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

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Are Money Worries Making You Sick?

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Do you find yourself stressing out over money issues lately? Or perhaps it’s been ongoing for awhile now. Either way, if you’ve got money problems that are causing you mental strain, angst or a general feeling of dread, you may actually be causing yourself real physical damage.

When you find yourself plagued by negative thoughts (in this case, about money), it’s not only your mental state you need to be concerned about. In fact, there have been a number of studies that show a direct correlation between fretting about your financials and failing physical health.

The correlation between worrying and your physical health is so strong that it simply should not be ignored. Because of  the association between worry and some significant health problems (high blood pressure, chronic migraines, heart attacks and debilitating back and neck pain), it’s crucial that you find an appropriate way to deal with your money worries. Failure to do so could put your health at serious risk.

Are you having trouble paying your mortgage bill? Has your car payment become more than you can handle? Is your electric company threatening to turn off your power if you don’t pay up soon? Are you dealing with seemingly insurmountable credit card bills/student loans/child support?

All of these things can lead to an overwhelming sense of anxiety. Along with the aforementioned physical health problems, long-standing, untreated anxiety can cause you to fall into a deep pit of depression.

Long-standing stressors can also make you more susceptible to infections like the common cold, the flu and other viruses. The more stressed you are, the more likely you will be to catch more serious and more frequent infections. This cause and effect relationship boils down to the fact that stress hormones like cortisol can interfere with your body’s ability to fight off infections.

If it seems like you always have a cold, or if your winter viruses linger long into the spring and even pop up during the summer, take a look at your overall stress level. Studies show that people who are under financial strain have a much harder time fighting off illnesses, and tend to stay sick longer then their more relaxed counterparts.

In fact, you may be up to five times more likely to come down with the cold or flu then people around you who are not under the same financial stress. You should take your body’s signals seriously, and if you’re consistently feeling ill, take inventory of the amount of stress you’re under.

If the primary source of your worry is financial, now is the time to reassess your budget. It may be that all you need is a budget overhaul. On the other hand, you may benefit from some certified credit counseling services in order to get your finances back on track.

If you’re reading this article here on our blog, it’s likely that you could benefit from taking a look around at some of our previous articles regarding money management and stress. Please feel free to read through all of our blog posts that may be pertinent to your own unique situation. Our hope is that you get your financial worry under control, and if you need to contact us, we would be glad to step in and help you.

Image credit: BHernandez

Is There a Statute of Limitations on My NJ Debt?

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Did you realize that debt has a statute of limitations? This means there is a set time limit during which you can be sued for money you haven’t been able to pay back. If you have a very old debt that you haven’t made any payments on in years, your lender may not be able to legally take you to court even if you never make another payment.

Although the concept of “limitations” on how long your debt can be collected may seem comforting, the process of proving that your debt has exceeded the statute of limitations time limit is actually quite difficult. It’s in your best interest to get as familiar as possible with the laws surrounding the statute of limitations on unpaid debt.

What Is the Statute of Limitations?

In this context, the statute of limitations is defined as a legal time period in which a lender, creditor or debt collector can sue you for money that you have not repaid in accordance with an agreement.

Each state has different laws regarding unpaid debt and the statute of limitations. The confusion and differing state regulations exist because the statute of limitations was not originally intended for the purpose of debt collection.

Because each state has different time limits for different types of debt, you’ll need to know which state your creditor may be suing you in. This in itself can be hard to uncover, because you can be sued in the state in which you reside, the state where you opened the defaulted account, or in the state where the creditor does business.

What Are the Different Types of Debt?

There are actually four different categories of debt, and they include: written contract, oral contract, injury, and property damage. Each of these different categories has a different time limit in each state. You can learn more about your specific type of debt and its time limits in all 50 states here.

You also need to know precisely when the clock started ticking on your defaulted debt. There are many things you can do that will actually “restart” your debt clock, which is why debt collectors are so doggedly determined to get in contact with you.

By making a promise to pay or simply admitting to a debt collector that you owe the money in question, you may start the clock over on your debt’s statute of limitations. Every time you make a payment, however negligible, you are also restarting the clock. So, if the statute of limitations on your unpaid credit card debt is 6 years and a debt collector calls you after 5 years – acknowledging responsibility or making a payment on the debt will reset  the statute of limitations timeline. You will then have to wait another six years for it to run out again.

An important thing to note is that there is no statute of limitations on federal student loans. Just as they cannot be discharged in a bankruptcy, they cannot be avoided due to the statute of limitations. In fact, a defaulted federal student loan can ultimately be taken out of your paycheck until it is paid back. Private student loans, on the other hand, do have a statute of limitations.

If you have an unpaid debt and feel that you will not be able to repay it in the foreseeable future, it is important to know all of the specifics behind the statute of limitations of your particular debt. It is also imperative that you contact a bankruptcy attorney if your debt is something that you cannot keep up with. An experienced bankruptcy attorney will help you formulate an effective way to address your debt. The right attorney can help you by defending you against a debt collector regarding statute of limitations, facilitating loan modifications or helping you file for bankruptcy.

It’s important to work with a qualified professional on this matter because the laws surrounding unpaid debt are confusing and laden with details. In order to avoid doing something illegal and/or getting yourself in even deeper debt, call Veitengruber Law and let us pull you out of debt for good.

Image Credit: Keith Williamson

Do You Really Need a Credit Card?

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So many people in America and all around the world think that living on credit cards is a normal and appropriate way to pay for things.  While it has definitely become commonplace, the practice of regularly paying by credit card is a surefire way to find yourself doomed to a long and tortuous climb out of debt hell. Keep on paying just the monthly minimums on your Visa or American Express bill and before you know it, you’ll easily rack up a $20,000+ debt that you can’t handle. Paying for items, gifts, groceries and bills with real money is always the desirable way to go, hands down.  A credit card is not real money; in fact, it’s one of the most expensive loans you could possibly ever take.

However, there are certain instances that will call for you to have access to a credit card, so don’t go cutting them all up in a fury. By all means, feel free to cut most of them up if you’ve got more than one or two accounts, but be sure that you keep at least one card handy, and use it only as we are about to explain.

As a friend of the Veitengruber Law family recently realized, her attempt to live completely debt free, although it was doing fantastic things for her credit score, was putting up roadblocks that she didn’t anticipate. It’s true; using a credit card can be beneficial in the following situations:

  • Taking a vacation – From renting a car to reserving a hotel room and booking spa services, a huge percentage of your vacation amenities must be paid for by credit card.  Usually, you can simply reserve the service with your credit card number and then pay cash by using your debit card when you arrive. In instances where you must put the entire balance on your credit card, do so with great caution and be sure to make payment to your credit card company as soon as your vacation ends to avoid paying huge interest fees.
  • In the event of emergencies – Suppose your home’s entire heating system simply goes kaput in the dead of winter and you just don’t have enough of a buffer in your bank account to pay for the repairs.  You’ve got no choice other than putting it on your credit card, but make large payments every time you get paid until your new heater bill is completely erased from your card history.
  • Dealing with someone you don’t completely trust – Using a credit card creates a history that using cash does not, and if a merchant turns out to be corrupt, credit card companies will take care of the problem for you by reversing the payment and cutting you a break.
  • While travelling – Aside from booking all of the details surrounding your vacation, carrying a credit card as opposed to cash on a trip is advisable as long as you know you can pay for what you spend once you get back home.  The reasons are a combination of possible confusion in unfamiliar countries and with merchants you’ve never dealt with, and the risk of credit card theft or loss.  In all of the hustle and bustle of a vacation, things can easily be dropped, lost, or stolen.  Cash can never be replaced, but a credit card, once stolen, can be reported immediately and no charges will then count against you.

Here at Veitengruber Law, we definitely don’t advocate for the regular use of credit cards, and if you’ve already been there, done that and you need help to get out of debt, we’re here to help.  Using a credit card wisely is ok; just be sure to keep your use extremely limited and within your actual spending budget.

Get Your Life Back After Bankruptcy!


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After filing for bankruptcy, many people are afraid that they will never be able to get their lives back in order. The truth is, bankruptcy was actually created to help troubled consumers rather than hinder them, and it is definitely possible to reinvent yourself after a bankruptcy as long as you are actively working to make improvements in several areas of your life.

Employment
If you are unemployed at the time of your bankruptcy discharge, the first thing you need to change is your employment status. Getting a job post bankruptcy is not the unattainable impossibility that many have been led to believe. “You’ll never get hired anywhere after a bankruptcy!” is simply a myth perpetuated by lenders to keep their debtors from having their debts discharged instead of repaying them. In general, bankruptcy is rarely a cause for an applicant not being hired for a job, even in positions that require security clearance.  Your credit score and report really have no significance when it comes to getting a job. Additionally, if you are already employed at the time of your bankruptcy, it may be necessary for you to look for a better paying job or a second job temporarily while you work on building your credit back up. Your bills definitely need to be paid on time, now more than ever.

Budgeting
Once you have secured adequate employment, make a realistic budget and stick to it.  Live below your means and start changing all of your bad financial habits. All of your debts have now been erased, so view this as a “do-over” – and do it right this time! Don’t let history repeat itself, or you’ll really have a problem, because you can’t declare another bankruptcy for 8 years.

Building Credit
Attorneys recommend that you get 1-3 bank credit cards and use each card a tiny amount each month, well within your means to be able to make your credit card payment in full and on time EVERY month. This helps gradually boost your credit score by showing that you can be responsible with money that is loaned to you.

Speaking of loaning – it is indeed possible to secure a personal loan after a bankruptcy. In order to expedite the process, look for lenders who lend to people with bad credit instead of seeking a loan from a traditional lender. Also, although your rates will likely be higher than average, do your best to get the lowest interest rate possible. You may be able to offer one of your assets to get a discount. Consider refinancing your loan at a later date to get an even better deal once your credit rating has gotten a little boost.

Finally, ensure that all credit bureaus have accurate information about your debts, and the fact that they have been discharged. You do not want your credit report declaring any old debts that have now been wiped clean. Only when credit bureaus have the correct information will your post bankruptcy credit score begin to improve.

Be Willing to Ask for Help
Contacting an attorney is always advisable even after a bankruptcy, especially if you are overwhelmed or unsure how to proceed in order to avoid making the same mistakes twice. Veitengruber Law would be happy to guide you after your bankruptcy discharge. We want our clients to reclaim their lives as quickly as possible, and we will work with you to help you reach your goals.