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Bankruptcy can provide relief of court debt

The economy hasn't only been tough on individuals. Many state treasuries have been struggling to shore up their coffers as well. That's why New Jersey and other states are now working with collection agencies to collect unpaid court debts.

In New Jersey, a court can work with a collection agency to collect a court debt that is owed for things such as traffic fines and other costs assessed by the court. Qualifying cases can be sent to collections only after the court has already pursued other methods -- such as license suspension and arrest warrants -- that have proved to be fruitless.

The law governing the right of New Jersey's courts to seek relief of debts was passed in 2010 and requires each court to apply for the program. Currently, 17 of the state's municipalities have active programs and many more have applied. There are more than half a million cases in New Jersey that are eligible for collection on debts worth almost a quarter of a billion dollars.

People seeking debt relief have a number of options available to them. It is, of course, advisable to work directly with the entity owed whenever possible, and to negotiate a payment plan before enforcement measures are put in place. If the person cannot afford to pay the debt, however, bankruptcy may be one way to eliminate those fines.

Municipal traffic fines and charges from the Department of Motor Vehicles may be considered unsecured debts, which can be discharged through Chapter 7 bankruptcy. Many unsecured debts can also be discharged through Chapter 13 bankruptcy, but a bankruptcy attorney can help to explain how this would work.

In addition to relief from court fines, some of the benefits of bankruptcy include stopping contact from creditors who are trying to collect a debt as well as preventing creditors from garnishing wages, issuing warrants and revoking or suspending one's license.

Source: Asbury Park Press, "NJ among states working with collection agencies to settle debts," Brittany Hargrave, June 27, 2013

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