You can build your credit after bankruptcy. Sometimes clients will come into my office in Cherry Hill, NJ and express concern that if they file bankruptcy they will not have credit again for 10 years. That is not accurate. In fact many times credit scores of clients are already low from missed payments and filing will actually lead to improvement in credit score. If a Chapter 7 Bankruptcy is filed, approximately three months later the individual receives their discharge. If they own a vehicle with payments and they have reaffirmed the debt, they are already on their way to reestablishing credit since their credit report will show the vehicle payments. After the bankruptcy is completed, often in less than one year an opportunity to obtain a credit card will arise. While avoiding credit cards is a good policy, it may be helpful to get a credit card with a low limit, use it for a small purchase like gasoline or groceries, and pay it off each month. At that point, your defaulted unsecured debt will have been eliminated and the current status on car payments and a credit card will have you well on your way to reestablishing credit.
Pro: Bankruptcy can often be used to eliminate or significantly reduce unsecured debt.
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.
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.
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.
Credit card debt can become overwhelming. Often in a desperate effort to avoid bankruptcy, individuals will borrow against or withdraw their pension or retirement savings to pay down at least some of the debt. In certain circumstances, that can help. But often, the pension loan is just a short term remedy and a bankruptcy has to be filed anyway. Except now, the individuals have reduced their retirement savings. Initially it should be noted that retirement savings are typically protected in a personal bankruptcy meaning that asset will not be lost or liquidated during the bankruptcy. If the unsecured debt is not significant and the pension loan can payoff the debt, and the loan payment is less than was being paid, the pension loan could work. However, if credit cards remain and now the individuals are paying credit card debt and a pension loan, then it may be that bankruptcy from the start may have been a better solution. Certainly before borrowing further, it would make sense to schedule a free consultation with an experienced attorney to consider the advantages and disadvantages of each option.