Personal bankruptcy filings have dropped by 50-percent over the past six years. There are a number of reasons for this decline in bankruptcy filings. Unemployment is down which is typically a factor. In addition, according to ABC, (Margot Kim http://abc30.com/finance/medical-bankruptcies/2252646/ ), outstanding medical debt has dropped as a result of the Affordable Care Act. Pre existing coverage requirements and limits on caps are two of the provisions that have contributed. The article also mentions the 'Bankruptcy Abuse Prevention and Consumer Protection Act' passed in 2005 as part of the explanation. However, I do not agree since the number of bankruptcies filed increased for a number of years after its passage and for the most part it has not prevented very many filings. Bankruptcy filings have historically been cyclical and with the next swing in the economy undoubtedly filings will rise again.
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 credit card debt is one reason many people file for chapter 7 personal bankruptcy. A drop in income, a divorce, or illness can cause credit card debt to accumulate. Bankruptcy is a good option in eliminating this credit card debt. A trustee compares your income to expenses and reviews the equity to your assets. A trustee will order the liquidation of your assets to repay your debt only if the equity in assets exceeds allowed exemptions. In most chapter 7 individuals keep all of their assets. Bankruptcy exemptions vary by state. If a married couple owns a home in Cherry Hill New Jersey or Voorhees New Jersey and the home is worth $300,000 and there is a mortgage of $260,000, because each can exempt approximately $24,000 worth of equity in their home for bankruptcy purposes they would be able to protect the equity in their home and they would be in a position to file a Chapter 7. They could eliminate their credit card debt. If there is disposable income this would be used to repay creditors. Chapter 7 is often a good option to help get a fresh start. If you are struggling financial, you should consult with an experienced attorney about your options.
Bankruptcy filings have dropped in the last year nationwide as well as locally in Camden County NJ, Burlington County NJ, and Philadelphia County PA. However, as can be seen from the statistics published by the US Courts, there are still a significant number of bankruptcies being filed. 25,763 were filed in NJ of which 2285 were filed in Camden County and 1686 were filed in Burlington County. Statewide that is an average of over 70 bankruptcies per day. In the Eastern District of Pennsylvania 9,533 were filed last year with 2,817 being filed in Philadelphia PA. Set forth below is the breakdown of the different types of bankruptcies filed, and whether they were personal bankruptcies or business bankruptcies.
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 harassing 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.
Credit card debt can be eliminated in chapter 7 personal bankruptcy in many instances. Often credit card debt can become overwhelming because of a drop in income, because of a divorce, because of an illness or other reasons. Bankruptcy is often the best option in eliminating this credit card debt. In a bankruptcy, the court is going to consider your income compared to your expenses as well as the equity in your assets. However, even if you have some equity under bankruptcy law there are exemptions that are allowed. The exemptions in New Jersey and Pennsylvania may differ from states where various state exemptions are added to the Federal exemptions. By way of example, if a married couple owns a home in, say, Cherry Hill New Jersey or Voorhees New Jersey and the home is worth $300,000 and there is a mortgage of $260,000, because they can each exempt approximately $24,000 worth of equity in their home for bankruptcy purposes they would be able to protect the equity in their home and they would be in a position to file a Chapter 7 and eliminate their credit card debt. As indicated, income and expenses would also be taken into account to determine whether there is disposable income. An experienced bankruptcy attorney can assist in determining whether Chapter 7 is the best option.
What do you do if you filed a Chapter 7 personal bankruptcy and received your discharge and then realized you forgot to include a creditor. Prior to 1996 the debtor was required to file a motion to reopen the bankruptcy, pay a court fee, then file an amendment to add the creditor. There was also a court fee involved in filing the amendment. However, in 1996, the Third Circuit Court of Appeals in Judd v. Wolff, in the appeal of a New Jersey case, concluded that in a no asset Chapter 7 bankruptcy case it would be a waste of the court's time to reopen a case to add a creditor when there is not going to be a distribution anyway. As a result, as long as the creditor has not been intentionally omitted from the bankruptcy schedules, the debt is eliminated even if the creditor was forgotten. Often a debtor will have their attorney write a letter to the creditor, citing Judd v. Wolf and advise of the impact of the case and the fact that the debt is discharged. Of course it is always better to list all creditors when the initial bankruptcy is filed. A credit report is a helpful tool in making sure all creditors are listed. However, if a creditor is forgotten, it can still be addressed.
As previously discussed in my Blog at bravermanlaw.com in certain hardship cases student loans can be eliminated. However, what about those circumstances where the student loan cannot be eliminated. Is there anything that can be done in bankruptcy that can help with limiting the student loan payments? The answer is yes. A Chapter 13 can be used to provide some relief. Chapter 13 is a form of bankruptcy where payments are made over a period of 3 to 5 years. It is often used to pay mortgage arrears over 5 years to allow the borrower to save their home. However, what about a situation where someone has unsecured debt, such as $20,000.00 in credit cards, and $80,000.00 in student loans, the student loan lender is demanding $600.00 per month and your salary cannot yet support that kind of payment. One option would be to file chapter 7 personal bankruptcy which would eliminate the credit cards but not help with the student loan payment. Another option is to file Chapter 13. Lets say you live in Northeast Philadelphia, your budget, when you don't count the student loans or the credit cards, would allow you to pay $200 per month for 5 years. In the Chapter 13, you stop paying all of the creditors and you pay $200.00 per month to the trustee which would total $12,000.00. After certain trustee deductions, your creditors, totaling $100,000.00 ($20,000.00 credit cards and $80,000.00 student loans) would share about $10,000 or roughly 10% of their claim. At the end of 5 years, the other 90% owed to the credit cards would be eliminated. As for the student loan, once the bankruptcy is over, you would then be obligated to continue making payments on the student loan. However, you will have made a manageable payment for 5 years with the hope that you are now in a better position to pay the student loan.
During the holiday season, consumers regularly pull out their credit cards to pay for their purchases. After the holiday season is over, those same consumers will be forced to face the reality of their spending. Overspending during the holidays often pushes residents in New Jersey, and all across the United States, into a debt situation from with they cannot escape. Fortunately, personal bankruptcy is an option for those who are facing insurmountable debt, but, as there are limits on how often bankruptcy can filed, it is important for consumers to know what to do after their bankruptcies are discharged.
Many people file for bankruptcy protection as a responsible means of getting their financial lives back on track. In New Jersey and across the United States, over 1.1 businesses and individuals filed for personal bankruptcy in 2013. The good news is that filing for protection is often successful. By making some proactive steps, bouncing back after filing may be faster than expected.