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New Jersey Debt Relief: Your Guide to State Laws and Managing Debt

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You’d think being dubbed the “Garden State” would mean New Jersey has a lot of green. But for residents, they could use a little more green. More than one in four New Jersey residents have debt in collections, according to the National Consumer Law Center.

See how the people of New Jersey handle their debt and your debt relief options if you live in New Jersey.

Debt in New Jersey: At a glance

New Jersey debt
Type Per capita balance, 2018 Rank out of 50 states* U.S. per capita balance
Credit card debt $4,040 3 $3,220
Student loan debt $6,090 8 $5,390
Auto debt $4,020 41 $4,700
Mortgage debt** $40,630 11 $33,680
*No. 1 is the highest
**First-lien debt only
Source: Federal Reserve Bank of New York, March 2019

Debt collection in New Jersey

The Fair Debt Collection Practices Act (FDCPA) makes it illegal for debt collectors to harass you to pay a debt.

This means that debt collectors contacting you on behalf of a company to get you to pay an old debt can’t contact you between 9 p.m. and 8 a.m., can’t threaten you or your family, and can’t lie about your debt. For instance, they can’t tell you that you owe more than you do or try to convince you that you’ll be arrested if you don’t pay up.

Responding to collection letters

Debt collectors have the opportunity to call, text, email and send you letters in the mail. But if you send a written request through the mail to end contact, they’re obligated to do so. You may want to send it by certified mail and get a notification that it was signed upon receipt. This will prove that someone at the business accepted the letter.

If you’re getting frequent phone calls, ask for more information about the debt, like where it came from and how much it is. If you have an attorney, the debt collector must stop communicating with you and instead continue all correspondence through your lawyer.

Whether the debt is yours or not, request debt verification from the debt collector. The collector must send you proof that the bill is yours. If it’s not yours, you have 30 days to dispute it. If it’s yours, though, you can negotiate with collectors on a payment plan that’s best for both of you. It’s easy to feel pressure under the circumstances, but try to keep a clear mind and don’t agree to anything you know you can’t financially handle. Once you do reach an agreement, get it in writing so you and the debt collector are clear on how payment will be handled.

If you discover that the debt isn’t yours, tell the debt collector that. If they don’t let up, you can file an online complaint with the Consumer Financial Protection Bureau, the Federal Trade Commission or call the New Jersey Office of the Attorney General at 609-292-4925.

Understanding New Jersey’s statute of limitations

The statute of limitations is how long a company has to sue you to collect an old debt. Once the statute of limitations is up, debt collectors have a hard time getting money you once owed.

New Jersey Statute of Limitations on Debt
Mortgage debt 6 years
Medical debt 6 years
Credit card 6 years
Auto loan debt 4 years
State tax debt 6 years

In New Jersey, the statute of limitations range from four to six years, depending on the type of debt. For example, if you have private student loan debt you haven’t made a payment on in more than six years, the statute of limitations is up. Once the statute of limitations is up, the debt becomes known as “time-barred” debt.

Debt collectors can still contact you regarding time-barred debt, and if you start to make payments on it, the statute of limitations starts over. If you’re unsure if your debt is time-barred, you can request debt verification or ask the debt collector when a payment was last made. If it’s been longer than the statute of limitations in the table above, it’s time-barred.

But keep in mind you may still be liable to pay a debt even if the statute of limitations is up. Some creditors might still try to sue you in court for time-barred debts. If this happens to you, find a reliable attorney to figure out your next steps. Don’t ignore a court summons and follow protocol, even if the law is on your side.

Debt that hasn’t been paid can stay on your credit report for seven years, and can hurt your chances of borrowing in the future.

New Jersey debt relief programs

If you’re struggling to get control of your debt, you have some options as a New Jersey resident.

Community Credit Counseling Corp. is a nonprofit based in New Jersey that aims to helping you reduce your monthly payments, interest charges and get out of debt.

Consumer Credit and Budget Counseling Inc. is a nonprofit credit counseling company based in New Jersey. They help with mortgage delinquency, credit counseling, foreclosure prevention and other types of debt relief.

Consumer Credit Counseling Service of Delaware Valley Inc. (also known as Clarifi) is a nonprofit that provides services in Pennsylvania, Delaware and New Jersey. You can get budget, financial health and mortgage default counseling for free.

Garden State Consumer Credit Counseling Inc. (also known as Navicore Solutions) is a nonprofit financial counseling company that helps you tackle credit and debt, student loans, housing, bankruptcy and other financial education needs.

Payday lending laws in New Jersey

Payday loans are very short-term loans that you pay back by your next payday, usually within two to four weeks. Interest rates are very high — sometimes upwards of 400 percent or more.

New Jersey is one of a few states that prohibits payday loans.

Tackling debt in New Jersey

Deciding to handle your mountain of debt is a great realization, but the execution may cause you to feel a bit overwhelmed. Your financial situation may determine which debt payoff strategy is right for you. Review all your choices before deciding on one — you may find a mix of a few works best for you.

Consolidate your debt

Combining all your debt into one manageable payment makes it easier for you to pay off your debt based on your income and what you can afford. Debt consolidation is when you take out a new loan to pay off all your outstanding debt from all your lenders. You’ll get new repayment terms and a new, fixed interest rate.

The most popular method of debt consolidation is taking out a personal loan. You don’t need excellent credit to qualify for all personal loans, but the better your score is, the better terms you’ll qualify for. It may be best to start with your local credit union before checking out other sources for loans.

If your credit score isn’t so great because you’ve fallen behind on payments, you may need a cosigner in order to qualify or to get the best rate possible. A cosigner is great to help you qualify for a loan or a lower-interest loan, but remember to use them cautiously. If you fall behind on personal loan payments, both your credit scores will tank.

Refinance your debt

When you refinance a home, auto or student loan, you replace your old loan with a new loan, along with a new interest rate and terms. If your credit score is good, you may have the chance to lower your interest rate, which can reduce your overall monthly payments.

If you decide to refinance your student loans, you can move all your different student loans into one easy-to-manage repayment system. When you refinance, you’ll essentially be restarting your repayment over again. Even with potentially lower monthly payments, you’re going to spend more time paying off your loan. Keep in mind, however, that if you opt to refinance federal student loans, you will forfeit the option to participate in repayment or forgiveness programs.

Keep in mind that refinancing doesn’t guarantee a lower interest rate, and you should consider skipping it if your payments look like they would increase. If you can score a longer term on your new loan, but your interest rate stays the same, you could see a drop in monthly payments as well. However, since the life of the loan is longer, you’re still going to pay more over time.

Try a balance transfer credit card

You can try a balance transfer card as another way to cut down your debt. With a balance transfer, you’d move your outstanding credit card balance to another card that preferably offers a 0% introductory APR, usually lasting around 12 to 21 months.

Since high credit card interest can hold you back from being able to pay your balance off in full, a balance transfer can remove the interest charges you would normally get, albeit only for a short time. And some transfers won’t be able to move over your entire outstanding balance. That means you’re still on the hook for credit card payments with interest included, along with your new credit card balance.

You may also have to pay a balance transfer fee, usually about 3% of the transfer amount. Keep this in mind as you explore credit card balance transfer options — if you’re unable to pay off the card before the promotional period ends, you could end up in even deeper debt than you were in before.

Filing for bankruptcy in New Jersey

While usually considered a last resort, you may have to start exploring options for bankruptcy. If you’ve looked over all your other choices and haven’t found anything helpful, you may want to consult the help of a bankruptcy attorney to see if you qualify.

Bankruptcy isn’t guaranteed to remove all your debts, and depending on the option you choose, you may still have to make payments on them.

There are two major types of bankruptcy: Chapter 7 and Chapter 13. Chapter 7 is when your assets are liquidated in order to repay your outstanding debt that is left after whatever is discharged. It’s relatively quick — it only takes a few months or so to complete — but not everyone qualifies. For Chapter 7, you’ll need to prove you’re unable to pay your debt based on your discretionary income.

For Chapter 13, your debt moves into a consolidation phase. While some debt is discharged, the rest is reorganized into a manageable monthly payment determined by the court. You’ll pay it off within three to five years, according to the court-mandated ruling, and if you don’t, your assets, such as your home, could get seized.

It costs $335 to file a Chapter 7 bankruptcy petition and $310 to file Chapter 13. Depending on your ruling, you may be able to get that fee waived or rolled into your repayment plan. You may also get to pay that fee in installments. If you have a bankruptcy lawyer, you may end up paying more due to attorney fees.

The bottom line

Suffering from debt is hard, but it doesn’t have to stay that way. The good news is that you have a lot of debt consolidation choices in New Jersey. Many are low or no cost options that are made just to help you tackle your debt and become financially free.

As you’re reviewing your options, it’s OK to decide on more than one or explore something at a later time. Getting out of debt is different for everyone, and the best option for you may be different than what someone else does. Don’t worry if it’s not perfect; choosing to get out of debt and working toward a debt-free life is a big, important step.

The information in this article is accurate as of the date of publishing.


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