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The emotional benefits of Chapter 11

Those who successfully complete the Chapter 11 process may experience a number of financial benefits, getting rid of their debt and welcoming new opportunities. However, the emotional advantages of Chapter 11 should not be overlooked either. People who are buried in debt may be facing incredibly difficult emotional challenges due to their circumstances, including depression, unbearable anxiety and so on. Moreover, these emotions can get in the way of their sleep and disrupt other facets of their lives (such as their job performance and relationships). By getting rid of debt through Chapter 11, some people are able to leave these emotional hurdles behind.

The bankruptcy process can generate negative emotions as well, especially stress and uncertainty. However, once the process is complete, those who took the right approach and were able to secure a favorable outcome may be able to leave adverse emotions behind. After getting rid of debt via Chapter 11, they may notice improvements in their relationships as well as their careers and personal interests. It is imperative for people who are going through these tough emotions to tackle their problems promptly and before their lives unravel in other ways.

Can student loan debt be discharged via bankruptcy?

Bankruptcy can help a person clear outstanding debt to work towards a brighter financial future. Most people claim that student loan debt, which is a burden on the finances of many graduates well into adulthood, can't be discharged via bankruptcy. While this is generally the case, Nerdwallet explains what steps you can take to get a handle on massive student loan debt. 

For many people who file for bankruptcy, getting student loan debt discharged is a separate process. This entails participating in an adversary proceeding, which is a type of lawsuit that exists outside the initial bankruptcy process. You or your legal team will file a complaint that requests the judge considers forgiving student loan debt. In this case, you must prove that you're faced with some type of financial hardship that makes student loan repayment all but impossible. 

Securing a mortgage after a Chapter 7 bankruptcy

Hackettstown residents who feel as though they are drowning in debt may find a Chapter 7 bankruptcy to be their best option at getting back to enjoying a comfortable financial position. Indeed, the benefit of having certain debts discharged is likely one of the primary reason why Chapter 7 is the most popular form of personal bankruptcy (as evidenced by the fact that the American Bankruptcy Institute reports that an average of over 62 percent of all cases in 2018 were filed under this chapter). Yet one question that those considering a Chapter 7 bankruptcy should ponder is how long such an action might prevent them from securing a traditional loan again (specifically a mortgage). 

While a personal bankruptcy can help one struggling with debt, it also has a significant impact on their credit rating. Lenders may be hesitant to loan them money out of fear that their recent financial struggles make it more likely that they might default on a loan. There are not, however, any set regulations that prevent a lender from offering a mortgage to one who has recently filed for bankruptcy. If a bankruptcy filer has a large enough down payment to offset any risk, they might even qualify for a mortgage soon after their filing date. 

What is a meeting of creditors?

If you are plagued by medical expenses, bills, credit card debt, mortgages and other expenses, you may feel overwhelmed by the monthly payments required just to stay afloat. It may get to the point where you are unable to keep your head above water, and the chances of paying off your expenses may seem impossible. Chapter 7 bankruptcy allows people in this situation to wipe away much of their debt and start again with a clean financial slate.

Once you have filed your Chapter 7 bankruptcy paperwork,you must attend a meeting of creditors before the trustee who is assigned to the case. This meeting will take place anywhere between 21 and 40 days after you have filed your paperwork. Creditors are given the date of the meeting and are invited to attend. During the meeting, the trustee and creditors in attendance may ask questions regarding your case. The trustee will ensure you understand the following:

  •      How the bankruptcy will affect your credit history
  •      All the chapters of bankruptcy that are available to you
  •      How to reaffirm a debt
  •      The effect a discharge will have on your finances

What can bankruptcy’s automatic stay protect you against?

As a New Jersey resident who has watched your debt spiral out of control, you may be feeling the pressure from your creditors as they attempt to collect what you owe them. Often, this seemingly constant barrage of phone calls can prove immensely stressful, but you may be able to put a stop to the communications by filing for bankruptcy. How?

According to LendingTree, once you begin bankruptcy proceedings, an automatic stay takes effect, and during this time, most of your creditors may no longer legally contact you in an attempt to collect on your debts. While the automatic stay period does not last forever (in most Chapter 7 bankruptcy cases, it last somewhere between 90 and 120 days) it can provide you with a period of relief while you work through your bankruptcy case and attempt to get a better handle on your finances.

Understanding the role of a creditors committee

For businesses in Hackettstown who are experiencing financial difficulties, a Chapter 11 bankruptcy offers the chance to halt the collection activities that have been driving it deeper into debt and formulate a strategy that will allow it to remain open. When discussing Chapter 11 cases, much attention is paid to the debtor in possession and the court-appointed trustee (if there is one). Yet while everyone assumes that their presence is recognized in a bankruptcy case, few details are often given about the creditors involved. Who looks out for their interests? 

The answer to that question depends on the unique circumstances of each individual case. If a debtor filing for Chapter 11 bankruptcy only has a handful of creditors, then dealings between the two sides can often be easily managed. Yet when several different creditors are involved, the court may appoint a creditors committee. 

Can credit cards help rebuild your credit post-bankruptcy?

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.

What bankruptcy mistakes should I avoid?

Filing for bankruptcy is a good option for people faced with exorbitant debt. Whether filing for chapter 7 or chapter 13, you must adhere to the specific laws regarding eligibility and your financial actions. Debt.org explains some of the common mistakes people make when filing, and what you can do to avoid them.

Relying heavily on your credit card

Losing lawsuit forces telecommunications company into bankruptcy

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. 

Medical expenses can cause overwhelming debt

For people who have recently seen the doctor, been sent to the emergency room or have had a medical procedure performed, the recovery process may entail more than just physical healing. It may take even longer for patients to heal financially from the medical expenses and debt accrued as a result of their medical treatment. In fact, a CNBC report announced that medical expenses were the number one cause for bankruptcies in the United States. Furthermore, it found that people who carry healthcare insurance were slightly more likely to declare bankruptcy than those who did not have medical insurance.

There are a few reasons why these medical expenses can become overwhelming and bury those who are responsible for paying them. Many people who carry insurance still have high deductibles, monthly premiums, copays and co-insurance expenses. For example, if a patient was to receive medical services for a broken arm, the patient may be held liable for most of that amount if the money is going toward a yearly deductible. In addition to paying toward the deductible, the insured must still pay a monthly premium to carry the insurance. Once the deductible is met, people may still owe a co-pay or be responsible for paying a portion of the expenses, depending on their plan.

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