Sometimes we have to take out loans or purchase things on credit to get something we need or want. Financial struggles can happen to anyone, but when those loans and credit cards start racking up interest, things can get dangerous. If you fall on hard times and can’t pay back these debts, they can grow to astronomical sizes and leave you suffocated and trapped in a seemingly endless downward spiral of “in the red.”
Filing for bankruptcy can often give someone the chance to start anew, but it cannot solve every single debt problem and bankruptcy comes with some negative side effects. Learning what bankruptcy can and can’t do for you can help you make the best decision for yourself.
What Bankruptcy Can Do
There are two different types of bankruptcy that you can apply to. Which one you want to choose will depend on your current financial abilities and what you are hoping to achieve by filing for bankruptcy.
Details about the two main types of bankruptcy include:
This style is for those with low income and filing for it can take an average of three to four months to be completed. It has limitations to protecting you from the loss of property, but in turn, relinquishes you from all your owed debt.
This style is for those who have a reasonable income, but are stuck and unable to recover from their deep debt situation. By paying a designated amount of your debt (not all of it) monthly for 3-5 years, you can maintain your property and be relinquished from any remaining debt balance thereafter.
This style can protect you permanently from mortgage foreclosures, keep property not protected with a bankruptcy exemption, and have debt adjustments when debt is worth more than what the what the property is actually worth
The types of things that both types of bankruptcy can do for you include:
- Stop creditors from harassing you and other collection activities
- Prevent foreclosures, repossessions, or evictions temporarily
- Eliminate credit card debt
- Eliminate other non-priority unsecured debts
Non-priority unsecured debts are those that are not considered crucial under state and federal law like child support and income or business taxes. These debts can include any of the following:
- Credit card debt
- Medical bills
- Utility bills
- Gym and organization memberships
- Personal loans
- Payday loans
- Student loans (this has its own set of rules to be eligible)
What Bankruptcy Can’t Do
Although bankruptcy is a an option when you are out of options, it cannot protect you from everything. Bankruptcy cannot protect you from certain priority legal obligations and there are exceptions to your foreclosure and repossession protection. Child support and alimony are legal obligations that you will still be required to pay for. The same is usually true of student loans. Only in rare cases will student loans be forgiven. This only can occur when someone can prove that there would be severe hardship in attempting to pay the student loans off.
Bankruptcy cannot protect your from a secured creditor repossessing or foreclosing your property when you can no longer afford it. In a sense, bankruptcy does not eliminate liens, which allow lenders to take and do with property as they need to cover a debt. If there are any liens on your property, bankruptcy can prevent you from having to pay it off, but not from you losing the rights to that property.
Contact a Clifton Bankruptcy Attorney for a Consultation About Your Financial Struggle in New Jersey Today
If you are struggling with debt, you may need a fresh start financially. An experienced bankruptcy and debt relief attorney can help you explore your options and determine the best course of action for you, your family, and/or your business. Our experienced New Jersey bankruptcy lawyers at The Law Office of Silverman & Roedel understand the nuances of New Jersey and federal bankruptcy laws, so we can help you protect your interests.
The articles on this blog are for informative purposes only and are no substitute for legal advice or an attorney-client relationship. If you are seeking legal advice, please contact our law firm directly.