I Received a NJ Bankruptcy Discharge: Now What?

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Having all or many of your debts erased in a New Jersey chapter 7 bankruptcy is referred to as a bankruptcy discharge. Most people filing for chapter 7 feel a great relief when their discharge is granted.

While you are deeply immersed in the bankruptcy process, it can be easy to view your discharge as the finish line. However, once you’ve passed that finish line, you’ll have new goals to reach for, and achieving these goals will be the true measure of your future financial success.

After bankruptcy, you’ll be aiming for repairing your credit score, which will take a hit when your bankruptcy is reported. Lenders will want to see that your credit score is slowly rising post-bankruptcy. While this isn’t always easy to do, it’s definitely not impossible. You can:

Apply for a secured credit card – While significantly different from a traditional credit card, secured cards are backed-up by money you pay up front. While few banks will see you as an ideal borrower right after bankruptcy, some offer secured card programs to borrowers who need help rebuilding their credit. This is a temporary solution that you should only use until your score rises enough to make you eligible for a traditional credit card.

Apply for a secured loan – This type of loan typically involves a credit union or a local community bank. You can either “borrow” from funds that you supply to your own loan account, or borrow money wherein you must make certain necessary payments before any funds will be released to you. While not a typical loan, these baby steps help your credit score because your loan activity will appear on your credit report, helping other lenders to see that you’re moving in the right direction.

Ask a family member to co-sign a loan or credit card – It’s true that we typically do not advise our clients to co-sign loans for friends or family members. A co-signer is putting a lot of faith into you, because they are essentially letting you “borrow” their good credit. The only times we recommend considering co-signing is after bankruptcy and when you truly have zero other options.

Request to be an authorized user – An alternative to finding someone to co-sign a loan or credit card is to request to be listed as an authorized user on a family member’s credit card. This is probably the option that will have the least positive effect on your credit score, but it can help a little bit. However, ensure that the lender in question reports all payment activity to credit bureaus for all authorized users, not just the main account holder.

As you begin your journey post-bankruptcy, the most important thing you do will be to make every single payment you owe to anyone ON TIME. This includes the aforementioned secured loans as well as utility bills and any other monthly expenses. Bankruptcy discharge should have given you a huge break from significant debts, leaving you with enough money to pay for your living expenses with a little bit left over each month. This means there are no more excuses for late payments.

When we work with a bankruptcy client, we also offer credit repair assistance after your discharge. If you’ve received your NJ bankruptcy discharge and you’re still struggling, we’re here to help you figure it all out.

Image credit: John Eisenschenk

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I’m too Broke to File for Bankruptcy!

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Nearly twelve years have passed since the 2005 Bankruptcy Reform Act took effect, which made it more difficult and expensive for struggling debtors to file for bankruptcy. The goal of the Reform Act was to prevent debtors from taking advantage of the US bankruptcy system in order to “write off” debts that they could actually afford to repay.

While good in theory, the hurdles put in place by the Reform Act have spawned a growing group of Americans who feel that they are doomed to live a life permanently broke and indebted.

Stricter qualification standards, mandatory credit counseling courses (on the debtor’s dime), increased homestead exemption restrictions and tougher attorney liability (read: higher rates) all add up to one thing: bankruptcy is now too expensive for those who need it most!

This has led many indebted Americans to attempt to file for bankruptcy on their own without the help of an experienced bankruptcy attorney. The concept of eliminating attorney fees may sound appealing at first, but the unfortunate truth for pro se bankruptcy filers is that the bankruptcy code is extremely complex and rife with opportunities for error. Mistakes on a bankruptcy petition cannot simply be erased or fixed with a simple “do-over,” and almost always cause a bankruptcy case to be dismissed.

What, then, is today’s flailing debtor to do?

If retaining a NJ bankruptcy attorney is cost prohibitive, and filing pro se is bound to lead to dismissal of your case – are there any real options? Living the rest of your life one step away from drowning in debt is not only undesirable; it can cause high stress levels that will prevent you from ever being truly happy.

Solutions for those “too broke” to hire a bankruptcy attorney do exist!

You don’t have to live with creditors breathing down your neck, watching your every financial move and prohibiting you from ever applying for a new loan. You also don’t have to lose your home to foreclosure (unless downsizing is something you want to do). Conversely, if you’re doling out steep rent payments every month, getting approved for a home mortgage does not have to be a mere pipe dream.

Bankruptcy is the fresh start and the only answer to financial insolvency. Despite the constraints placed upon consumers under the Bankruptcy Reform Act, there is help available. You just have to know where to look.

Attorneys, as a group, have a reputation for being solely focused on money. In New Jersey, there are bankruptcy attorneys who truly want to help their clients! For example, Veitengruber Law is a NJ bankruptcy firm that cares more about helping people than about taking their money. When you look for an attorney to help you file for bankruptcy, make sure your attorney is interested in helping you even beyond your bankruptcy discharge.

Attorneys like George Veitengruber will sit down with you for a free consultation to discuss your financial situation. During your consult, a long term plan to repair your credit will be mapped out. Retainer fees and other costs will be discussed, and a payment plan will be set up that actually works for you. We’ll also help you get creative in order to pay your legal fees.

A bankruptcy attorney who cares about your financial future does exist! If you’re looking for New Jersey debt resolution assistance in Monmouth, Burlington, Camden, Gloucester or Atlantic county, fill out our contact form today. We can help.

Image credit: Sodanie Chea

 

 

 

How to Convert a Bankruptcy from Chapter 13 to Chapter 7

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In a chapter 13 bankruptcy, debtors are able to reorganize their current debt load in order to make their monthly payments feasible. You should consider filing for chapter 13 if you have a steady  income but your debts are too much for you to handle. Chapter 13 bankruptcies allow you to keep all of your assets. You will still have to continue making payments on all of your debts; however, your debt timelines will be extended (typically over a three to five year period).

Sometimes debtors file for chapter 13 only to realize that they cannot even manage their agreed upon payments. If this happens, you should be able to modify your chapter 13 plan. For example, if part of your reorganization plan involves a monthly car payment – you could surrender your vehicle and your plan payment amount will go down. Of course, this is only possible if you can get by without a car, or if you have another vehicle that you can use.

If there are no effective ways to significantly modify your chapter 13 plan, you still have another option: bankruptcy conversion.

What is bankruptcy conversion?

A bankruptcy conversion equates to changing bankruptcy chapters.

How does a bankruptcy conversion work?

The first step in converting your bankruptcy is to speak with your bankruptcy attorney. This should always be your initial reaction whenever making any changes to your finances if you’re currently in bankruptcy. Your NJ bankruptcy attorney will be able to determine whether you will qualify for a chapter 7 or if it would be more beneficial for you to modify your existing chapter 13 plan.

As long as you have not received a chapter 7 discharge within the past eight years, you can “convert” a chapter 13 to a chapter 7 bankruptcy by re-filing some of your bankruptcy forms. You’ll be assigned a new trustee, and some of your assets will be sold in order to lower your debt total. At the end of a chapter 7 case, you’ll (ideally) be granted a discharge of all or most of your remaining debts that were not paid by liquidating some of your assets.

Will I qualify for chapter 7?

If you already successfully filed for and were granted a chapter 13 reorganization bankruptcy, you should be able to voluntarily switch to a chapter 7 at any time. You and your attorney will have to file a Notice of Voluntary Conversion with the court.

When a debtor is interested in converting their chapter 13 to a chapter 7, it is typically due to a significant life event that has altered their ability to make their previously agreed-upon payments. These life events include (but are not limited to) things like:

  • Divorce
  • Job loss
  • Foreclosure
  • Injury
  • Disability
  • Natural disaster
  • Eviction

If you’ve experienced one of more of the above situations, converting your chapter 13 bankruptcy to a chapter 7 liquidation bankruptcy makes sense and the bankruptcy court will likely grant you a conversion with no problems.

What if I previously filed for chapter 7 and was denied?

In the event that you have recently filed for chapter 7 but didn’t qualify, you may have to take the NJ Means Test. If your jurisdiction doesn’t require that you pass the Means Test, the court will request a written explanation from you disclosing why you need to convert to a chapter 7.

How much paperwork is involved in converting a chapter 13 into a chapter 7 bankruptcy?

Luckily, you do not have to completely start over if you want to convert to a chapter 7 bankruptcy. Some forms will need to be re-filed so that the court has your updated financial information, but your original bankruptcy petition will remain in place.

To learn more about converting from a chapter 13 to a chapter 7 bankruptcy, talk to an experienced New Jersey bankruptcy lawyer. Your specific case details are important and your attorney will be able to steer you in the direction that will get you to your desired financial destination as quickly as possible.

 

Image credit: Scott McLeod

NJ Bankruptcy: The Required Forms

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In our last post, we talked at length about the Schedule I form. Our reason for discussing one document in such detail is because Schedule I is where many debtors make significant errors that result in their NJ bankruptcy case being thrown out. To someone who has put all of their hopes into discharging their debts, bankruptcy dismissal can be a heartbreaking defeat.

However, along with the Schedule I form comes a plethora of other paperwork that is required for all bankruptcy types. On the very day that you file for bankruptcy, you must provide the court with a number of documents. These include:

Voluntary Petition for Individuals Filing for Bankruptcy (Form #101)

Statement About Your Social Security Numbers (Form #121)

Creditor Matrix/Creditor Mailing List

Credit Counseling Certificate

Initial Statement About an Eviction Judgment Against You (Form #101A)

Statement About Payment of an Eviction Judgment Against You (Form #101B)

Bankruptcy Petition Preparer’s Notice, Declaration & Signature (Form #119)

Disclosure of Compensation of Bankruptcy Petition Preparer (Form #2800)

Although the following forms can be filed within 14 days after your initial paperwork, it’s best to file everything on Day 1, so that nothing is forgotten or late:

Schedules of Assets and Liabilities (Form #106) with the following attachments:

  • Schedule A/B: Property (Form #106A/B)
  • Schedule C: The Property You Claim as Exempt (Form #106C)
  • Schedule D: Creditors Who Have Claims Secured by Your Property (Form #106D)
  • Schedule E/F: Creditors Who Have Unsecured Claims (Form #106E/F)
  • Schedule G: Executory Contracts and Unexpired Leases (Form #106G)
  • Schedule H: Your Codebtors (Form #106H)
  • Schedule I: Your Income (Form #106I)
  • Schedule J: Your Expenses (Form #106J)
  • Summary of Your Assets, Liabilities & Statistical Information (Form 106Sum)
  • Declaration About an Individual Debtor’s Schedules (Form #106Dec)
  • Statement of Financial Affairs for Individuals Filing for Bankruptcy (Form #107)

Additional forms required for chapter 7 debtors:

Statement of Intention for Individuals Filing Under Chapter 7 (Form #108)

Chapter 7 Statement of Your Current Monthly Income (Form #122A-1)

If necessary, Chapter 7 Means Test Calculation (Form #122A-2)

If necessary, Statement of Exemption from Presumption of Abuse Under § 707(b)(2) (Form #122A-1Supp)

Additional forms required for chapter 13 debtors:

Chapter 13 Statement of Your Current Monthly Income and Calculation of Commitment Period (Form #122C-1)

Calculation of Your Disposable Income (if needed) [Form #122C-2]

Chapter 13 Plan (Form #113, or local plan form)

As you can see, filing for bankruptcy in New Jersey is no walk in the park! Getting rid of those debts that have been preventing you from moving forward in life does make all of this paperwork worth it; however, we advise all NJ debtors to work with a qualified bankruptcy attorney.

Hesitation to hire a certified New Jersey bankruptcy attorney is understandable, especially when you’re already struggling with money. What Veitengruber Law wants you to know is this: we are sympathetic to your situation and we DO NOT overcharge our clients. In fact, we will actually help you work out a payment plan for our own fees! By working with an experienced legal team, your paperwork is guaranteed to be error-free, on time, and without accidental bankruptcy fraud, which can happen when debtors fill out their own paperwork incorrectly.

Beyond all of the forms, there is a lot to learn about the legal side of bankruptcy in order to file a successful case. Things like the means test, exemptions, trustee requirements, the 341 hearing, redemption, foreclosure (if applicable), tax information, child support/alimony obligations (if necessary), and landlord/tenant rules are all details that your attorney will be able to handle for you so that the outcome of your bankruptcy case is optimal.

In addition to your attorney’s wealth of knowledge regarding every step of the NJ bankruptcy process, he will also be able to work with you after your debt has been discharged (erased) to get your credit score back up where it belongs. Defaulting on debt(s) drops your score, as does filing for bankruptcy, but as soon as your debts are gone, you’ll have nowhere to go but up!

Image credit: J.P. Robichaud

5 Common Bankruptcy Myths: Debunked

Without a doubt, there is no shortage of misinformation when it comes to bankruptcy. Veitengruber Law works hard to consistently provide valid, up-to-date information about bankruptcy in New Jersey to help our readers and clients educate themselves based on facts.

Today, however, we’re going to address some of the biggest bankruptcy myths and the truth that lies behind them. Much like the mythical mermaid, believing in something that isn’t based on facts won’t make it a reality any way you look at it.

  1. “You can’t discharge income taxes in bankruptcy.” For some reason, it is a common misconception that income taxes are non-dischargeable in a chapter 7 bankruptcy. The reality is that income taxes are the only type of tax debt that can be discharged! Read more about the rules associated with tax debt qualifications for bankruptcy here.
  2. “Because of the Means Test, I’ll have to file chapter 13, which won’t help me get rid of any debt, so why bother?” While the first half of this may be true, even if you don’t qualify for chapter 7 based on the Means Test, filing for chapter 13 does not automatically mean that you will have to repay all of your debts in full. In fact, most chapter 13 reorganization plans see the debtor only paying a fraction of their total debt amount.
  3. “I can’t risk ruining my spouse’s credit, so bankruptcy’s not an option.” This is something we hear constantly. In New Jersey, bankruptcy does not have to be filed jointly with your spouse. You may need to disclose how much money your spouse makes, but ultimately you can file solo and it will literally have no impact on your spouse’s credit score.
  4. “Bankruptcy is only for people who are unemployed and/or impoverished.” While we understand why this belief exists, we want to be clear that it doesn’t matter how much money you make when it comes to bankruptcy. As long as your debts and expenses outweigh your income, you will almost certainly pass the Means Test, which will qualify you to file for bankruptcy in NJ.
  5. “Any attorney can help me file for bankruptcy. The cheaper the better.” Did you know that some attorneys will take your retainer even if they have zero experience with bankruptcy law? Do your research and select a bankruptcy attorney in New Jersey who has hundreds of bankruptcy cases under his belt. Selecting a NJ lawyer with little to no bankruptcy experience may cost you less money up front, but the end result can be catastrophic.

At Veitengruber Law, we’ve made it our priority to help New Jersey debtors get out from under their debt. We provide our clients with personalized and in-depth meetings so we can evaluate your debts from every angle.

As our client, you’ll receive tailored advice and a team to walk you through the entire bankruptcy process from start to finish and beyond. Because we understand the financial strife our clients are facing, we offer free consultations and extremely flexible payment plans that fit into your reality.

“There are very few monsters who warrant the fear we have of them.” ~ Andre Gide

Is Fear Keeping You from the Financial Help You Need?

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One of the biggest hurdles for many of our clients is fear. This emotion can be a gigantic stumbling block when it comes to getting assistance in many situations because asking for help is hard. You may think that asking for help means you’ve failed at something, but that line of thinking will only magnify and worsen the problem at hand.

The reason you have trouble asking for the help you need is because we live in a ‘self-help’ society where, for many people, seeking assistance suggests a deficiency of some sort.

Regarding personal finances – it’s completely understandable that many of our clients come to us at the last minute. The hard truth about the extent of your money problems can be really difficult to come to terms with. Feeling out of control and unsure how to fix things, it probably has felt easier not to think about money at all.

When you’ve waited until the eleventh hour to reach out for help, you’re much more likely to be acting in panic-mode, which will cloud your thinking. It can also impair your ability to communicate your needs effectively, making everything that much more confusing for everyone.

Veitengruber Law advises anyone struggling with any of the following to stomp out FEAR and ask for help as early as possible:

  • paying your monthly living expenses
  • outstanding credit card debt
  • imminent foreclosure
  • looming sheriff’s sale
  • job loss (which will quickly lead to financial strain)
  • divorce as a displaced homemaker or stay-at-home-mom
  • overwhelming medical debt
  • identity theft that led to a financial crisis
  • deficiency judgement after short sale or foreclosure
  • any other personal or business financial burden

The earlier you come to us, the better we will be able to help you sort out whatever money situation you’ve found yourself in. We want everyone who needs us to have no fear about consulting with us. In fact, you should be proud of yourself for reaching out to a bankruptcy attorney who has the experience needed to turn your situation around.

With all of that being said – if you have let fear hold you back and you’ve come to the sudden realization that you’re about to be in real, serious trouble, we’re still here with open arms, ready and willing to go to battle for you.

Did you bury your head in the sand as the foreclosure sale date on your home passed? Does it feel like there can’t possibly be any way to save your home from sheriff’s sale?

Even when it feels hopeless, push your fear aside and call us. We’ll have an entire team working to save your property or solve whatever financial puzzle you challenge us with. Last minute solutions aren’t ideal, but when you work with us, they are possible.

We can help you file for NJ bankruptcy, which will automatically postpone a foreclosure, even if the Sheriff’s Sale is tomorrow! We’ll go over your financial details to determine the best plan of attack. No matter what money emergency you’re facing, Veitengruber Law is the team you want on your side. We prioritize legal emergencies. You will not be ignored, pushed to the bottom of the schedule, or left to play phone tag with our voice mailbox.

If you need help saving your home, getting out of debt, filing for bankruptcy, applying for a loan modification, or arranging the sale of your home via short sale – message us today or call us now (732-852-7295) to get the kind of assistance that gets results.

 

Image credit: David Goehring

New Jersey Bankruptcy: Frequently Asked Questions

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While it’s true that everyone’s financial situation is unique, there are a number of commonly asked questions about the bankruptcy process that apply to all debtors. To help our readers, we compiled a list of the questions most frequently asked by our bankruptcy clients. Use this page as a reference when getting started with your own bankruptcy case.

  • How could bankruptcy help me? Many people don’t have a good understanding of what it means to file for bankruptcy, so it can seem daunting and confusing. In short, bankruptcy (chapter 7) gives debtors relief from their unsecured debts. Many, if not all of your unsecured debts can be wiped clean! Filing for bankruptcy can also: stop your home from being foreclosed upon, help you save your vehicle from repossession, put a stop to annoying debt collectors, and prevent any of your utilities from being shut off.

 

  • Should I file for Chapter 7, 11 or 13? File for chapter 7 if you have very little disposable income and significant unsecured debts. You should consider chapter 13 if you do have a decent income and would be able to pay back some or all of your debts if they were reorganized more optimally. Chapter 11 bankruptcy is intended to be used by businesses and people who owe substantial amounts of money.

 

  • Would I even qualify for bankruptcy? In order to determine if you’d qualify to file a NJ bankruptcy petition, you’ll have to discuss your personal financial details with your bankruptcy attorney. In general, you will need to disclose: a list of all of your debts, any property you own (personal and real estate), pension(s), stocks, and life insurance policies. It is impossible for us to determine whether or not you’d qualify for bankruptcy without discussing your personal finance details with you.

 

  • Will I lose everything I own? This is one of the most common misconceptions held by many people regarding bankruptcy. In filing for chapter 7 bankruptcy, you’d be able to keep anything that is considered ‘exempt’ from your creditors. You can learn more about New Jersey state and federal bankruptcy exemptions here.

 

  • Does filing for bankruptcy involve me physically attending court? You will have to attend court for something called the Meeting of Creditors, which helps your bankruptcy trustee decide what assets to liquidate. The good news is that your New Jersey bankruptcy attorney will attend the meeting with you.

 

  • What will happen to my credit score? Filing for bankruptcy definitely does drag your credit score down. We try to look at it as “there’s nowhere to go but up!” A bankruptcy on your credit report is better than having a large number of unpaid debts that you’ve chosen to ignore.

 

  • Will I be 100% debt-free after a bankruptcy discharge? Chapter 13 will help you set up a payment plan that is achievable for you and will not involve liquidation of your assets. A chapter 7 discharge means nearly all of your debts will disappear, with the exception of student loans, child support/alimony, fines, and any debts (loans) that were acquired illegally.

 

  • Will Veitengruber Law help me repair my credit after bankruptcy? Absolutely! We will help you set up an appropriate budget so that you can stay out of debt. We’ll also walk you through the process of repairing your credit score. Veitengruber Law will give you a number of helpful suggestions that will steadily increase your credit score after your bankruptcy discharge.
Image credit: photosteve101

Planning to File for Bankruptcy: Can I Still Take a (Pre-Paid) Vacation?

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There are several behaviors you should not engage in if you are in the midst of, or are imminently planning to file for a bankruptcy discharge. For example, in the 90 days prior to the date that your bankruptcy petition is filed, you should avoid paying back any personal monies that have been loaned to you.

To do so will cause those payments to be scrutinized by your bankruptcy trustee, and likely s/he will dub them “preference payments,’ which means you favored paying back some of your creditors over others. That is considered foul play in bankruptcy court, and any money that you paid back in the 90 days preceding your filing can be recovered so that it can be split evenly between everyone you owe money to.

You also should not go crazy using your credit cards with the thought that “the debt will be erased anyway, so why not?” This kind of action is called bankruptcy fraud and when it is discovered, your case will be dismissed without discharge of your debts.

Also, when possible, try to avoid getting married in the weeks and months leading up to your bankruptcy filing date. Plan your wedding around your bankruptcy discharge, especially if your future husband or wife makes a decent wage. To marry him or her before filing for bankruptcy means the court will then consider your joint income when deciding whether or not you can pay back your debts.

Probably the most important thing to avoid when getting ready to file for bankruptcy is lying to your bankruptcy lawyer. For that matter, if the case is underway, don’t lie to the trustee either. Making false claims regarding a bankruptcy filing will immediately result in your case being dropped, and may mean that you can never again file bankruptcy on the debts that you currently hold.

An interesting question that has been raised recently is whether or not a potential bankruptcy debtor can (or should) still take a vacation in the 90 days before filing, and/or during the actual case timeline. While it may seem that the easy answer here is “Don’t do it;” it’s actually ok as long as you can easily prove that you already paid for the vacation, and at the time of payment, you had no financial difficulties.

A pre-paid vacation is often non-refundable, and is usually booked far in advance, which for many people means that it was paid for when their financial outlook was much brighter. Anyone’s money situation can change on a dime! Previously, you may have been current on your bills, regularly slipping some money into savings, and you were still able to purchase a luxury vacation. With the quick snap of two fingers, you have now found yourself in a much different set of circumstances.

You can take a vacation that was pre-paid (as long as it was NOT paid for in the 90 days preceding your case filing and you can assuredly prove that your finances were stable when you paid for it). Take the trip, but don’t use your credit card to pay for a bunch of extras while you’re there, because those expenses will definitely be called into question during your bankruptcy court case.

 

Image credit: Hakan Dahlstrom

I’m too Embarrassed to File for Bankruptcy!

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The over-use of credit cards has become very commonplace in today’s society. Don’t have enough money? Just swipe this card through, or type in a simple series of numbers online. No problem; worry about it later.

The problem results when ‘later’ finally rolls around. Even charging small amounts can add up FAST. Virtually anyone can suddenly find themselves up to their eyeballs in credit card debt, being unable to make even the minimum payments. On top of that, missing only a few months of payments will tack hefty late fees onto an already mind-blowing amount of debt.

Most people who find themselves with mounds of credit card debt did not intend to end up in dire financial straits. In fact, the majority of credit card users start out determined to pay off their credit card balance on time, every single month. “As soon as the bill arrives, I’ll mail out a check. I’m just waiting for my __________(paycheck, tax return, raise, new job to start, etc).” For some people, the timing is right and as soon as they get paid, they knock out any credit card payments that were due. For others, however, the self talk turns to something like:

“I can’t believe I racked up so much credit card debt! I’m so embarrassed!”

The fact of the matter is that everyone makes mistakes sometimes. Good people occasionally make bad judgement calls that can at times snowball out of control.

Even if you had the most honorable plan when you began charging things to your credit card, if even one of your life circumstances takes a wrong turn, you can find yourself falling short.

Many factors can alter your course, and unfortunately sometimes your course can start going steadily downhill. Perhaps you’ve encountered one or more of the following unexpected hurdles:

  • A growing family
  • Work demotion
  • Job loss
  • Injury or chronic illness
  • Divorce
  • Lay-offs
  • Special needs children
  • Death of a spouse
  • Elderly parents in need of care
  • Moved to a location with higher cost of living
  • Gambling addiction
  • Medical bills
  • Drug addiction
  • Poor communication about money

Any of these factors can lead you to make bad choices regarding your finances, either willingly or because you were left with what felt like no other choice. When dealing with difficult life events, charging groceries to your credit card may feel like no big deal. After all, your family has to eat, right? And, even if you’re out of work, you still need to put gas in your car to go to job interviews. With no disposable income, you might find yourself using your credit card for almost everything very quickly.

It’s natural to feel embarrassed when you can’t pay your bills. Human nature tells us that as responsible adults, we should be able to keep our finances in order. However, don’t let your embarrassment stop you from taking steps to get back on track.

Even deep in debt – you have choices! You can continue to let your debt roll over until you lose all of your possessions, OR, you can be proactive and file for bankruptcy NOW.

By filing for Chapter 7 bankruptcy, you’ll be able to wipe out ALL of your credit card  (and most) medical debt. You’ll be able to keep your home and car as long as you can afford the payments. Your credit score will suffer, and the bankruptcy will remain on your credit report for a decade, but that’s actually much better than your current situation.

A fresh start free from the burden of your credit card debt will allow you to get current on your mortgage, car payments, and utility bills. Staying current each month will slowly but surely bring your credit score back up to a respectable level, and avoiding credit cards in the future will keep it there.

Image credit: Justin Maier

Can Bankruptcy Erase Personal Debts?

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Have you found yourself falling further and further behind on payments that you owe your creditors? Creditors can range from banks and credit card companies to hospitals, schools, physicians, stores and friends. Anyone who has loaned you money is considered to be one of your ‘creditors.’ This simply means that you owe them money.

Most people know that filing for bankruptcy can alleviate a large portion of money owed to creditors (lenders). It’s also a pretty well-known fact that college loans are almost impossible to find relief from at the moment. Medical, credit card and real estate debt can be eliminated or significantly reduced by filing for bankruptcy.

What some people don’t realize is that bankruptcy can help erase personal debts along with those debts owed to a large corporation or credit collection agency. For example, if you borrowed a large amount of money from your grandmother, or other family member or friend, filing for Chapter 7 bankruptcy will most likely eliminate your requirement to repay her. Your grandmother (or other personal lender) must be listed as a creditor in your bankruptcy paperwork in order for this to happen, though.

If you properly list any personal loans in your bankruptcy documentation, those specific debts will usually be discharged along with all of your other outstanding debts. However, this does not mean that you aren’t allowed to pay the person back. Most people, in an effort to maintain happy families and relationships, actually want to be able to repay any of their friends or family members who have loaned them money over the years.

After your bankruptcy proceeding is complete and most, if not all, of your larger debts have been discharged, you will be in a much better place to repay any personal loans that you may owe. Often, lifting all of your major debts will leave you with enough money to pay your bills and get your life back on track. At that time, you will be able to address those personal debts that may still be lingering.

A question was recently raised regarding the use of a family member’s credit cards and whether or not that type of debt could be included on a bankruptcy petition. The answer to that is two-fold. If you simply list that you borrowed money from this person, your responsibility to pay back the debt can be lifted. However, if, for example, your grandmother allowed you to use her credit card – she will still owe the full amount that you charged. You cannot include someone else’s credit card debt on your bankruptcy petition.

Again, after your bankruptcy discharge, you can then turn your attention to repaying any personal debts that may interfere with your personal life. You might want to explain to anyone who loaned you money that you will be able to start paying them back as soon as your bankruptcy case is settled. It is important that you do not repay any personal debts in the 90 days immediately prior to the date of your bankruptcy petition. These payments will be considered ‘preference payments’ by your bankruptcy trustee, and s/he will likely be able to take back (recover) that money in order to distribute payments equally among all of your creditors.

 

Image credit: Jessica Spengler