New Jersey Bankruptcy Law Blog

You may want to pursue other options before resorting to bankruptcy, or the court may have instructed you to undergo credit counseling as part of your debt restructuring plan. For whatever reason, you and other New Jersey residents with significant financial problems may want to find out how credit counseling works and how it may improve your situation.

As NerdWallet explains, there are numerous reputable credit counseling companies that are dedicated to giving you tools to get out of financial distress. Those that are nonprofit often have better services than for-profit credit repair companies, which are in the business to make money and sell numerous services and might not have your best interests in mind. Generally, credit counseling companies offer the following services:

• Assisting clients with a debt management plan, which assists them in consolidating their debts and lowering interest rates
• Teaching general budgeting skills, including reviewing clients’ income, expenses and goals
• Informing clients on their bankruptcy options, as well as how each option works and whether it may be beneficial to them
• Counseling clients on their housing challenges, whether they are renting, hoping to be approved for a mortgage or facing foreclosure

If you are like many other Americans, you may have medical bills that you are struggling to pay. In fact, more than two million people in the United States are overwhelmed with medical debt and many consider bankruptcy as a way to get out of the mess. Medical bills can deplete savings accounts, cause credit card debt and make it hard for you to pay your mortgage or buy everyday items you need to get through life. What is the root cause of these unruly medical expenses?

Even after paying hefty monthly premiums, you may be made to pay a high deductible, copays and a percentage of the service being performed. Some high deductible plans require the member to pay $10,000 before full benefits kick in and even then, you may have to pay a good percentage of the cost. All of this adds up, and for some people, it becomes more than they can bear. 

When you file for Chapter 7 bankruptcy, there are a host of issues that may be running through your mind. You may feel overwhelmed while attempting to complete all of the tasks required to file for bankruptcy, such as completing a credit counseling course and filling out all of the bankruptcy documents. Once you have completed the paperwork, the court will schedule a meeting of creditors. 

During the meeting of creditors, all of the creditors who are owed money are invited to speak out regarding your debt. The meeting is overseen by the trustee who is appointed to your case. All of the creditors listed on your bankruptcy documents are invited to attend the meeting, which must be held within 60 days of filing your paperwork. Once you arrive at the meeting, you are put under oath. The trustee may then begin asking questions regarding your current property and finances. It is the job of the trustee to see if you have any property that may be sold for funds that will be distributed to creditors. Creditors are also given a chance to speak at the meeting. 

Once you have filed for Chapter 13 bankruptcy, you may feel as though you are getting back on track with your finances. Chapter 13 helps debtors set up a payment plan to repay their debt over a certain period of time. In some cases, the bankruptcy decreases the amount of debt you owe through negotiations with creditors. A bankrupcy, however, can affect your credit score and may make it difficult to apply for loans or qualify for other financial items as well. Some people may turn to using a credit card as a way to rebuild their credit once their bankruptcy has been discharged. You should be extremely careful when doing this, as some credit cards are not designed to help you financially. 

Subprime credit cards market to people who have low credit scores, and typically do not qualify for prime credit cards. Yet, these cards often come with higher interest rates and you may end up struggling to repay your balance. According to Nerdwallet, there are more than 48 million people in American that have credit scores below 600. In order to provide credit to these people with lower credit scores, subprime card companies add other fees, rates and interests, such as maintenance fees, processing fees, annual fee and processing fees, on to the balance to compensate for the risk.