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Bankruptcy may be the best option for some New Jersey residents

Many New Jersey residents still consider filing for bankruptcy as a last resort. However, it is often the best option and the most responsible way to deal with seemingly insurmountable financial problems. The question many people struggle with is how to know when filing bankruptcy is the way to go.

People try to deal with their debt through means other than filing bankruptcy, such as second mortgages and debt consolidation loans. In many cases, this only serves to make matters worse. Enlisting the services of a credit counselor seems like a good idea, but their advice to not use credit cards or make sure minimum payments are made often comes too late and does nothing for the current situation. In the meantime, the individual's credit continues to get worse, and it may feel as if there is no end in sight.

As a consumer's financial situation deteriorates, it becomes more difficult to make even the minimum payments on some debts -- if a person is able to make payments at all. Debt collectors begin calling on a regular basis, only adding to an already stressful situation. This often makes day-to-day life intolerable.

The bankruptcy code exists to help consumers who, through no fault of their own, find themselves in this situation. Individuals generally file one of two types of bankruptcy. The first is Chapter 7 bankruptcy, where debts and assets that are not legally exempt are liquidated. The second is Chapter 13 bankruptcy, where debts are reorganized and paid through a repayment plan administered by a bankruptcy trustee.

Many New Jersey consumers are concerned that their credit will be ruined forever by filing for bankruptcy, but this simply is not true. Once a bankruptcy is filed, the damage being done to a person's credit stops and can recover over time. Obtaining a fresh start with which to rebuild one's financial life in a responsible manner can mean the difference between continued struggles and a new lease on life.

Source:, How to Know When Bankruptcy Is Your Best Option, Katherine Muniz, Jan. 26, 2014

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