Hackettstown New Jersey Legal Blog

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. 

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.

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.