New Jersey Bankruptcy Law Blog

Things to do when your financial train starts to derail

Whether you're married, single, a household income earner or not, if you're an adult living in New Jersey, you've likely encountered financial challenges at some point in your life. What prompted those challenges and how you reacted to them may compound or alleviate stress. Some people panic when financial times get tough, and they wind up making matters worse.

It's understandable you might feel overwhelmed if you're having trouble paying bills and making ends meet, but it's best to try to remain calm and explore logical options to find a solution to the problem. Sometimes it's an easy fix; other times, a particular situation may warrant seeking serious debt relief support to help you get out of a hole and restore financial stability.

Boomers and bankruptcy

It is often assumed that by the time a person retires, they may be passed the point in life where they would be under the pressures of serious debt. That, however, is not always true. Many seniors in New Jersey and around the country continue to experience serious financial challenges. A new report has even found that these challenges are forcing a large number of people over the age of 65 to file for bankruptcy.

As reported by Insider, the report was based on data from the Consumer Bankruptcy Project and found that the rate of personal bankruptcy filings among people 65 and older has increased by as much as 300% since 1991. It did not break that out by the type of bankruptcy, Chapter 7 or Chapter 13. Consumers in this age group are also prone to carry levels of debt that exceed those of their predecessors.

Should you reaffirm your loan during bankruptcy?

If you feel overwhelmed with medical expenses and credit card debt, you are not alone. and are struggling to keep up with your monthly mortgage payment, you are not alone. Many Amercians struggle to keep up with their monthly mortgage payment, while juggling other expenses and find it difficult to make ends meet. Bankruptcy allows you to discharge these debts and start over again with a clean financial slate. Chapter 7, otherwise known as liquidation bankruptcy, allows you to part with most of your loan obligations. Yet, there may be items that you do not wish to part with once your bankruptcy is finalized. 

Debt reaffirmation allows you to keep certain property and continue to pay on the loan, even after the bankruptcy is approved and other debt is discharged. For example, if you are paying on your auto loan and wish to keep your car once the bankruptcy is over, debt reaffirmation allows you to renegotiate the loan with the lender and continue to make payments. Often times, the bank will work with you by lowering your interest rate or reducing your monthly payments in an attempt to help you keep your loan, and your property. In most cases, it is advantageous for the lender to do this and have you continue making loan payments than declaring bankruptcy on the item. 

What should I know about credit counseling?

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

The various ways issues with debt could be affecting your life

Dealing with the strain of overwhelming financial challenges can be a harrowing process, and issues with debt can affect your future in various ways. If you are struggling under the weight of debt, you may encounter a multitude of hardships every day, some of which could have an adverse impact on your quality of life.

Should you encounter a scenario in which you begin to see prolonged periods of financial strain, you may begin to experience the level of stress that can accompany a similar life circumstance. However, you might not fully understand just how significant an impact your debt could have on your goals in life.

Is your medical debt pushing you toward bankruptcy?

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. 

Will Chapter 7 discharge recent credit card debt?

When you file Chapter 7 bankruptcy in New Jersey, you expect that the court will discharge virtually all of your consumer debt, including your credit card debt. For the most part this is true. However, you need to be aware that it is not necessarily true when it comes to your recent credit card debt.

Bloomberg News advises that Section 523(a)(2)(C)(I) of the Bankruptcy Code contains a presumption against discharging credit card debt that you assume within 90 days of the date on which you file bankruptcy and that amounts to $675 or more of purchases for consumer goods.

What is the meeting of creditors?

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. 

Which millennial financial issues concern you most?

Being one of many residents in New Jersey who are in their 30s, you likely lead a busy lifestyle that has included financial challenges at some point along the way. Perhaps striving to stay afloat financially is a constant issue in your life. If so, you're definitely not alone in the struggle.

Whether you're single or married, have children or not, and what you do for a living can all have significant impacts on your financial state at any given time. Saving money is typically quite challenging nowadays, and many millennials run into serious financial problems. This is why it's always a good idea to have a support plan in mind if your financial train suddenly derails.

Should you apply for a credit card after Chapter 13?

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. 

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