What Happens if You Avoid Getting Served for a Collections Lawsuit?

May 3, 2019 by Steven Neuner Esq.

Can You Avoid the Server in a Collections Lawsuit Forever?

If you have mounting debts behind you, you may end up facing a debt collection lawsuit at some point. This problem is not uncommon; there are roughly 30 million Americans who have at least one debt in collections. While avoiding the process server does delay you in getting bad news, it can cause some problems for you later on.

The Lawsuit Still Happens Even if You Aren’t Served

There are some important things to know if you are considering trying to hide from a process server for a debt collections lawsuit. For starters, you should understand that avoiding the process server will not actually keep you from having to go to court. Technically speaking, the court date could proceed without you knowing about it. However, the server is expected to put forth a good faith effort to find you.

When the server cannot get in touch with you right away, they could attempt a variety of other contact methods. They might try to visit your workplace or last known address. If this does not work, the state of New Jersey lets the server leave a copy of the summons at your address or give it to anyone else in your household who is over the age of 14. For people without a known address, the plaintiff can put a notice in a local newspaper informing you of the upcoming lawsuit.

There May Be Legal Consequences to Avoiding the Server

Avoiding a process server means you might end up being the subject of a lawsuit that you are not aware of. If a roommate throws away the papers or the notice is published in a newspaper you never see, you have no way of knowing the time and date of the lawsuit. This is a big problem because the judge usually rules in favor of the plaintiff if the other party does not show up.

Another problem with avoiding a process server in New Jersey is that you end up not having the time to prepare your defense. The legal process of being served with a lawsuit is meant to give you time to find a New Jersey lawyer and get ready for your case. If you are dragging out the process of being served, you end up without enough time to defend yourself or work with the people suing you to find a reasonable settlement.

Being Served Doesn’t Mean You Can’t File for Bankruptcy

A major reason people want to avoid a process server in a debt collections lawsuit is because they plan on addressing the lawsuit by filing for bankruptcy. Depending on your situation, it is true that bankruptcy can help manage the consequences of a debt collections suit. However, this does not mean you have to resort to elaborate methods of hiding from process servers. As a bankruptcy lawyer can help you understand, you still have the opportunity to restructure your debts regardless of whether any lawsuits have been filed or judgments have been entered. However, it is still usually best to file for bankruptcy between the time of being served and going to trial because it lets you get started on the process as soon as possible.

It is tempting to avoid bad news and hope that it goes away, but trying to hide from a debt collections lawsuit never ends well. To get a good outcome from your case, you need to let yourself be served so you can meet with a lawyer and get started on your defense. Neuner & Ventura LLP has spent over 30 years helping the residents of New Jersey deal with debt and bankruptcy issues. Our law firm has the experience needed to help with these sensitive issues. Contact our practice in Marlton, NJ, today at (856) 596-2828 or email us to set up your free initial consultation.

How to Exclude Debts From a Bankruptcy

April 30, 2019 by Steven Neuner Esq.

How to Keep Debts Out of a Bankruptcy Case

It is estimated that there are just over 640,000 bankruptcies every year in the United States because of medical debt. While a bankruptcy filing may seem final, this doesn’t mean that an individual cannot continue to pay other debts while seeking to eliminate a medical bill or similar cost. There are ways a person can keep certain debts out of a bankruptcy filing.

Reaffirm the Debt With the Lender

When you file for bankruptcy, you have the option of signing an agreement that declares that you will continue to pay a debt as agreed. For example, you may assert that you will continue to pay your car loan or mortgage while having other debts discharged. Once the debt has been reaffirmed, it may be more difficult to go back on your agreement. Therefore, it may be in your best interests to avoid doing so until the idea can be discussed with a bankruptcy attorney or other professional.

What Types of Debts Can Be Reaffirmed?

It is much more common to reaffirm a secured debt as opposed to an unsecured one. Debts such as auto loans and mortgages are secured by the assets themselves. There are many potential benefits to telling a lender that you will repay the debt as agreed and keep them out of a bankruptcy proceeding.

What Are the Benefits of Reaffirming a Debt?

Reaffirming a debt can allow you to keep your car or house during a Chapter 7 case. While state law may permit you to keep equity in a home or car, you might not be able to keep the asset itself. This could make it difficult to go to work or keep a roof over your head during your case and in the months after as you work to rebuild your credit. Furthermore, by making your car or mortgage payment on time, it will be easier to rebuild your credit history and improve your credit score in less time.

There May Be Limits on How Much Debt You Can Reaffirm

While a lender may agree to allow you to reaffirm a debt, a bankruptcy judge could decide that it is not a good idea for that to happen. For example, a judge might decide that you will have too much debt after the bankruptcy case is over. Generally speaking, this means that you wouldn’t have enough money to provide the basics for yourself or your family while making debt payments.

A judge could also choose to reject a reaffirmation agreement if he or she feels that it would not be in your best interests for any reason. The court may reject if it seems like you don’t truly understand what you are agreeing to or if you owe more on an asset than it is worth.

Remember, once you reaffirm a debt, you are generally required to pay the full balance regardless of what happens to the asset. While it is possible to file for bankruptcy again, you can’t file for Chapter 7 protection for eight years after your current case is over.

Creditors May Be Willing to Negotiate

Depending on the circumstances of your case, a creditor may be willing to negotiate a new payment as part of the reaffirmation process. Creditors might decide to lower your interest rate, forgive a portion of the outstanding balance or waive any fees that you have accumulated. In some cases, they will choose to do all three. Your lenders may be willing to be flexible as getting a portion of what they are owed now could be easier than not getting anything after the case has been completed.

If you are in need of a bankruptcy attorney, don’t hesitate to contact us at Neuner & Ventura LLP. You can get in touch with us in Marlton, New Jersey, by dialing (856) 596-2828. You can also contact us through our online form or visit our law office during normal business hours.

Taking a Bankruptcy Means Test to Qualify for Chapter 7

March 26, 2019 by Steven Neuner Esq.

Chapter 7 Bankruptcy and the Bankruptcy Means Test

Nearly 500,000 people filed for Chapter 7 bankruptcy in 2016. If you are considering declaring personal bankruptcy, you probably are trying to figure out whether you should choose Chapter 7 bankruptcy or Chapter 13. Obviously, there are many factors that will go into your decision; however, one of the main considerations you need to keep in mind is whether you qualify for Chapter 7 in the first place, something that is determined through a bankruptcy means test.

What Is a Bankruptcy Means Test?

In order to file for Chapter 7 bankruptcy, which leads to debt forgiveness, you must qualify first by passing the bankruptcy means test. In short, you have to show that given your income, expenses, and family size, you do not have enough disposable income to meet your debts. Clearly, the bankruptcy means test was meant to limit the number of people who can opt for Chapter 7. That being said, if you don’t pass the test or you just want to hold onto some of your assets, such as your house or car, you can file for Chapter 13 where your debts will get restructured.

How Does the Test Work?

Simply put, the test gauges how much disposable income you have by deducting your expenses from your income. Consequently, the higher your disposable income, the less likely it will be that you’ll qualify for Chapter 7 as you’ll be expected to repay your debtors using your disposable income. Hence, even if you don’t pass the test and have to go bankruptcy means test through Chapter 13, the test will prove instrumental in setting your payment schedule. All that being said, the test consists of two parts: 1. Step 1: To start with, the test takes a look at your household income over the past six months and compares it with the state’s median income. The test also takes into consideration any changes or fluctuations in your income. On the one hand, if your income is already lower than the state’s median income, you pass automatically. Conversely, just because your income is higher than the median doesn’t mean that things are over: There is still the second step. 2. Step 2: At this stage, you have to calculate all your expenses over the past six months, especially things that are considered “allowable expenses,” such as your rent, your groceries, your clothing, and your medical costs. All of these costs are affected by the size of your family as well as where you live. Once these expenses are calculated, they are deducted from your household income in order to arrive at your disposable income, and if it is low beyond a certain threshold, you can qualify for Chapter 7. It should be pointed out that this stage can be a bit tricky: There are a lot of things that have to be accounted for, and you need to be as thorough and as forthcoming as you can be. Otherwise, if you omit something or write down conflicting information, you risk having your case tossed out altogether.

What Happens After a Bankruptcy Means Test?

In the event of passing the test, you can go ahead and file for Chapter 7, and the majority of your unsecured debt will be wiped away. Nevertheless, you need to bear in mind that this might not be the best route for you, and you might find it preferable to pursue Chapter 13. This is the sort of conversation you ought to have with your bankruptcy attorney. However, if you fail the test, you can’t appeal the decision. Yet, this doesn’t mean that you are obligated to go for Chapter 13. Assuming that you can hold on a bit, six months exactly, you can take another stab at the test again. After all, the test looks at your income and expenses over the past six months. It goes without saying that this entire process is significantly easier if you have the right bankruptcy attorney by your side. Therefore, if you are thinking of filing for bankruptcy, do not hesitate to contact us at (856) 596-2828, and we will be happy to start you off with a free consultation. Alternatively, you can come visit our offices in Marlton, New Jersey.

Does Bankruptcy Conclude Following a Discharge?

March 20, 2019 by Steven Neuner Esq.

What Occurs After Debts Are Discharged?

When a person successfully files for bankruptcy, his or her debts will eventually be discharged, which typically occurs at the very end of the process. In the final three months of 2018, more than 175,000 individuals and companies filed for bankruptcy, which shows just how common it is for people to take this step. If you’re thinking about filing for bankruptcy but are unsure of what the process involves, our New Jersey bankruptcy lawyer can help.

To What Does a Bankruptcy Discharge Refer?

When a bankruptcy court decides to order a discharge, there are a couple of things that occur. The main aspect of a bankruptcy discharge is that the debtor will no longer be required to pay some of his or her debts. However, not all debts are discharged. Some of the main debts that can’t be discharged when filing for a Chapter 7 bankruptcy include:

Debts incurred from student loans
Income tax debt in most cases
Spousal support and child support
Money that was gained via fraud
Any debt that’s not listed on your initial bankruptcy paperwork

Along with the discharged debts, this order will stop creditors from attempting to collect any of the debts that have been discharged, which means that these individuals are unable to contact you through telephone calls or demand letters that attempt to obtain these debts.

When a Bankruptcy Discharge Typically Occurs

The timing for a bankruptcy discharge can depend on which chapter of bankruptcy is filed. When a Chapter 7 bankruptcy has been filed, it’s common for the discharge to occur once the time expires for filing a bankruptcy lawyer complaint relating to a specific debt that’s about to be discharged. Creditors will usually have a certain amount of time to object to the discharging of a debt. This expiration date is oftentimes several months after the individual filed for bankruptcy. In Chapter 11 and 13 bankruptcies, debts will usually be discharged once the affected individual or company provides any and all payments relating to the plan that was made after the bankruptcy was filed. A bankruptcy plan is typically created soon after a person files for bankruptcy in an attempt to eventually pay back some of the debts that are owed. Once the plan has been fulfilled, it’s possible for some or any of the remaining debts to be discharged. There are times when this discharge could be denied if a person did not complete an educational course for financial management in the time that was allotted for him or her to do so.

Reasons That a Bankruptcy Case Could Be Reopened

In many instances, a bankruptcy case will officially end when a discharge has been ordered. However, it’s possible for a bankruptcy case to be reopened in certain situations. Knowing what these situations are may be able to help you avoid having your case reopened in the future. For one, a bankruptcy case could be reopened if the debtor would like to add a debt that he or she initially forgot to list. When a debt isn’t listed in the initial bankruptcy filing, it won’t be discharged. Adding debt to the list allows the debtor to correct the problem while also notifying the creditor about the bankruptcy case in question. It’s also possible for a bankruptcy case to be reopened by a creditor or trustee if he or she finds a debt that wasn’t listed in the initial paperwork. There are times when the liquidation of certain debts would be more beneficial to a creditor or trustee, which could cause him or her to ask the court to reopen the case. If you’re in the midst of bankruptcy but you would like some legal assistance on the matter, our bankruptcy lawyers at Neuner & Ventura can provide you with the assistance you require. When you’re about to file for bankruptcy, call our New Jersey bankruptcy lawyers at (856) 596-2828 at our office in Marlton so that we can guide you through your case and help answer any questions that could arise.

You Can Pay Debts Even During a Bankruptcy

February 24, 2019 by Steven Neuner Esq.

Reaffirming Debts During a Bankruptcy

Between March 2017 and March 2018, the number of bankruptcy cases filed in the United States dropped by 1.8 percent. Although the number of filings may be going down overall, there is still a chance that you will need protection from creditors. If you desire, it may be possible to reaffirm some debts and keep them out of your bankruptcy case.

What Is Reaffirmation?

Reaffirmation of a debt is a process during which you agree to repay a debt according to its current terms. You may choose to reaffirm a debt even if it is eligible to be discharged in a Chapter 7, 11 or 13 case. In order to commit to paying a lender as agreed upon initially, you will have to file form B240A with the bankruptcy court.

Does the Court Have to Approve a Reaffirmation?

In most cases, the bankruptcy judge in your case will need to approve the reaffirmation. Approval may not be granted if you owe more than an asset is worth. For example, if a vehicle is only worth $5,000, you may not be able to agree to pay a lender $10,000. Generally, there is no need to obtain court approval to reaffirm any debt secured by a home or other real property.

Why Would You Want to Reaffirm a Debt?

There are a couple of reasons why it may make sense to reaffirm a debt. First, it allows you to keep an asset during the course of the bankruptcy. For instance, by agreeing to make payments in a timely manner, you could avoid losing a car in a liquidation bankruptcy. Another good reason to continue to pay a debt is that it could help rebuild your credit after other debts have been discharged. Instead of having to take out a secured credit card or other token credit account, you can make payments to a lender with which you already have a history.

Can You Rescind the Reaffirmation?

It is generally possible to rescind the reaffirmation for up to 60 days after filing the proper paperwork with the court. If you do choose to rescind the reaffirmation, the asset could be liquidated or otherwise worked into a repayment plan.

A creditor could also move to have a debt included in a bankruptcy case if you fail to make payments as agreed. Your bankruptcy attorney may be able to explain the process of changing your mind after agreeing to pay a lender under the current terms of a loan.

Can You Sell Assets Held Outside the Bankruptcy Estate?

As long as the deal with your creditor allows you to sell an asset, you generally have the right to do so. This can help you raise funds to keep up with a repayment plan or let you get rid of an asset without losing equity that has accrued. Selling a home may be far preferable to having it foreclosed. Trading or selling a vehicle could also be beneficial in the event that you can’t get the court to agree to a cram down.

Debts Can Be Repaid After a Discharge

Whether you choose to reaffirm a debt or not, it is always possible to pay an outstanding debt in full. This is true even if you had it discharged in a bankruptcy case. Doing so could be helpful in preserving relationships with vendors, friends or family members. It can also be an ideal option for those who feel that they have a moral obligation to repay money that they borrowed from any source.

If you are in need of a bankruptcy attorney, reach out to the legal representatives from Neuner & Ventura LLP. You can contact our law office in Marlton, New Jersey, by calling (856) 596-2828. You can also use the contact form on this site or visit us at our practice at the Willow Ridge Executive Office Park.

What a Chapter 11 Bankruptcy Reorganization Plan Entails

February 21, 2019 by Steven Neuner Esq.

How a Chapter 11 Reorganization Plan Is Created

While filing for bankruptcy comes with a number of consequences that can be difficult to manage, doing so can provide you with an opportunity to save your business. There are more than 7,000 Chapter 11 bankruptcies filed every year, which shows how common this type of filing is. Here at Neuner & Ventura LLP, our bankruptcy lawyers have handled a large number of cases pertaining to this type of bankruptcy, which you should know more about when you’re getting ready to file.

What Reorganization Plans Typically Include

When a business has filed for Chapter 11 bankruptcy, they will have a certain amount of time to restructure their debts and reorganize their business in a manner that may allow for future success. While there are typically limits placed on how long a business can take to create a reorganization plan, these limits aren’t usually strict and can be extended by the bankruptcy court. The initial time limit is around four months, during which time a business will need to reorganize their financial affairs. Once these four months have passed, the creditors that are owed money by the business in question will be able to file competing reorganization plans if they wish to do so.

However, competing plans are rare because of how much work goes into creating such a plan. Instead, the creditors can recommend changing the filing to a Chapter 7 bankruptcy if they are dissatisfied with the plan that was sent in by the company in question. In most cases, business operations will need to be downsized somewhat to open up assets that can be used to cover a portion of the debts that are still owed. Though rare, it’s also possible that the restructuring may allow the company to pay back all of the debts they owe.

How a Chapter 11 Plan Is Confirmed

Once you’ve created a plan that reduces expenses, frees up assets, and provides a way for your business to move forward, the plan will then need to be confirmed by impaired creditors as well as the court that oversees the case. The plan will need to meet a variety of requirements before confirmation occurs. For one, the plan must be a feasible one, which means that the court must determine that the company’s plan for the next five or 10 years is likely to be a successful one. The plan must also be deemed by the courts to have been made in good faith, which essentially means that success can’t be obtained through illegal means.

For the plan to be confirmed, it will also need to be in the best interests of all creditors, which means that the creditors will need to receive as much or more than they otherwise would have if a Chapter 7 bankruptcy had been filed instead. Finally, the plan will need to be fair and equitable. This term means a couple of things. For one, the creditors that are owed will need to receive repayment that at least matches the value of the collateral. Equity owners will also not retain any form of ownership once the plan has been confirmed if the creditors have not been paid in full.

How Our New Jersey Bankruptcy Attorneys Can Provide Assistance

If you believe that the only way for your business to survive is by filing a Chapter 11 bankruptcy, our experienced bankruptcy attorneys are here to help. Creating a reorganization plan following the filing of bankruptcy oftentimes makes for a lengthy and complicated process. Obligations will need to be met, and the plan will likely need to be created in a certain time frame. Our bankruptcy lawyers can help you file any of the necessary paperwork while also making sure that your plan meets all of the legal requirements and is likely to be confirmed.

If you’re getting ready to file for Chapter 11 bankruptcy but you want to obtain some legal assistance to help guide you through the extensive process, call our New Jersey bankruptcy lawyers today at (856) 596-2828 to schedule your first consultation at our office in Marlton.

How to Add Debt During a Chapter 13 Case

January 21, 2019 by Steven Neuner Esq.

Taking on Additional Debt in Chapter 13 Bankruptcy

Roughly 800,000 people filed for bankruptcy in 2016. In a Chapter 13 case, you are allowed to reorganize both secured and unsecured debts and pay them back over a period of three or five years. In some cases, you are allowed to incur a post-petition debt if a trustee approves. Contact a Burlington County bankruptcy attorney for help with your Chapter 13 bankruptcy case.

The Debt Must Be for a Legitimate Purpose

To be approved for a new loan or to accrue new debt after filing for Chapter 13 bankruptcy, the money must be used for a legitimate need. For instance, it may be possible to borrow money to buy a car to get to work. The loan would likely be approved if not having reliable transportation led to a job loss and an inability to make plan payments.

The Balance Must Not Be Excessive

Generally speaking, you won’t be allowed to borrow more than necessary to complete a transaction. For example, if you are looking to buy a new car, you probably won’t be allowed to buy a luxury vehicle to get to work. Instead, you will likely be restricted to buying the least expensive vehicle that provides safe and reliable transportation.

The Creditor Must Consent to Being Part of a Payment Plan

A creditor must file a proof of claim that acts as its consent to being part of a reorganization repayment plan. Secured creditors are likely to give their consent as it can take steps to foreclose or repossess property after the bankruptcy ends. Unsecured creditors are likely to consent because they won’t have to wait as long to start receiving payments.

However, this may not be the case if the creditor believes that a remaining debt balance would be discharged at the conclusion of the repayment period. In most cases, priority creditors will consent to the addition of new debt as they will get paid first in any scenario. A bankruptcy attorney may provide more insight into how creditor approval could impact your quest to obtain a loan during an ongoing case.

Trustee Approval May Not Always Be Necessary

In most cases, a bankruptcy court will not approve a new debt unless the trustee has issued his or her approval. However, there may be times when you can’t get trustee approval in a timely manner. For instance, you may need to pay a tax bill or an emergency medical expense. In such a scenario, a judge may agree to allow you to borrow money to cover those and similar bills.

Some Lenders Specialize in Working With Debtors in Bankruptcy

To improve your chances of getting a loan, it may be best to work with lenders who have experience with borrowers subject to a repayment plan. These lenders may be able to guide you through the process of obtaining an offer sheet that is detailed as possible.

This is important as the trustee and the judge will want to see the loan’s term, balance and interest rate before making an approval decision. Working with subprime lenders can also be helpful as they can craft repayment terms that can be tailored to your needs.

The Final Step Is to Amend Your Current Repayment Plan

If a judge does give approval to take on a new debt in a Chapter 13 case, the payment plan will need to be changed to reflect your new liability. It will also be amended to show your new monthly plan payment and how it is distributed to your creditors. Once the amended plan has been put in place, you will be required to follow it until completion unless further modifications are made.

If you need a bankruptcy attorney to represent your interests, don’t hesitate to contact the legal representatives at Neuner & Ventura LLP. You can contact us about post-petition debt by calling our office in Marlton, NJ, at (856) 596-2828. You can also use the contact form on our website or see us personally at Willow Ridge Executive Office Park.

How Filing for Bankruptcy Damages a Credit Score

January 16, 2019 by Steven Neuner Esq.

How Your Credit Score Is Affected by Filing for Bankruptcy

If you’ve weighed all your options and found that filing for bankruptcy is the only one left open for you, you may want to know how your credit score is going to be affected by the act. While the number of bankruptcies has declined over the past decade or so, there were still around 800,000 business and personal bankruptcy filings in 2017. Call a bankruptcy lawyer at Neuner & Ventura LLP today if you’d like to discuss the process or get it started.

Main Problems Affecting a Credit Score After Bankruptcy

Filing for any type of bankruptcy will invariably cause your credit score to lower substantially. The exact amount will largely depend on how high your score was to begin with. A higher initial score also means that the drop will be greater. Individuals with a credit score of over 700 have seen their numbers go down by more than 200 points following a bankruptcy filing. Knowing how your credit score is going to be impacted once you file for bankruptcy may help you plan on how you’re going to eventually rebuild that credit.

Filing for a Chapter 7 or Chapter 13 bankruptcy will also adversely affect your credit report in a similar manner as it does your overall score. The actual information from your bankruptcy is kept on your credit report for quite some time. For instance, public records from a standard Chapter 7 bankruptcy will be kept on your credit report for a period of 10 years. On the other hand, the details of a Chapter 13 bankruptcy will be kept on your credit report for around seven years. Some of the additional bankruptcy details that are listed on your report for seven years include:

Any accounts that were included in the bankruptcy
Third-party judgments
Collection debts
Tax liens

Lessening the Negative Impact on Your Credit Score

filing for bankruptcy The negative impact of a bankruptcy filing will automatically lessen as the years go by, causing your credit score to slowly increase. While a bankruptcy filing has a substantial influence on a credit report and the score associated with it, the debts are already discharged, which means that the weight of the bankruptcy is most keenly felt immediately after it has been filed.

As long as additional problems don’t occur, credit scores usually start to increase slightly very soon after the bankruptcy has been filed. Once the information has been fully removed from your report after 7-10 years, it will no longer cause issues with your credit score.

How Credit Is Rebuilt Following a Bankruptcy Filing

There are several steps people commonly take when rebuilding their credit score following a bankruptcy. Most individuals get a new line of credit, which is usually available via a secured credit card. A secured card works by having the individual pay a deposit that acts as the monthly credit limit until a certain amount of time has passed. Making monthly payments and keeping debt at a low level helps with the rebuilding of a credit score. It’s also possible that the credit report still contains debt that should have been discharged with the bankruptcy filing. This can be cleared up with a simple phone call.

How a New Jersey Bankruptcy Attorney Can Help

Regarding filing for bankruptcy, at Neuner & Ventura LLP, our bankruptcy attorneys want to make sure that all your needs are met. Whether you want to know more about how your debts will be discharged and your credit score will be affected or you still need time to ponder your various options, we are here to help. We have extensive experience with handling both types of bankruptcies, and we’ll assist you in any hearings that occur throughout the filing process.

If you’re seriously considering filing for bankruptcy in New Jersey, contact us at our Marlton office today by calling (856) 596-2828. A Marlton bankruptcy lawyer at our firm can determine which form of bankruptcy is best for your situation.

Dealing With Your Credit Score After Bankruptcy

December 17, 2018 by Steven Neuner Esq.

Understanding Your Credit Score After Bankruptcy

One of the biggest issues that prevents New Jersey residents from filing for bankruptcy despite facing mountains of debt is the potential credit score ramifications. When you file for bankruptcy, your credit score can sometimes drop by as much as 200 points. At the same time, however, this effect is not permanent; you can take steps to rebuild your credit after bankruptcy and the debt relief that accompanies it. A bankruptcy attorney can help you understand the impact on your credit score after bankruptcy.

Bankruptcy and Your Credit Score

Some people may expect that they will have a higher post-bankruptcy credit score if they have avoided negative entries on their credit report before filing. Of course, many people file for bankruptcy after late fees, escalating interest rates and collector calls have already made their lives extremely difficult. In general, however, a positive payment history before bankruptcy does not significantly lower the effect of bankruptcy. Instead, the presence of the bankruptcy itself is the most significant factor in evaluating your post-bankruptcy credit, especially in the immediate period after filing.

A bankruptcy attorney can provide more information about how bankruptcy will affect your credit. It is well known that Chapter 7 bankruptcy information remains on your credit report for 10 years. However, not all entries related to bankruptcy remain on file for that long. The following items remain on your report for seven years:

Chapter 13 bankruptcy filings and related public records
Judgments, tax liens and third-party collections discharged in the bankruptcy
Credit cards and other lines of credit discharged in bankruptcy

Where Your Credit Score Comes From

credit score after bankruptcy FICO credit scores, calculated by the Fair Isaac Company, are used in making credit decisions about car loans, home mortgages and credit cards. These scores can range from 300 to 850, and a score around 720 is considered to be a good credit risk. There are three main credit agencies, Trans Union, Equifax and Experian, that report information for the calculation of this score. These agencies will look at your outstanding debt, bankruptcies, payment history, new credit and the length of your credit history.

Even though bankruptcy information is quite persistent on a credit record, filers won’t be consigned to poor credit throughout that period. A low credit score can have an impact on many areas of life, so it can be in your interest to elevate that rating as soon as possible. Within four or five years after bankruptcy, you may be able to achieve a “good” credit score.

You Can Rebuild Your Credit After Bankruptcy

There are several ways people can begin the process of rebuilding their credit scores after filing for bankruptcy. One of the most common is opening a secured credit card. These credit cards are backed by a cash deposit that you made with the card issuer, so they are in some ways similar to a prepaid or debit card. However, rather than simply depleting the balance, you will be expected to pay the bill each month for your purchases. Because of this, secured credit cards report your payment behavior to credit reporting agencies. This means that they are one of the most effective methods to begin establishing a positive credit history.

Once you begin establishing more positive credit, you could also apply for small personal installment loans. Be sure to always choose options that report to the credit bureaus. Adding positive credit items to your report will begin to bolster your score. Of course, once you begin to open new lines of credit, it’s important to make your payments on time to establish a positive payment history. You should also aim to keep your cards well below your limits as lower balance utilization can be a positive factor when evaluating your credit.

Contact Neuner & Ventura, LLP

If you’re facing mounting debt from credit cards, medical bills, car loans or lines of credit, you may be looking for a solution that can provide some relief. The experienced New Jersey bankruptcy lawyers at Neuner & Ventura offer free consultations to help you better understand your options. Call our Marlton office at 856-596-2828 or use our online form to contact us today.

What Happens to Unsecured Debt in a Chapter 13 Bankruptcy?

December 14, 2018 by Steven Neuner Esq.

The Fate of Unsecured Debt Balances in Chapter 13 Bankruptcy

If you have $394,725 or less in unsecured debt, you may be eligible to file for Chapter 13 bankruptcy. While creditors must be paid in a Chapter 13 case, you may not necessarily pay off the entire balance. In such a scenario, these balances may be discharged when the repayment period ends. Your bankruptcy lawyer can answer questions about your unsecured debt balances.

How Much Are You Required to Pay to Creditors?

The amount of unsecured debt that you are required to pay depends on the terms of your repayment plan. Generally speaking, unsecured creditors must receive at least what they would have received if you had filed for Chapter 7 bankruptcy. Of course, the amount that you have to pay each month to all creditors depends on the amount of disposable income that you have. Your disposable income is what is left over after paying for necessities like food, shelter and other basic needs.

What Is Considered to Be Unsecured Debt?

Any debt that is not labeled as secured or priority debt is considered to be unsecured in a Chapter 13 case. Priority debts include child support payments owed now or those owed in the future, back tax debt and student loan debt. Secured debts include home or auto loans where there is collateral attached to the loan that a lender has an interest in. It is important to know that secured debts may be converted to unsecured debts when filing for Chapter 13 bankruptcy.

Converting Secured Debts to Unsecured Debts

Your bankruptcy attorney may talk about the process of turning a portion of your secured debt into an unsecured one. For example, if you owe $5,000 on a car that is only worth $4,000, that extra $1,000 could be reclassified as unsecured in nature. If you have a second mortgage, the difference between the amount owed on the loan and the value of the home could be reclassified as unsecured debt. In some cases, the lien held by the second mortgage lender could be stripped entirely. Your bankruptcy attorney may be able to further explain this process and how it may be beneficial to your case.

You Must Adhere to Your Payment Plan

While unsecured debt balances will generally be discharged at the end of a Chapter 13 case, it is important to make payments to creditors in a good faith manner. This means that you must first propose a payment plan that strives to take all creditors into consideration. Once the plan has been proposed and approved by creditors, the trustee and the bankruptcy judge, you must make payments according to that proposal.

Failing to proceed with payments could get your case dismissed, which may open yourself up to foreclosure, repossession or other negative consequences. The length of the payment plan will be based on your income and assets at the time of filing. If you have relatively few assets or a low income, the repayment plan will cover three years.

What Happens After Unsecured Debts Are Discharged?

When an unsecured debt is discharged after a Chapter 13 case, creditors cannot come after you for payment. This is true whether the lender was a national bank, your employer or a family friend. However, you may still voluntarily make payments on the debt in an effort to retain relationships with friends, family members and business partners.

If you receive calls or letters from creditors or debt collectors about a debt that has been discharged, contact your bankruptcy lawyer or the court that oversaw your case. It is also a good idea to check your credit report to ensure that creditors have accurately reported information about your bankruptcy and the status of a debt.

Generally speaking, it may be easier to go through a bankruptcy proceeding with a bankruptcy lawyer. For assistance, you can contact the office of Neuner & Ventura LLP in Marlton, NJ, by calling (856) 596-2828. You can also use the contact form on our website to learn more.