Hackettstown New Jersey Legal Blog

Whether you have recently filed for bankruptcy or you have already had your bankruptcy discharged, you may be feeling the effects of bankruptcy on your credit score. There are methods you can take to rebuild your credit and get a fresh financial start. If credit card debt was a contributing factor to your initial need to file for bankruptcy, you are not alone. Yet, even after your bankruptcy is discharged, you may get invitations from credit card companies as a way to rebuild your credit and get back on your feet. It is important to stay on the alert for subprime credit card companies, as they can cause you to become stuck in debt once again.

Subprime credit card companies offer credit to people who have credit scores below 600, then charge inflated interest rates and fees as a way to protect themselves against a higher default rate. You may think you are improving your credit score, while you may be getting sucked into an endless cycle of maintenance fees, interest, annual fees and processing fees. Secured credit card companies, on the other hand, rely on interest to provide their revenue.

A common misconception about many in Hackettstown may be that the struggles that force people into bankruptcy can be easily avoided through proper resource management. If that is what most believe about individuals, then imagine how much more mismanagement is attributed to businesses that are forced to seek bankruptcy protection. The truth is that many of the issues that result in people and companies considering bankruptcy are unforeseen, and the decision to take such action is only motivated by avoiding further financial difficulties (as opposed to simply getting off the hook for having to pay back their debts). 

This notion is well-demonstrated in the recent bankruptcy filing of a regional telecommunications company based in Arkansas. The company started providing phone and internet services to rural clients. It eventually expanded to offer more information services in other markets, and even was recognized as a Fortune 500 company. Yet it was the decision to spin off its fiber-optic network assets into a Real Estate Investment Trust that led to its financial struggles. Some of its bondholders sued, claiming the move was a violation of their bond agreements. The court ruled in favor of the bondholders, leaving the company facing a massive civil liability. Its decision to file for Chapter 11 bankruptcy was motivated by the company's desire to continue to provide its services uninterrupted and without losing any of its resources as it works to reorganize its management structure. 

Debt can often seem like a form of bondage to those in Hackettstown who suffer from it. Missed payments, late fees and other penalties can quickly add up to the point of one facing a seemingly insurmountable financial obstacle. In such cases, personal bankruptcy offers protection from further collection efforts, thus halting the growing liabilities compounding one's troubles. Chapter 7 bankruptcy also offers the added advantage of allowing certain debts to be discharged. It is for this reason why this particular form of bankruptcy consistently ranks as the most popular, with the American Bankruptcy Institute reporting it comprising over 67 percent of all non-business bankruptcy filings from the second quarter of the 2018 fiscal year. 

According to the website for the Federal Judiciary, when one first petitions the court to initiate a Chapter 7 case, they must include the following: 

• A detailed breakdown of both their assets and debts
• A record of their current income and expenditures 
• A statement explaining their current financial affairs
• Any unexpired leases or executory contracts they are involved with

For a company that is struggling with debt, bankruptcy may be a viable option in helping it get past such challenges and re-establishing itself in Hackettstown. Yet the fact that some companies are able to file bankruptcy and still remain in operation may cause some to wonder whether said businesses are simply taking advantage of bankruptcy laws to get out from under their debts. What those who think this may not know is that the rules governing a Chapter 11 (which allows businesses to reorganize themselves at the approval of their creditors) are very strict in how a business' debts are discharged, even going so far as to mandate many still be paid. 

This fact is evidenced in a recent Chapter 11 filing initiated by a Catholic diocese in Montana. The diocese is currently facing litigation stemming from over 80 reported cases of sexual abuse that were perpetrated by clergy members primarily between 1950 and 1980. In this case, the victims seeking compensation represent one of the diocese's creditors. The state's federal bankruptcy court recently announced that the diocese must pay out $20 million to these victims. The bulk of the settlement will be generated through the sale of a number of the diocese's properties, while insurance is expected to cover the remaining portion.