New Jersey has a high cost of leaving compared to many other American states. It comes as no surprise then that people often find themselves with high-interest and long-term debt that they need to repay. These debts can spiral out of control, causing even financially responsible people to fall behind if they become ill, make a bad investment or have a break in employment.
Credit Karma points out that one way to tackle this is to file Chapter 13 bankruptcy and create a court-approved repayment plan. This may give the debtor three to five years to repay current debts owed. When deciding how much the person can afford to repay, the courts consider the following:
- Taxes
- Medical bills
- Household income
- Cost of food and utilities
Payments are usually either bi-monthly or monthly and they consolidate the debts. If the debtor keeps up with payments for the three to five years, then the court may decide to discharge most of the debts owed. In some instances, all debts get discharged.
Many people worry about how filing for Chapter 13 bankruptcy may affect their credit scores. Experian provides reassurance that recovery is possible and may take a shorter period of time than many people think. Credit-builder loans and secured credit cards help people to rebuild their credit scores, thereby helping to speed up the process.
After a year or two of a good payment history, they may then become eligible for regular credit cards. After seven to ten years, the bankruptcy filing typically disappears from the credit report almost as if it had never happened. The key to keeping it that way is to build healthy and cautious financial habits during recovery onward.