When debt becomes overwhelming, individuals in New Jersey should understand that they have real options to address their financial problems. In some cases, personal bankruptcy might be their best option. The decision to file for bankruptcy is never an easy one to make. Although the process could result in debt relief, those choosing this method to take care of all or most of their debt should understand all the steps involved in the process so they can have a full picture of their situation and how it could impact them in the future.
Dealing with debt and struggling with debt are very different things. Residents in New Jersey often utilize credit cards for various reasons, but if an individual fails to use them rationally, this could lead to serious financial problems. While using credit cards is a convenient and often safe way to make purchases, it is also a payment method that could lead to bad habits and even serious financial problems.
It is not uncommon for residents in New Jersey and other states across the nation to obtain a loan to help fund a major purchase. Whether it is a home, a vehicle, their education or a business venture, a loan is very helpful. Although useful, these loans could be considered a major debt and could lead to financial troubles if the individual does not take proper actions to guard against such liabilities. Even when an individual takes the necessary steps to protect themselves, financial problems, such as unemployment, could occur. This could cause the individual to consider filing for bankruptcy.
Co-Signing a Loan
When it comes to obtaining a loan, many seek a co-signer to ensure they obtain the loan. This could lead to some concerns for the co-signer, especially if the owner of the loan decides to file for personal bankruptcy. For many co-signers, they question whether any protections will be extended to them if the holder of the loan they co-signed for files for bankruptcy.
Many people who have filed a bankruptcy may be surprised to receive solicitation during their bankruptcy for new credit cards. They may think that because they filed a bankruptcy, they will have difficult time obtaining any type of credit.
Credit Cards and Chapter 7 Bankruptcy
If you have filed a Chapter 7, you may find it surprisingly easy to apply for some credit cards. They may have a restricted balance and may charge very high interest rates, but then may be available.
People often worry when they are considering bankruptcy that their credit score will be damaged. The debate typically focuses whether filing for bankruptcy will cause more damage than a debt settlement agreement.
With a Chapter 7, where you obtain a discharge for most of your debts and repay nothing, the bankruptcy will remain on your credit report for 10 years.
A Chapter 13 bankruptcy, where you repay a portion of your debts and receive a discharge for the remaining amount, will be reported for seven years, and affect your credit score for that length of time. A debt settlement will also be reported for seven years.
People throughout New Jersey have probably seen reports that medical debt is the leading cause of bankruptcy in the United States. In fact, the Federal Reserve reported that last year two out of every five Americans have received a lower credit score because of unpaid medical bills, and nearly one out of every six credit reports lists a medical collection debt.
A favorable credit score will help you secure credit and help to ensure that interest rates and fees tied to that credit are low. As a result, it is important to maintain a positive credit score when possible and to consciously rebuild it if it has dropped due to bankruptcy or some other debt-related issue. Unfortunately, some dips in consumer credit occur due to no fault on the part of the consumer. Scores containing errors inevitably have a dramatic impact on your credit.
We recently discussed some ways in which filing for bankruptcy will affect your future financial stability. One inevitable consequence of bankruptcy is that it temporarily decreases your credit score. However, this negative impact on your credit rating can absolutely be only temporary in nature, provided that you take steps to improve your score over time.
Prior to filing consumer bankruptcy you should obtain a copy of your credit report. Our New Jersey Bankruptcy Firm Department's practice is to request a list of creditors and then also order a credit report on the client to make sure all creditors are being included.
How Will Filing Bankruptcy Affect My Credit?
Inevitably every bankruptcy client that I meet with asks how filing for bankruptcy will affect their credit and if they can keep a credit card open after filing. A petition for bankruptcy will be reported to the credit bureaus and - just like any other derogatory credit history - will remain on the credit report for several years. This is not to say that a person who has filed for bankruptcy will not be able to get new credit - in fact, many people are offered new credit cards very soon after the bankruptcy is over.