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bankruptcy, chapter 13, chapter 7, COVID-19, filing for NJ bankruptcy, New Jersey bankruptcy

Filing for NJ Bankruptcy Because of COVID-19

On Behalf of Veitengruber Law | Aug 06,2020

Throughout the pandemic, many Americans have been piecing their finances together bit by bit to get by. This has sometimes meant deciding which bills and debts will go unpaid in order to stay above water as long as possible. As business closures and restrictions stretch into the second half of the year, many are facing the reality that these “temporary” setbacks aren’t going away anytime soon. If you are one of the many Americans who have accrued a substantial amount of credit card debt, personal loans, or missed payments due to financial hardships caused by COVID-19, you aren’t alone. Filing for NJ bankruptcy may help you get out from under your debts so that you can face whatever challenges the future holds. When you take on debt, the creditor's expectation is that you will be paying back that debt. When you cannot pay back that debt and a bankruptcy occurs, the bankruptcy court will determine which debts can be discharged and which debts the borrower will still be responsible for. The circumstances surrounding debts accrued during COVID-19 are a specific scenario that courts have had little experience dealing with previously. There are certain rules that govern what debts will be considered for discharge during bankruptcy. For starters, individuals who have incurred debt for "personal use or purpose” are restricted in the debts they can discharge. Generally, if it's clear that a debtor is likely going bankrupt, any debts accrued during that time period (deemed unnecessary) cannot be discharged. So, if you lost your job and are unable to pay your bills and therefore know you are likely headed for bankruptcy, you cannot charge an extravagant getaway to your credit card knowing you don’t intend to pay back the debt. Because of this, debts deemed mostly “consumer debts” can be denied discharge or be converted to be covered under Chapter 13 bankruptcy. Under Chapter 13 bankruptcy, debtors have a set period of time to pay back debts under an agreed upon repayment plan. Consumer debts are considered any debt accrued for personal, family, or household purposes. This includes vacations, clothes, and entertainment—but it also includes food, utilities, and medical debts. There is the potential for the debtor to argue in court that the consumer debt incurred was not voluntary. Legal precedent does exist for debtors to win the argument in court that debts not “voluntarily incurred” should be eligible for discharge under Chapter 7 bankruptcy. But this determination is entirely up to individual courts and judges. For instance, a judge may determine a life saving medical treatment—while clearly for personal use—was not voluntarily incurred and therefore is eligible for discharge, whereas a cosmetic medical procedure would not be. This entire scenario calls into question exactly what debts are voluntary and which debts are necessary to sustain normal life. The reality of these questions is even more complex in the face of the coronavirus pandemic. The choices made by the debtor when it comes to consumer debts will be closely scrutinized— but so will whether or not the debt(s) could be avoided due to the very unique circumstances we're all living through. In many ways, the current situation in the US is unprecedented. Debtors will have to work closely with debt counselors, attorneys, and creditors in order to find solutions to these issues as bankruptcy cases caused specifically by COVID-19 are on the rise in America. Veitengruber Law is an experienced bankruptcy law firm and, more importantly, WE CARE ABOUT OUR CLIENTS. We can provide guidance throughout the bankruptcy process. If COVID-19 is impacting your finances, we can help you find solutions to manage your debt. We promise that if you reach out to us, your problem will not be ignored.

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