Information About Bankruptcy in New Jersey
You Can Still File Bankruptcy!
The new bankruptcy law that went into effect in October 2005 does not prevent anyone from filing a bankruptcy case. The bankruptcy system was created and still exists to serve you. If you are dealing with a job loss, divorce, separation, uninsured medical expense or some other financial distress, then I have good news for you. Everyone who needs to file for bankruptcy because of a financial crisis still can. And, I mean everyone.
Since the beginning of recorded history, societies have had a form of debt relief for people who found themselves in a financial crisis. Debt forgiveness is mentioned in the bible. This is because people have always, and will always get into financial trouble that they cannot solve by themselves. Our founding fathers knew this and therefore included a provision for bankruptcy laws in our Constitution.
In spite of what some people on tv are saying, you are not a failure or an immoral person if you file for bankruptcy. Financial problems usually have nothing to do with having done something wrong. People who have lost their jobs, have uninsured medical expenses, are no longer able to work, or have incurred extraordinary expenses, such as car accidents or hurricanes, have nothing to be ashamed about. Several of our presidents have sought the help of the bankruptcy process including Thomas Jefferson who went on to help build the University of Virginia and Abraham Lincoln who went on to become our greatest president. Can you imagine if they woke up every morning having to worry about paying their old debts? Would they have been able to accomplish the great things they did?
Some very successful people have also filed for bankruptcy, e.g. Mark Twain and Donald Trump. Walt Disney actually filed bankruptcy several times. Because he received a chance to start over again, “get a fresh start in life,” he was able to create Disney Studios, Disney Land in California and Walt Disney World in Florida. The company founded by him now employs thousands of people, has produced movies watched by millions of people, and has brought laughter and fun into our lives.
So what did the new law change? The law now says that people making a lot of money must file a Chapter 13 bankruptcy case instead of a Chapter 7 bankruptcy case. In a Chapter 13 case a person repays some or all their debts out of future income under court supervision. What does this really mean to you? If you are a family of four in New Jersey $99,474; Delaware $83,928; Pennsylvania $78,626, then this part of the new law does not even apply to you.
In most Chapter 7 cases debts are forgiven for credit cards, medical bills, and short- falls on car repossessions and foreclosures.
The new law changed some other aspects of the bankruptcy process. Here is a brief summary of the more significant changes:
- If you filed bankruptcy before, then you have to wait eight years instead of six years to file again.
- If you filed recently and had your case dismissed, then you get fewer protections under the new law if you file again.
- You have to participate in a 90 minute credit counseling session at a cost of about $50.00 before you can file a bankruptcy petition.
- Money owed to an ex-spouse arising out of a divorce will not be forgiven.
- You must participate in a debt management course at a cost of $50 at the end of your bankruptcy case.
You can still use a bankruptcy filing to do many good things for you. The three most important ones are:
- Discharge (wipe out) debts such as credit cards, medical bills, back rent, and deficiencies (short falls) on foreclosures and car repossessions,
- Stop wage garnishments, sheriff sales, lawsuits against you, and the calls from creditors or collection agencies
- Start over again, by putting your past financial problems behind you.
The bankruptcy courts are still open to people who have found themselves in a financial crisis. In many cases filing for bankruptcy is the only moral option open for people being crushed by debt, and harassed by creditors. Filing for bankruptcy makes it possible for people to have a fresh start in creating a different and more fulfilling future.
Will filing bankruptcy ruin my credit rating?
Based on the simple fact that you are considering filing bankruptcy, your credit rating is probably already very low, or you are looking at events that will take it there in the very near future. A bankruptcy filing is a significant dent in your credit rating and will push your score lower. As with many people facing bankruptcy, their credit scores are already so low that a bankruptcy cannot do any more damage.
Will I ever be able to get credit again?
The simple answer is yes. People who are actively considering filing bankruptcy have credit ratings such that they cannot get any new credit. Once they file for bankruptcy, their ability to borrow improves significantly. Pre-bankruptcy people typically owe a large amount of unsecured debt. Post-bankruptcy that debt disappears. Your are at better credit risk for two reasons. One, you no longer owe that large amount of money. Secondly, you cannot file Chapter 7 again for eight (8) years. Our experience is that client’s typically receive new credit card applications within two months of the time they file their Chapter 7 bankruptcy case.
Will I get a great interest rate with a high credit limit?
The answer is no, but there are credit card companies that will extend credit cards shortly after filing Chapter 7.
Will I be able to finance the purchase of a car?
As soon as your discharged is issued, you will become eligible to finance the purchase of a new car. Once again, you will not get the best interest rates, but if necessary you will be able to finance the purchase of a car.
Will I be able to finance the purchase of a house at any time in the future?
The simple answer is Yes. Federal Housing Administration Rules say that you will be ineligible to qualify for a mortgage for the first three (3) years after you file for bankruptcy. After that, what will matter are all the typical things that go into the decision to grant a mortgage or not, ie: do you have the income to make the mortgage payments; have you been paying your bills on time after you filed bankruptcy.
Will Everyone Know I Filed Bankruptcy?
The fact that you filed bankruptcy is public record and if someone wants to do research on you, they will be able to find it. If someone runs a credit report, it will also show up there. Beyond that, the fact that you filed bankruptcy will not appear anywhere in the newspapers as a general rule. There are two exceptions. First, if you are a celebrity, the fact that you filed bankruptcy is newsworthy and consequently may appear in the paper. The second exception is if you are a scoundrel. If you have been arrested for some noteworthy crime, the fact that you filed bankruptcy will almost certainly be reported. Absent these two circumstances, your name will not appear in the paper. The Philadelphia Inquirer does report bankruptcies filed once a week. The report is on a Monday in the business section and covers all of Philadelphia and all of South Jersey. Typically the Inquirer devotes about four column inches of space to recent bankruptcies. Unless you are a celebrity or scoundrel, your name is not going to appear there.
As mentioned previously, the fact that you filed bankruptcy will appear on your credit report for up to ten (10) years. After ten years, federal law requires that they remove it from your credit report.
The significance of having filed bankruptcy has diminished over recent years. This is in part because since the 1970′s our society has become driven by the extensions of credit to consumers. Prior to that, it was very difficult for people to get car loans, mortgages and credit cards. Now it is common for many people to file for bankruptcy in any given year. Well known celebrities file for bankruptcy and major corporations, such as GM Chrysler. See my article “You Can Still File for Bankruptcy”.
What will matter more is what you do after you file bankruptcy. Do you have a steady income? Are you paying your bills time? Those factors will have more importance in the future for you then the simple fact that you filed for bankruptcy.
News Articles About Bankruptcy
- Three Points to Consider in Debt Settlement, Bankrate.com, 10/9/2009
- How to Bounce Back from Bankruptcy, Parade Magazine (Philadelphia Inquirer), 8/16/2009
- Credit Card Companies: Piling on Debt, Philadelphia Inquirer, 7/27/2009
- The Basics: Twelve Myths about Bankruptcy, Bankrate.com
(National article quoting John Hargrave)