Life After Bankruptcy: What to Expect After Your Bankruptcy in New Jersey

If you are considering bankruptcy, you are not alone. 

This means that you are far from alone if you have considered filing bankruptcy, either personally or for your small business.

Although filing bankruptcy may have helped to solve your financial problems, you might still be left with more questions than answers.  This article aims to direct individuals and small business owners who might be left with one, over-arching question: what happens during life after bankruptcy?

The Moment You File Your Bankruptcy Petition

As soon as you or your lawyer files a petition for bankruptcy in a United States Bankruptcy Court, you have reached a milestone: not only have you just gotten yourself over the mental and emotional hurdles of choosing to file bankruptcy, but also you have a new frame of reference to address your past.   Upon the filing of the petition, all creditors actions against you are stayed and any lawsuits, levies, wage garnishments, etc. have to stop.

Any financial debts you have incurred prior to filing bankruptcy are called “pre-petition” debts. These are debts that can reasonably be expected to be discharged or modified during a Chapter 7 bankruptcy. For example, pre-petition debt may include medical bills, hospital bills, money judgments against you, credit card debt, personal loans, or even missed mortgage payments.

From the moment you file your petition in court, your pre-petition debt is collectively settled in your bankruptcy action, and placed in your “bankruptcy Estate.” Any debt that you incur after your bankruptcy filing date, however, is not included in your Estate.

Your bankruptcy Estate (all of your pre-petition debts and assets) is then handled by your court-appointed bankruptcy Trustee. A Trustee has many duties, which vary from case-to-case, but his or her duties include compiling your assets, rounding up your debtors, challenging a creditor’s claims, or objecting to a debt’s discharge.   The trustee’s duties, powers, and functions are dependent upon the type of Chapter in bankruptcy that you file.

During the Course of Your Bankruptcy Court Experience 

Depending on the type of Chapter you file, with an appointed Trustee to spearhead your bankruptcy proceeding, there is a little less weight on your shoulders. You no longer have to handle harassment from creditors; you no longer have to field phone calls (except from your lawyer); you no longer have to let that pre-petition debt drown you financially, mentally, physically, or emotionally.

Keep in mind, though, that any debt incurred after the date of filing bankruptcy (even if incurred during the court action) will not receive the benefits and protections of bankruptcy. Instead, this debt will survive your bankruptcy.  For this reason, it’s important to be cautious – but be courageous, too.

Can I Build Back My Credit After Bankruptcy?

After you file bankruptcy, your credit score will undoubtedly drop. Chances are, though, that your score was probably not too good to begin with. Yet, obtaining a loan is a double-edged sword: you cannot get a loan without good credit, and you cannot build your credit without having loans to pay back. 

Don’t let this discourage you though - most people begin to build back their credit within 1 to 2 years after filing their bankruptcy petition. This is because lenders know that these debtors would not be able to file bankruptcy again for at least 8 years. In other words, people who have recently filed bankruptcy are much more likely to pay back their loans in the future (or at least for the next 8 years).  Think about it – if you were a lender, would you rather loan money to the person who has not filed bankruptcy, yet has $10,000 in debt, or the person who recently filed bankruptcy, but has made timely payments on all loans for the last 2 years?

You can even potentially claim a new home after the bankruptcy process. Filing bankruptcy can also relieve you of your crippling student loan debt. 

As such, it is important that you keep a cautious yet courageous attitude and participate in our consumer society to build back your credit – and your confidence.

Avoiding These Common Mistakes After Bankruptcy

One of the biggest benefits that bankruptcy offers is its ability to set a “clean slate” for you. Essentially, you are able to manage your future debts and assets – including bank accounts – without the mess of collections proceedings.

This protection is key to building back your financial health, because it allows you to save money and budget. Although that might sound obvious, it’s much more difficult to attain when you are in the midst of thousands of dollars in debt. Think big, budget small – if you are able to start from a clean slate, managing your money from the foundation is possible and highly recommended.  

Be Confident, Yet Ask for Help

How to Ask for Professional Help from a NJ Bankruptcy Attorney

In the grand scheme of things, filing for bankruptcy in New Jersey may be one of the most beneficial decisions you make in your life. It certainly comes with its downfalls – however, if you are stressed out and bottomed out in debt, rest assured that there is indeed life after bankruptcy. Ask your New Jersey lawyer today if you are considering bankruptcy or want to learn more about your options.