bankruptcy. Some debts are non-dischargeable, and you need to know what they are so that you continue making payments on them. However, chances are good that your NJ bankruptcy lawyer discussed any debts of this type with you prior to your filing date.

 

New Jersey Foreclosure: Frequently Asked Questions

In a New Jersey foreclosure sale, your home will be sold in an auction-type setting. The sale will be publicly announced and will be open for anyone to attend. Since New Jersey is a judicial foreclosure state, the local sheriff will typically lead the auction. If the sheriff cannot conduct your sale, another public official will do so.

Everyone who attends the foreclosure sale is able to place bids in order to buy your former home. As in all auctions, “to the highest bidder go the spoils.” The spoils in this case refers to your mortgaged home.

So: you stopped paying your mortgage payment. For a variety of reasons, people sometimes do this. Maybe you ran into temporary (or permanent) financial trouble because you: lost a job, got divorced, fell ill, made some poor money choices – the potential reasons are endless. Regardless of how you ended up in foreclosure, it’s probably not something you hoped would happen to you one day.

No one goes around saying, “I hope I get foreclosed on at least once in my lifetime!” Because foreclosure something you didn’t wish for – you probably don’t know what to expect. As a general rule, we don’t sit around thinking about things that we don’t plan to experience. Therefore, now that you have found yourself smack dab in the middle of a foreclosure, chances are that you have some questions.

We’ve covered a lot of foreclosure sub-topics here on our blog. Today’s foreclosure question we’d like to answer for you is:

“Who gets the money from the foreclosure sale?”

The normal course of a foreclosure auction is that the bidding remains rather low and the final, winning bid is often less than the house is actually worth. In fact, many times foreclosed homes are sold for less than the original mortgagor still owes the bank. There are, of course, exceptions.

Here is a breakdown of what will happen to the proceeds from your foreclosure sale, who receives payment, and in what order:

  • The first person/entity to be paid from the foreclosure sale proceeds is the New Jersey lender who granted you the loan for the mortgage in the first place. The bank or mortgage company needs to recover as much money as possible because you didn’t repay them like you originally agreed. A small portion of the proceeds will also go toward settling the cost of having the foreclosure auction.
  • If there is still money left after the sale is paid for and the lender has fully recovered the amount they are owed, any secondary lenders (2nd or 3rd mortgage granters) will receive the full amount you borrowed (perhaps for a home equity loan) or as much as possible.
  • After the above parties have received payment in full is the only time you, as the mortagor, will be entitled to receive any money from your foreclosure sale. Keep in mind: you are not likely to receive much, if any, money from a foreclosure sale because foreclosed homes don’t typically sell for as much as they would in a traditional real estate transaction.

In fact, you may even owe money when all is said and done. If the winning foreclosure bidder pays less than you still owe on the property, your lender will suffer a loss. This discrepancy is known as a deficiency balance. As the mortgagor, you can legally be held accountable for this amount.

You can learn more about NJ foreclosure procedures, get the answers to common foreclosure FAQs, and find out how a foreclosure will affect your life on our NJ law blog. We can also help you save your home via foreclosure defense, if that is your ultimate goal.

I’m Being Sued for More Money than I Owe!

Is a debt from your past coming back to haunt you in the present? Although not ideal, sometimes it happens. Perhaps you weren’t making sound financial decisions at that point in your life and accidentally (or intentionally) ignored some past due notices until they just stopped coming.

It can feel like it’s easier to ignore bills when you don’t have the means to pay them. However, the end result is almost always going to be substantially worse than your original debt.

While it can take some companies awhile to take action on smaller debts, the bad news is that your (once) small-ish debt has had a load of time to compound upon itself, rolling around in interest rates, gathering late fees and potentially even picking up attorney’s fees. If your original lender or credit card company has hired counsel to address getting you to pay up, it is possible for them to tack their attorney’s fees on to the amount owed.

What can I do?

Your credit card company is hoping that you’ll get scared by the big number they’re asking for – as you should. If you receive a summons and complaint that says you owe double, triple or quadruple your original debt amount – now is the time to obtain counsel yourself.

How can I afford an attorney if I can’t even pay my debt?

Working with a New Jersey debt settlement attorney on a matter like this is highly unlikely to cost you thousands of dollars. In all likelihood, the right NJ lawyer will have the required negotiating skills to bring the amount owed down to a much more reasonable number – simply by making a few phone calls and/or sending some letters.

Your attorney can then work to coordinate a payment plan that is manageable for you so that you can pay off the (now much lower) balance. The lender/credit card company will almost always be happy to get some form of payment from you as opposed to nothing.

What will happen if my case goes to court?

If, by chance, your credit card company does not want to settle via your credit repair attorney, New Jersey courts will set up a mediation wherein the same kind of talks will take place. A court appointed mediator will work with you and your attorney, along with counsel for the opposing side, to negotiate a resolution that everyone can agree to.

The bottom line is: if you have been served with a lawsuit to collect a debt in a much higher amount than you originally owed, you’re probably not going to get out of paying at least part of the debt unless you file for bankruptcy. If you have the means to pay back the amount that your lawyer negotiates for you, you should do so in a timely manner so that your credit score doesn’t take an even bigger hit.

On the other hand, if you are completely strapped and cannot imagine even one dollar of your debt (and likely other debts that you owe) being repaid, it is definitely time to consider filing for a NJ bankruptcy. This will wipe out a significant amount of your total debt, leaving you much more financially stable, which will allow you to “start over” with a much cleaner slate.

 

Image: “Breaking into your Savings” by Images Money – licensed under CC 2.0