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Unsecured Consumer Debt Issues During and After the Stay-At-Home Order is Relaxed: A New Jersey Bankruptcy Attorney's Perspective

April 20, 2020 | Posted In Business Litigation

As all NJ residents know, we are all mandated to stay at home due to the pandemic, unless employed in an essential occupation. We also know that for many, this has meant layoffs/furloughs, with unemployment benefits being their only source of income.

What will the economic new normal look like for consumers in relation to their unsecured debt? Unsecured debt is any debt that is not secured by an asset, like a house mortgage, home equity line of credit, or car loan. It is the hope of all consumers, as well as all New Jersey bankruptcy attorneys dealing with debtor/creditor rights, that the unsecured creditors (and utility providers) will allow great flexibility in repaying past due obligations and meaningful debt forgiveness/reduction.

However, creditors may insist that all past due monthly payments are to be brought current, and/or they may add on late fees and interest and penalties. If consumers find themselves unable to pay their debt during and after the relaxation of the stay-at-home order, there is relief by filing for bankruptcy protection.

A consumer’s inability to pay their debt may be a result of not receiving enough money from unemployment benefits, not being rehired after businesses open again, or simply not being able to catch up after being out of work for a lengthy period of time during the economic shut down.

What Can Happen if You File Chapter 7?

If a consumer files a Chapter 7 bankruptcy petition, their unsecured debt, such as credit cards, personal loans, past utility bills and medical bills, will be eliminated upon discharge. However, many consumers have had their unsecured debt sold from creditors like credit card companies to secondary debt collectors (private businesses that buy unsecured debt). These debt collecting companies have been, and most likely will continue to be, very aggressive with trying to collect on the debt owed that they now own.

What Debt Collectors Do


Debt collecting companies buy unsecured debt for virtually pennies on the dollar amount owed and only recoup their cost of buying the old debt and make a profit by having the consumer pay as much as they can on the debt. Many of these debt collecting companies have used very aggressive tactics in the past and continue to do so by making numerous threatening telephone calls, sending threatening letters, and using illegal tactics of threatening to initiate wage garnishments against your salary and executions against your bank accounts even when there is no judgment.

Though not legally settled at this time, it is expected that bank accounts that are currently or about to be executed against and have the “Coronavirus Stimulus Check” direct deposited into may be seized by these debt collecting companies.

Chapter 13 Bankruptcy Might Be an Option

If a consumer is not able to file a Chapter 7 bankruptcy but can file a Chapter 13 bankruptcy, then the consumer may pay a very small percentage back on the unsecured debt, which includes credit cards, personal loans, past utility bills, medical bills. Upon discharge, the obligation to pay these unsecured debts will be eliminated.

New Jersey Bankruptcy Attorneys Are Here For You

Discussing your options with a New Jersey Chapter 7 and Chapter 13 bankruptcy lawyer as we go through and ultimately exit this portion of history will allow consumers to be informed of their choices and options under the Federal Bankruptcy Code.

It continues to be the hope of all involved with creditor/debtor rights that the private debt collection companies, mortgage companies, credit card companies, utility providers, car lending companies, unsecured loan providers, cell phone carriers, Internet/ cable providers, etc. will offer options to help all consumers catch up on late payments or restructure payments. However, if they do not, then all consumers need to know their rights for debt relief through bankruptcy.

Discuss your options under Chapter 7 or Chapter 13 with one of our New Jersey bankruptcy attorneys in confidence. To schedule a free, no-obligation consultation at Helmer, Conley and Kasselman, call us at 877-435-6371 or tell us how we can help online today.

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Helmer, Conley & Kasselman, P.A.

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