Archives for May 2017

Bankruptcy vs. Debt Reconsolidation

If you are struggling to keep your head above water financially, you may have considered bankruptcy as an option to get a fresh start. However, under the bankruptcy laws, you must undergo “credit counseling” before you can complete the bankruptcy process, so that you can determine if there are other options that will allow you to resolve your problems without bankruptcy. One of those options is what is known as “debt consolidation.” So why wouldn’t you just pursue debt consolidation, rather than incurring the stigma of a bankruptcy?

What Is Debt Consolidation?

Debt consolidation involves pooling all of your debts together and thereby making your debt more manageable. In the process, you can clear up longstanding debts, simplify the payment process and perhaps reduce both payments and interest rates. It’s important to understand, though, that it’s consolidation—it won’t reduce your debt at all. At best, it will lead to lower monthly payments and a longer period of time to pay off your debts. There’s another option, known as debt settlement, where you can actually negotiate reduced payoff amounts.

Which Is Best for You?

There are advantages and disadvantages to both strategies:

  • With a bankruptcy filing, you’ll be working with an attorney, so you have less concern about fraud or misrepresentation by the person who’s assisting you. With a bankruptcy filing, you’ll immediately have the protection of the automatic stay, so that your creditors will be required to stop contacting you in an effort to collect the debt. Additionally, with a bankruptcy, the slate will be wiped clean, often in a very short period of time. Even if you don’t qualify for Chapter 7, you can have a fresh start in three to five years.
  • With a debt reconsolidation, you won’t take the hit to your credit score that you’ll get with a bankruptcy filing. However, you’ll still have most or all of the debt, and you may still struggle to stay current. If you can’t, your credit record could be more negatively affected by a debt consolidation than a bankruptcy. In addition, if your consolidation includes debt settlement, you may have to recognize forgiven debt as income.

Contact Neuner & Ventura, LLP

We understand the stress, anxiety and confusion that can be associated with a potential bankruptcy filing. We offer a free initial consultation to every client. For an appointment, call Neuner & Ventura at 856-596-2828 or send us an e-mail. We do, however, reserve the right to charge a fee to review any work done by another attorney. Evening and weekend appointments are available upon request.

Representing Clients across South Jersey

The Federal Exemptions in a Chapter 7 Bankruptcy

If you’ve been struggling to meet your financial obligations, whether because of injury or illness, divorce or any other reason, one of the ways you can get a fresh start is by filing a Chapter 7 bankruptcy petition. With a Chapter 7, you can permanently rid yourself of certain debt (student loans, tax obligations and child support/family law arrearages usually don’t qualify) in exchange for the sale of some of your assets. Many states have their own schedule of exemptions and there’s also a federal schedule. In New Jersey, as in nearly half of all states, you can choose whether you want to claim the state or federal exemptions, but you can mix and match between the two.

The Federal Bankruptcy Exemptions

The federal exemptions are adjusted every three years and were last modified in 2016. Under current law, the following exemptions apply:

  • The homestead exemption — Under federal law, you can claim up to $23,675 in the equity in your home. The exemption covers many types of real estate, including condos, co-ops and even burial plots, but you must actually live in the dwelling to claim the homestead exemption.
  • Personal property exemption — There are a number of specific personal property exemptions under the federal schedule, including:
    • $1,600 for any jewelry
    • $2,375 for tools of your occupation or trade, including books
    • $3,775 for any equity in your motor vehicle
    • $12,625 for loan value, dividends or interest in a life insurance policy
    • $12,625 for household goods, including books, animals, appliances and musical instruments
  • Personal injury settlements or verdicts — You can keep up to $23,675 in the value of any settlement or verdict
  • Retirement accounts – All retirement accounts are typically exempt, though there’s a cap of $1,283,025 on IRAs.

Contact Neuner & Ventura, LLP

At Neuner & Ventura, LLP, we know that the bankruptcy process can be intimidating and confusing. We offer a free initial consultation to every client. For an appointment, call our office at 856-596-2828 or send us an e-mail. We do, however, reserve the right to charge a fee to review any work done by another attorney. Evening and weekend appointments are available upon request.

Representing Clients across South Jersey

Bankruptcy and your credit report- when do bankruptcies or other adverse reports come off my credit report?

We have often been asked what impact a bankruptcy has on credit and how long it stays on the credit report. In a previous blog post we pointed to a NY Federal Reserve study that showed that a bankruptcy actually sped up the return of decent credit for those who need it. But the question remains. So here is the answer:

Under federal law (15 U.S. Code § 1681c) a consumer credit reporting agency is not permitted to report a bankruptcy for more than 10 years from the date of filing (if filed by the debtor and not by a creditor. We are informed some will remove it after 7 years for Chapter 13 bankruptcies that are successfully completed.

Most debts included in a bankruptcy must be removed after 7 years from the date the debt went to collections. Once the statute of limitations for the debt has expired, even if in less than 7 years, the debt must be removed. Paid tax liens must be removed 7 years after payment.

New Jersey residents can get a free annual credit report from www.annualcreditreport.com. This site has a lot of important information.

We encourage our clients who have gotten a discharge to check their credit report a month or two later to make sure that all the debts which were discharged are listed at a zero balance. (the debt stays on the report for 7 years but getting a zero balance report helps your credit score). If this is not on the report we recommend writing to each agency (addresses and contacts on annualcreditreport website), demanding a correction. The letter should be send certified mail and attach a copy of the discharge and schedule F.

There is a lot of information available about credit scores. See About credit scores

The most important thing, however, is to be proactive about your debt problems. We always start from your situation, and help you understand your budget and alternatives, so you can develop the plan that works best for you.

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