How will Bankruptcy affect me in NJ?
What is bankruptcy exactly?
Bankruptcy is a process designed by the federal courts that help consumers and businesses to remove or repay debt while under the protection of the bankruptcy court. There are two types of bankruptcies that an entity can file for. Chapter 7 bankruptcies are where all debt you owe is eliminated. This is also known as liquidation. Chapter 13 or reorganization, as it’s commonly referred as, is where you file with the bankruptcy court on how you can repay the debt owed to creditors. Depending on your personal situation, you will be required to pay back some of the debts in full while others may be paid back partially or not at all.
What is an automatic stay?
After you file for bankruptcy of any kind, the court issues an “automatic stay” into effect. The automatic stay stops most creditors from taking collection action against you. This can be a powerful reason for bankruptcy especially if you run the risk of being evicted and/or losing basic resources such as utilities, foreclosures or wage garnishments. If the stay is lifted, the creditor can proceed with collections.
Does bankruptcy affect my job employment or employment in the future?
Your employer can’t fire you due to filing for bankruptcy. Employers can’t discriminate against you either by reducing salary, taking away responsibilities or demoting you for filing for bankruptcy. If there are other reasons, unrelated to bankruptcy for your employer to take action on you, then the fact that you have filed for bankruptcy does not protect you.
In Chapter 7, will all of my unsecured debts get wiped out?
In Chapter 7 bankruptcy, unsecured debts are debts that are not tied to property that will be wiped out such as credit card debt, gasoline card debt and medical. There are some nondischargable debts in bankruptcy. For example, child/spousal support, student loans and debts based off frauds (writing bad checks or lying for credit applications).
Will bankruptcy stop harassment from creditors?
The automatic stay requires most debt collectors to halt on all collections against you until the bankruptcy is completed.
How does bankruptcy affect my credit score?
Creditors don’t like to see a bankruptcy on credit scores but the amount of damage is dependent on how bad your credit was before filing for bankruptcy. If the amounts of accounts you have are delinquent, your score won’t drop significantly because your credit is already bad. If you have a higher score before filing for bankruptcy, your credit will take a major hit.
How can I improve my credit score after I declare bankruptcy?
Bankruptcy can ruin your credit for a maximum of ten years but you can start rebuilding your credit right away. When it comes to credit scoring companies like Experian, Equifax or Fico, there are several factors that are taken into consideration when computing your score. These can be things such as: your payment history, debt remaining, length of credit history and how much new credit you’ve applied for in the past.
You can improve your credit score by making sure that your payments are all done on time. Also, keeping your debt low compared to how much credit you have available helps. When you are ready for a credit card, charge small and pay the bill off in full.
If you have bankruptcy questions give us a call at 973-442-0200.