New Jersey has one of the highest costs of living in the country, and that cost keeps going up. Even in normal times, it can be hard to keep up with your expenses. And now, with millions out of work, it’s no surprise that so many people are drowning in debt. Fortunately, the law provides a way to clear debts and get a fresh start: bankruptcy. If you’re thinking of declaring bankruptcy, you should talk to an attorney to go over your options and determine what the best way forward is for you.
What is bankruptcy?
Bankruptcy is a legal procedure designed to give individuals, married couples, and businesses a fresh start by allowing them to discharge their debts. The law recognizes six types of bankruptcy, called chapters, but Chapter 7 and Chapter 13 are the ones used most commonly by individuals and couples while Chapter 11 is the one most commonly used by businesses.
In a Chapter 7 bankruptcy, most of your assets are handed over to a court-appointed trustee, who then sells them and divides the proceeds among the person’s creditors. After that, your debts are wiped out. A Chapter 13 bankruptcy allows you to put together a repayment plan. Under Chapter 13, you pay any income you earn above what you need to support yourself and your family toward your creditors for 3-5 years, and then your debts are discharged. This option lets you keep your property.
Chapter 11 is similar to Chapter 13, but it’s normally used by businesses instead of individuals or couples.
What are the pros and cons of bankruptcy?
Bankruptcy can be a good option if your debts are much more than you can pay, but it has its downsides. Not everyone can file for bankruptcy; if you have enough money to pay your debts, you can’t file. If you’ve filed in the last seven years, you can’t file again. Even if you can file, bankruptcy can have a negative impact on your credit score. In some cases, you might be better off negotiating your debts with your creditors instead. Finally, some debts, like student loans and luxury purchases, can’t be discharged in bankruptcy.
Downsides of filing for bankruptcy
- Can’t file if you have enough to pay
- Can’t file twice in seven years
- Bankruptcy hurts your credit score
- Some debts can’t be discharged
What should I do if I have more debt than I can handle?
If you have more debt than you can handle, contact Rosenblum Law today for a free consultation. Our experienced attorneys can advise you on whether you should file for bankruptcy or try a different strategy, and figure out how and when to file for bankruptcy if necessary. The bankruptcy code is complicated, so having a good attorney to advise you is critical to keeping as much of your income and assets as possible.