Essex County, New Jersey Legal Blog

Many New Jersey residents find themselves in financial distress for one reason or another. By the time they consider filing bankruptcy, creditors could be calling incessantly and demanding payment. Fortunately, one of the benefits filers enjoy is that filing for bankruptcy can stop harassing phone calls from creditors.

The stay that goes into place upon filing a bankruptcy petition prevents creditors from pursuing any actions to collect the debt. This also prohibits the filing of any lawsuits, garnishments and levies against a New Jersey resident as well. Furthermore, at the end of the process, many of your debts could be discharged, which means that you will no longer be responsible for paying them.

When New Jersey residents are in financial distress, they might begin to think that bankruptcy would be a viable way to deal with the overwhelming amount of debt they incurred for whatever reason. Unfortunately, there are so many myths surrounding Chapter 7 bankruptcy that some people might not file for fear that those myths are true. However, understanding the facts about bankruptcy can help dispel those myths.

Many New Jersey residents are under the impression that they will lose their homes, cars and other personal property when they file. In many cases, that does not happen. The U.S. Bankruptcy Code and New Jersey law allow for certain assets to be retained by a filer so long as their value does not exceed prescribed amounts. This means that most people get to keep their property.

This question seems to be gaining some traction in political circles. With nearly $1.5 trillion dollars in student loan debt across the country, some sources say that something needs to be done before another nationwide economic crisis occurs. Re-instituting bankruptcy as a way for financially struggling college graduates to obtain student loan debt relief could help remove at least some of the pressure that students here in New Jersey and around the country feel when they are unable to repay their loans.

Currently, it is nearly impossible to discharge student loans in a bankruptcy. However, it did not always used to be that way. Congress passed legislation restricting the discharge of student loans based on a belief that once students graduated, they were filing bankruptcy in order to avoid repaying their loans. In hindsight, it has been revealed that only around one percent of graduates were actually doing that.

Once a New Jersey resident has decided to file for bankruptcy, it will be helpful to understand how the process works. A Chapter 7 is a liquidation, which means that the trustee could sell any non-exempt assets in order to pay creditors. In many cases, all of a filer's property falls under an exemption, and qualifying debts are discharged.

Before that, however, a potential filer will need to undergo a means test to verify that he or she qualifies for a Chapter 7. While information regarding all debts, including lawsuits, garnishments or other legal actions, is gathered, a credit counseling course will need to be completed before the petition can be filed. After the petition is filed, another course will need to be completed before a discharge can be issued. It should be noted that certain debts are not generally subject to discharge, such as student loans, taxes and child support, among others.