New Jersey Bankruptcy Law Blog

Critical information about the means test

To qualify for Chapter 7 bankruptcy, debtors in New Jersey may need to pass a means test. The means test is designed to determine if an individual has enough disposable income to pay his or her creditors. It is important to note that those who are looking to have business debts discharged generally don't need to pass it. However, those who are subject to this step will begin the process by gathering as much personal financial information as possible.

This information will be used to determine if a debtor's household income is below the median for the state. If it is, a debtor has passed the means test. Typically, only information from the past six months will be used when making this calculation. If a person's household income is higher than the state median, it is still possible to qualify for a liquidation bankruptcy.

If you file for bankruptcy, what property can you keep?

Making the decision to file for bankruptcy isn't easy. This is a choice that likely comes after months or even years of financial struggle, and you may be worried about losing everything if you make this choice. Thankfully, bankruptcy law provides you a way to deal with certain types of balances once and for all while still keeping the property and assets that are most important to your life. 

Chapter 7 bankruptcy allows financially struggling consumers to get rid of many types of debt and get relief from debt collection processes, such as wage garnishment. This process is known as liquidation bankruptcy, which means that certain assets will have to go toward the repayment of your debt. However, this does not means you'll lose everything.

Not everyone will pass the Brunner Test

Bankruptcy may be an ideal way for debtors to eliminate most of their outstanding debt balances. However, it is rare to see student loan debts discharged through bankruptcy. For a judge to consider discharging student loans in a bankruptcy case, an individual would need to pass the Brunner Test. To pass this test, an individual needs to show that he or she put forth a good faith effort to repay what he or she owed.

Debtors will also need to show that paying back their student loan balances would create unreasonable hardship. Finally, it needs to be shown that the hardship is unlikely to end before the loan repayment period ends. It is important to know that there is no clear definition of hardship. Therefore, it is up to a judge to determine on a case-by-case basis whether an individual would be able to repay a loan balance now or in the future.

Debt may not simply be a lack of money

Many New Jersey residents who struggle with meeting their financial obligations on a regular basis can't help but imagine how less complicated life would be if their net worth were somehow miraculously increased. People with money, as the theory goes, don't worry about every penny, don't lose sleep over what unexpected setback is lurking around the corner and can actually look forward to the future. The truth, however, isn't that black and white. Many individuals who earn a solid living, have a nice home and outwardly appear affluent also struggle with credit card debt.

Once people acquire enough money, credit card debt and almost all debt entirely is eliminated, but this doesn't become a reality for most Americans until they approach millionaire status. Many in the $100,000 income range regularly carry credit card balances each month, and these averages can be several thousand dollars. For those living paycheck-to-paycheck, this can be difficult to fathom, but there are common reasons for this.

Debt collectors must follow strict rules

New Jersey residents who are struggling to make ends meet will likely know how persistent debt collection companies can be. While debt collectors are permitted to contact borrowers by mail or telephone, they must abide by strict rules laid down by the Fair Debt Collection Practices Act. The 1977 law does not allow debt collectors to call borrowers before 8:00 a.m. or after 9:00 p.m., and collection companies are required to comply when requests to cease contact are made in writing.

The FDCPA allows debt collectors to apply reasonable pressure to secure payment of unpaid bills, but they are not permitted to lie, make threats or use abusive language. They are also prohibited from divulging personal financial information to family members or employers. When their collection efforts are unsuccessful, debt collectors may sell debts to a third party or file lawsuits against borrowers to recover money they are owed.

Tips for avoiding medical debt on credit cards

Median household income is on the rise, but medical costs are rising even faster. Many people end up putting these expenses on their credit cards. However, there are steps people in New Jersey can take to avoid medical debt.

First, people should research health insurance options. For some people, an insurance plan simply may not be affordable. Medicaid or other plans may be an option for some. For those who can afford health insurance and who are still on the fence, it is worth considering what the cost of remaining uninsured might be. Even healthy people can have catastrophic accidents or a sudden illness that can lead to high costs and even bankruptcy.

Rebuilding credit possible after filing for bankruptcy

Before people struggling with debt in New Jersey go forward with a bankruptcy, they typically want to know what the long-term effect of that action will be. Although bankruptcies present a negative item on people's credit histories, they still have opportunities to improve and maintain their credit scores as years go by.

Chapter 7 bankruptcies remain on credit histories for 10 years, but Chapter 13 bankruptcies drop off credit histories after only seven years. During either of these periods, people often see an immediate improvement in their actual credit scores in the first two years after filing. This happens because the legal action has resolved outstanding debts so that they no longer show as unpaid or past due.

Is bankruptcy a possible solution to your financial woes?

You'd likely have a difficult time finding an adult in New Jersey (or any other state) who has not, at some time in his or her life, experienced financial problems. If you currently count yourself among those who have seen better days regarding finances, you might be feeling a bit anxious or stressed as you enter the holiday season. It's helpful to keep in mind that most financial problems are not permanent.

The key to finding a strong solution is to first understand the underlying cause of your financial crisis and learn as much as you can about any and all viable options that are available to help you get things back on track. You might be surprised to learn that a solution is easier to obtain that you initially thought.

Why American household debt has increased significantly

According to a report from Clever Real Estate, Americans have twice as much credit card debt as they did in 2000. Households in New Jersey and throughout America have an average of $31,420 worth of debt, which is more than the average American salary in 1950. In that year, the typical American household had $533 in debt. Researchers say that credit cards are one of the three primary factors for such a significant increase over the past 70 years.

The report indicated that financial literacy and where people live play a role in how much they owe to lenders. In 2018, roughly 70% of borrowers didn't pay the full balance on their credit card debts, and they ended up paying $113 billion in interest and fees. The increase in credit card and other consumer debts has correlated with an increase in bankruptcy since the 1980s according to the report's authors.

How to enjoy the holidays without going broke

Traditionally, retailers in New Jersey and throughout the country offer deep discounts and other deals to shoppers in the days after the Thanksgiving holiday. While shoppers may enjoy hunting for deals, it is important that they create a plan prior to making any purchases. This can help them acquire quality gifts for their loved ones without going too deep into debt. Ideally, individuals will create a budget and spend time researching their purchases before completing any transactions.

To attract more customers, some retailers may match prices offered by the competition. Therefore, it may be a good idea to compare prices among several different companies before making a purchase whether online or in a physical store location. Those who are going to be shopping in stores or online during November and December should learn more about a retailer's return policy.

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