CCCS of Central New Jersey

CCCS

A Service of Family Guidance Center Corporation

Bankruptcy

According to financial expert and award-winning journalist Terry Savage, who recently teamed with the National Foundation for Consumer Credit to offer consumers advice on successful financial management, "Bankruptcy does not wipe your credit slate clean and give you a fresh start. Bankruptcy should be a last resort to solving financial problems -- when the mountain of debt is so great and the creditors so unrelenting that no other accommodation can be reached."

Consider these facts:
* When you file for bankruptcy, it stays on your credit report for up to ten years.
* You'll have difficulty getting future credit such as mortgage loans.
* Any credit you get will probably cost you more in terms of interest rates and fees charged.
* Alimony, child support, and most taxes survive bankruptcy and will still be owed.
* Bankruptcy can affect your ability to get a job, because many employers obtain a credit report when assessing job qualifications. As of October 1997, changes in the law require your consent for this.

Chapter 7 & 13

Chapter 7
Chapter 7 bankruptcy is referred to as "straight bankruptcy." The rules that apply to this chapter are found in Chapter 7 of the bankruptcy code. It is also known as "liquidation" because the debtor's unprotected assets are liquidated or converted to cash by a trustee who is appointed by the court to disburse the funds to the debtor's creditors to repay part of the debt owed. Any person, partnership, and most corporations can file Chapter 7.

Chapter 13
Chapter 13 is the chapter of the bankruptcy code which affords the debtor the opportunity to repay all or part of his debts over an extended time period. This type of plan requires that the debtor have a consistent income to make future payments for the duration of the plan. Chapter 13 is designed for consumers who need relief from their creditors and the collection activity to reorganize their debts and come up with a plan to repay them. In this chapter, the debtor is allowed to keep basically all of his assets, including those not exempt and not mortgaged.

Both types of bankruptcy may get rid of debts where creditors have no specific rights to property and stop foreclosures, utility shut-offs, repossessions, garnishments and debt collection activities.

The Last Resort

Think about bankruptcy as a last resort. There are a number of alternative ways to fix your finances without risking your credit rating. Rather than trying to avoid your creditors, talk to them. Let them know that you'd like to work out a plan to begin paying off your debt. Call a credit counseling agency for help in setting up a Debt Management Plan. A qualified agency can talk to your creditors and help reduce your monthly payments, interest charges, and phone calls from creditors.

Contact us at 888-379-0604 to find out about CCCS's financial counseling and debt repayment programs.

If you need legal advice on filing bankruptcy, contact your local bar association for a referral. If you don't have the money to pay for an attorney, you can contact legal aid services, a university law school with a legal assistance program, or your local bar association for a referral to an attorney who can help you free of charge. Look for an attorney who is state-certified or certified in bankruptcy practice.

Adapted with permission from the site of the National Foundation for Consumer Credit