Personal Bankruptcy Archives

Reestablishing Credit after Bankruptcy

Each year a number of people file for bankruptcy protection as a responsible means of getting their financial lives back on track. Across the United States, over eight hundred thousand individuals filed for personal bankruptcy in 2015 and in New Jersey that number was around 25,000. Typically a bankruptcy will reduce or eliminate debt. By also taking some proactive steps, recovering after filing may be faster than expected.

Eliminating Judgement Liens After NJ Bankruptcy

Sometimes a bankruptcy is filed after a judgement has already been entered. If the debtor owns real estate then the judgement will be a lien on the real estate. If there is not excess equity and the equity is claimed as exempt, then the judgement can be voided during the bankruptcy. But what if no action is taken to void the lien during the bankruptcy. That is where NJSA 2A:16-49.1 comes into play.

Filing A Bankruptcy Should Be Considered When...

Deciding to file a bankruptcy is a difficult decision for people for several reasons. First, many people hope to never have to file a bankruptcy. But it is also a difficult decision because people are not sure if they have reached the stage where it makes sense. Are there warning signs? There are. Here are some of the warning signs for when a bankruptcy should be considered. You never pay more than the minimum on credit cards or even take cash advances just to be able to meet your monthly obligations. You have depleted savings and are now withdrawing from retirement accounts. You are borrowing money from friends and relatives or resorting to payday loans. You are missing some payments and getting collection calls. Your car is about to be repossessed. You claim extra dependents and as a result you owe taxes to the state you live in such as the State of New Jersey or the Commonwealth of Pennsylvania from your tax return and have to try and get a payment plan to pay the tax. Any one of these problems are grounds to at least consult with a bankruptcy attorney to see whether it makes sense in your particular circumstances. 

Qualifying Military Service and Bankruptcy Means Test

As a general rule, individuals filing a bankruptcy in New Jersey, Pennsylvania and other states must complete and file a "Statement of Your Current Monthly Income," referred to as the means test. Under this test, if you make more than the average family your size in your state, then limits may be imposed on your expenses which could result in you having to pay some or all of your debt back in a Chapter 13. The income limits in Pennsylvania are lower than in New Jersey. However, if you are in the military you may be exempt from this requirement.

Bankruptcy the First Step in Rebuilding Credit

When people reach the point of contacting a bankruptcy attorney, often their circumstances include not only overwhelming debt, but low credit scores from multiple defaults and late payments. The bankruptcy will not only address the debt issue, but by eliminating the debt, begin the process of building your credit score.

Bankruptcy Exemptions In New Jersey and Pennsylvania

Bankruptcy exemptions are used to protect assets when a bankruptcy is filed. For example, a Chapter 7 bankruptcy is also called a liquidation but the reality is assets are only liquidated if there is equity in the assets and the assets are not exempt. New Jersey and Pennsylvania bankruptcies rely primarily upon the federal exemptions. As of April 1, 2016 those exemptions have increased. For example if an individual files a bankruptcy and they own a home the exemption in their residence is $23,675. This is an increase from the $22,975 utilized prior to April 1, 2016. By way of example, if an individual owns a home worth $200,000 and there is a mortgage for $180,000, for bankruptcy purposes there is no equity since the equity in the home can be exempted. As a result, a Chapter 7 bankruptcy can be filed and the home would not be liquidated. Exemptions also exist for other assets. The new exemption amounts as of April 1, 2016 utilized in New Jersey and Pennsylvania for federal exemptions include $3775 for equity in a car, $12,625 for household goods and furnishings, and $1600 for jewelry. In addition to the exemptions being increased, other amounts also increased such as the maximum amount of unsecured debt in a Chapter 13 which increased from $383,175 to $394,725.

Advantages of Personal Bankruptcy Over Debt Settlement

While there are circumstances where debt settlement may make sense, in most circumstances personal bankruptcy has more  advantages. For example, in most chapter 7 bankruptcies, nothing is paid to unsecured creditors. In addition, individuals in New Jersey and Pennsylvania can use either federal exemptions or state exemptions to protect their assets, typically not losing any in the Chapter 7 Bankruptcy. With debt negotiation, there is still a payment made to the creditors even if they agree to reduce their claim. In addition, typically if a debt is compromised outside of bankruptcy, a tax liability can result. For example, if a credit card company accepts $4500.00 on a $10,000.00 claim, the company will issue a 1099c for the $5500.00 that they have forgiven and that will count as income. With bankruptcy harrassing letters and phone calls immediately stop. In many instances income taxes more than 3 years old can be eliminated in a bankruptcy. The bankruptcy is generally resolved quicker than debt negotiation and as a result you can begin to rebuild credit sooner. You should discuss with an experienced attorney each of these options to determine which makes the most sense for you. 

Stop Creditors from Harassing Relatives with Fair Debt Collection Practices Act

The Fair Debt Collection Practices Act can be used to stop or punish creditors and debt collectors from harrassing relatives and friends. Financial stuggles often make it impossible to keep up with credit cards and other bills. While bankruptcy often would help address the debt, sometimes individuals are not aware of this option or may feel they do not have enough debt to warrant bankruptcy. Typically harrassing letters and telephone calls from debt collectors will start. What happens when creditors start calling and harrassing your relatives about the debt with the hope that you will pay to stop those calls to your relatives. The Fair Debt Collection Practices Act (FDCPA) can be used to limit those contacts as well as punish the creditors for violations. Under the Act the creditor can contact and speak to the relative ONE time. They cannot leave a message. They can only ask for contact information like address or home phone number. They cannot ask for payment from the relative. If the contact goes beyond what is allowed, the creditor is in violation of the FDCPA.

Rebuilding Credit After Personal Bankruptcy

Rebuilding credit after filing a Chapter 7 or Chapter 13 personal bankruptcy and receiving a discharge is an important question often asked by individuals filing bankruptcy. Whether the individuals live in Cherry Hill New Jersey, Blackwood New Jersey, Mount Laurel New Jersey or any of the many cities and towns in the area, years ago when those individuals filed for bankruptcy it was much more difficult to build up credit. However, that has changed to a large degree. In fact often people file bankruptcy at a point where their credit score is low from a number of defaults and the mere filing of the bankruptcy itself can be a huge first step towards rebuilding credit. However, there are other important steps to take in reestablishing credit.
It is important to understand that credit reports are often inaccurate. Consequently a few months after receiving a bankruptcy discharge it is highly recommended that you get a credit report and confirm that it properly states your financial circumstances. Debts discharged in bankruptcy should be reflected in the credit report as having been discharged. Sometimes for whatever reason a credit card may reflect as still being open and in default. In that circumstance you would want to contact the credit reporting company and provide them a copy of your bankruptcy schedules showing that the creditor had been included in the bankruptcy and ask that they correct their credit report. Another way to build up credit is to apply for a credit card or retail card. While the individuals should certainly be cautious especially if bankruptcy was caused by credit card debt, having a credit card where it is used and paid off each month will help build up credit. In addition, opening up a bank account is a good way to help demonstrate you are responsible. Also, it is important to make sure all payments, whether it is utilities, rent or your new credit card, are timely paid.Following these simple steps can help to rebuild credit after bankruptcy in no time.

New Jersey "Strip Off" of Second Mortgages

As a general rule if there is a mortgage secured by your residence it must be paid. This would also include equity lines and lines of credit which are secured by second or third mortgages on your residence. However, there is an exception, at least when a Chapter 13 Bankruptcy is filed. If the amount owed on the first mortgage exceeds the value of the real estate, then the second mortgage can be eliminated and treated as an unsecured creditor. The rationale for this decision is that since there is no equity for the second mortgage to attach to, it is just an unsecured claim. Whether you reside in Cherry Hill New Jersey, Pennsauken New Jersey, Mount Laurel New Jersey or any other towns in New Jersey, if there is no equity in the property after the first mortgage, then a strip down can be accomplished in a Chapter 13 bankruptcy. As a result, when a Chapter 13 Bankruptcy is filed, upon completion of the case and entry of discharge, the second mortgage can be eliminated. The Supreme Court of the United States has agreed to hear a case involving a strip down and a Chapter 7 Bankruptcy in Florida. If the Supreme Court determines that in fact a second mortgage can be eliminated in a Chapter 7, this will be a great option to get a fresh start. However, regardless of which way the Supreme Court sides, the ability to eliminate a second mortgage in a Chapter 13 is still a valuable tool in a bankruptcy attorney tool belt.


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