The economic downturn and related job loss has taken its toll on New Jersey consumers. Almost 40,000 non-business bankruptcies were filed in New Jersey in 2010. Of those, approximately 30,000 filed for Chapter 7 relief.
Credit card debt is a major issue in most consumer bankruptcies. You are not alone in needing relief from overwhelming credit card debt; many people in New Jersey have benefitted from the fresh start that a Chapter 7 bankruptcy provides.
Traps and Pitfalls of Credit Card Debt
Using a credit card does not necessarily mean you will have to file bankruptcy in the future. But there are a few key warning signs that it may be time to talk to a New Jersey bankruptcy attorney about your credit card use. If you have done any of the following, a Chapter 7 bankruptcy may be the help you need:
- Taken out a cash advance from one credit card to make the minimum payment on another credit card
- Used a credit card to live beyond your means, purchasing things that you otherwise could not afford
- Lost your job and are living off your credit cards
- Used a credit card to pay for basic needs, including food or housing because you had no cash in your checking account
There are many reasons why people end up owing more than they can pay on credit cards. Whatever your reason, bankruptcy may be your best option for a fresh start, free from credit card debt. Contrary to a common belief related to the 2005 bankruptcy law changes, credit card debt can be eliminated through a Chapter 7 bankruptcy.
Chapter 7: The Credit Card Bankruptcy
A Chapter 7 bankruptcy, often considered a no-asset or liquidation bankruptcy, allows a filer to wipe out most, if not all, unsecured debt. Unsecured debt is money that is owed to which no collateral is attached; unsecured debt is not tied to property. When you use a credit card, your signature is your promise to repay, and that is all. Unsecured debt also includes personal loans and medical bills; it does not include your mortgage, car loan or other debt tied to property.
There are other options for dealing with credit card debt. But be wary. Settlement companies or consolidation companies may offer to help you settle your credit card debt for less than you owe, but you are typically required to pay back at least some of the debt that you owe. There are also many unscrupulous debt settlement companies that will take your money but not really help you - or even make things worse.
A Chapter 7 bankruptcy may not require repayment of any of your unsecured debt. Before entering into any sort of agreement for assistance from a consolidation or settlement company, you should consult a bankruptcy attorney. An experienced lawyer can fully explain your options for eliminating credit card debt and starting over.
