Steps to take before filing for bankruptcy

Anyone who wants to file for bankruptcy may need to learn about the lasting debts, monetary costs and other options before going through the legal process.

When New Jersey residents find themselves wallowing in large amounts of debt, they may consider filing for bankruptcy to relieve some of the stresses. According to the United States Bankruptcy Court District of New Jersey, there were 27,525 case filings over the course of a single year. While this legal action can be a valid option for a lot of people, it is often more complex than people realize. Rather than simply announcing their desire to be free of overwhelming financial obligations, some debtors may need to take a few steps before deciding to go through this process.

Learn about the debt that remains

The type of debt a person has may dictate whether this financial option is good for him or her. Not all financial obligations are taken away by going through this process. For example, a divorced person would still be responsible for child support or alimony payments even after being declared unable to pay his or her outstanding sums. Other potential expenses not taken away by filing for bankruptcy include the following:

  • Real estate liens
  • Some taxes
  • Student loans

If the bulk of a person's debt falls outside of these categories, it may be a good idea to go through with the financial liquidation.

Consider the monetary costs

Filing for bankruptcy can give a person financial breathing room, but the process itself can actually cost quite a bit of money. Between legal fees and court fees, most filers should expect to pay a fair amount of money. Depending on the type of case filed, some people may even lose their biggest assets, including houses and vehicles. The more complex a case is the more a person may have to pay. This type of debt relief could also make it harder for people to qualify for loans or get new credit in the future.

Look into other options

Before anyone is able to file for bankruptcy, they often have to go through some form of credit counseling. These experts may help people drowning in financial commitments find other ways to relieve their stresses. For example, some individuals may be able use debt settlement or debt consolidation to manage existing outstanding balances. The settlement option allows borrowers to negotiate with creditors to reduce the balance or interest rates to make paying off debts easier. Debt consolidation, on the other hand, lumps multiple balances into one new account, which allows borrowers to pay a single fee every month.

In New Jersey, the process of filing for bankruptcy can be very complex. No matter where a person is in the process, it can be beneficial for him or her to work with an attorney who has experience helping people through Chapter 7 and Chapter 13 bankruptcy cases.