Dying with Debt in New Jersey: Who Pays?

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LIVING with piles of outstanding debt can become an extremely stressful and harrowing experience. Luckily, there are many fail safes in place in NJ designed specifically to help debtors who are struggling to get out from under some heavy debts. Options include loan modifications, mortgage refinancing, debt negotiation, filing for chapter 7 debt forgiveness, and reorganizing your debt schedule via chapter 13 bankruptcy.

What happens to your debts if you pass away without having paid them back in full? For some people, this may not be a concern, but most people do not wish to leave their descendants stuck with mountains of their old debt. The question then becomes: Who pays for the debts of the deceased?

The answer has a lot to do with whether or not the deceased lived in a community property state. In a community property state, all earnings made by each party (married person) during the length of the marriage are considered to be owned equally by both spouses. The same ownership applies to any debts that were acquired by either spouse while living in a community property state.*

Community property states include: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. In Alaska, married couples have the ability to choose whether or not they want to assign their assets (and debts) as community property or not. As you can see, a great majority of the states in the U.S. are in fact, not community property states.

As New Jersey is not a community property state, a surviving spouse is not specifically held liable for the debts left behind by their late husband or wife unless the debt was something that both parties put their signature on. Therefore, a debt left behind when someone passes away will not tarnish the credit score of the spouse that survived.

However, a deceased person’s estate can be held responsible to repay creditors. This means that any assets left behind can be sold in order to pay off outstanding debts. Luckily, if the deceased has a small estate with relatively few assets, creditors will have to write off the debt.

New Jersey offers family members a simplified probate system that can be used when the deceased had no will and/or very few assets. This simplified probate system is for use when the assets of the deceased are not more than $20,000, which the surviving spouse would be entitled to in total. If the deceased had no surviving spouse, the threshold is $10,000.

If the deceased left behind a large estate, naturally all of their debts will be easy to pay off by simply selling some of their assets.

Navigating probate can be confusing, especially because you will be doing so while simultaneously dealing with grief and loss. Consulting with the deceased’s estate planning attorney may help you deal with creditors during this time. Educating yourself about the New Jersey probate process will be your best defense at keeping creditors and debt collectors at bay.

 

*More info at nolo.com

 

 

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Fines, Tickets & Bail Bonds: Can They be Discharged in Bankruptcy?

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If you are filing for bankruptcy, it’s important that you include all of your debt on your bankruptcy pleading. To omit any of your debts is considered bankruptcy fraud and can cause your entire case to be thrown out of court. Maybe you’d rather not include some debts on your bankruptcy paperwork because you’re embarrassed by them. Unfortunately, the bankruptcy court doesn’t take your feelings into consideration, and they want to know about all of your debts. Every. Single. One.

Regardless of whether you’re talking about criminal fines, tickets, penalties or bail bonds – they all must be included in your bankruptcy pleading. However, even though you must list all of your debts, there is no guarantee that they’ll all be 100% discharged (forgiven).

When it comes to government fines and penalties, it matters less what they’re called and more what their purpose was. Any fine or ticket that had the purpose of generating money for the government (even due to misconduct on your part) can be discharged in a chapter 7 bankruptcy.

On the other hand, if you participated in a criminal act and were fined as a result, you’ll likely be unable to discharge it. Any fine or ticket that has the goal of punishing law-breakers for their actions will not be dischargeable in a bankruptcy.

Many times it can be difficult to determine if your government fine, penalty or ticket will be able to be wiped out in bankruptcy. It can be tough to discern whether your fine was intended to compensate the government or punish you for the crime.

Some of the most common fines/penalties include:

Bridge tolls – Although sometimes controversial, most bankruptcy judges agree that unpaid bridge and road toll fines are dischargeable due to the fact that their main purpose is payment to the government for road or bridge use.

Bounced check fees – Writing bad checks is a fraudulent act; therefore, you will not be able to erase them in a bankruptcy.

Fees for violation of building codes – Violating building codes is considered to be a criminal act; therefore, these fees aren’t dischargeable either.

Tax penalties – This type of penalty has its own set of guidelines when it comes to bankruptcy law.

Unpaid bail bonds – Since bankruptcy Code 523 states that bail bonds are not monies owed to a governmental authority, they are dischargeable as long as there wasn’t any fraud involved in their acquisition.

Remember, having your debts relieved via bankruptcy is not a basic right. In order to be granted a discharge, there are many rules and regulations you need to follow throughout the entire bankruptcy process. Failing to list all of your creditors is only one of many reasons your bankruptcy petition can be denied. Some other actions to avoid during the entirety of your case include:

Failing to provide any and all documents required

Hiding property or assets with intent to commit fraud

Hiding or destroying financial records

Lying about anything relating to your case, and

Disregarding a court order

To learn more about the New Jersey bankruptcy process and what it takes to file, please read our bankruptcy blog. We will consult with you free of charge, so call our office or email us to set up an appointment. You have nothing to lose but your debt!

 

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Cancelled Flight? Know Your Rights!

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While the blizzard of 2016 has a plethora of New Jerseyans looking forward to queuing up Netflix and eating snacks all weekend, there are some people who aren’t happy about the storm, not even one little bit.

It’s true that the bitter cold months of January and February are typically the most popular time of year to jet out of here and into a more tropical locale. After dealing with cracking skin and endless static cling, a week-long beach-side getaway sounds downright blissful. Not to mention, off-season rates for everything vacation-related can mean big savings for anyone traveling on a budget.

The risk of winter wanderlust, for those of us living in a seasonal climate region, is naturally that a gigantic snowstorm will roll into town just as you’re about to roll out. This can result in delayed flights, which may put a few kinks into your itinerary, OR  (cue horror music) cancelled flights.

Unfortunately, most people discover much too late that they just don’t have many rights when it comes to their flight being cancelled. In the United States, airlines are by law only required to provide passengers with food and water if they’re stranded on the runway for more than two hours. If your flight gets cancelled, you may get a voucher for a slightly discounted hotel room. You might also be pointed in the direction of the airport benches for the night.

What rights do you have as a consumer with a cancelled flight?

We all know that a discounted hotel room near the airport isn’t anyone’s idea of making up for lost snorkeling time and mai tais. However, the only thing airlines are required to do is to make sure you reach your destination at some point. It may not be until the next day; it may be several days later.

As you can imagine, this can royally mess up vacation plans, as hotels and resorts are not likely to hold room reservations when you don’t show up. This can very quickly derail your entire vacation.

In order to be your own best advocate, start calling your airline on your cell phone while you simultaneously stand in the ticketing line. Weather conditions may cause other travelers to ditch their travel plans, opening up plane seats that you can use! If your airline simply doesn’t have any open seats on any flights within a reasonable time frame, ask them to find you a seat on a different airline.

It’s up to each airline individually to determine how much help they want to be to their delayed travelers, however, persistence often pays off. If you absolutely can’t get a flight out in time, contact the hotel or resort where you’ll be vacationing. Alert them to your situation and ask if they can push your entire vacation back a few days to accommodate your travel troubles. You may be pleasantly surprised by how flexible some establishments will be – as long as they have openings.

You may have to make do with a few shifts in your overall vacation plan, but by being proactive you can almost always salvage most of your much-needed getaway. Preparedness and quick thinking will give you the best chances of reaching your destination even when weather threatens to ruin everything.

 

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New Jersey Bankruptcy: Frequently Asked Questions

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While it’s true that everyone’s financial situation is unique, there are a number of commonly asked questions about the bankruptcy process that apply to all debtors. To help our readers, we compiled a list of the questions most frequently asked by our bankruptcy clients. Use this page as a reference when getting started with your own bankruptcy case.

  • How could bankruptcy help me? Many people don’t have a good understanding of what it means to file for bankruptcy, so it can seem daunting and confusing. In short, bankruptcy (chapter 7) gives debtors relief from their unsecured debts. Many, if not all of your unsecured debts can be wiped clean! Filing for bankruptcy can also: stop your home from being foreclosed upon, help you save your vehicle from repossession, put a stop to annoying debt collectors, and prevent any of your utilities from being shut off.

 

  • Should I file for Chapter 7, 11 or 13? File for chapter 7 if you have very little disposable income and significant unsecured debts. You should consider chapter 13 if you do have a decent income and would be able to pay back some or all of your debts if they were reorganized more optimally. Chapter 11 bankruptcy is intended to be used by businesses and people who owe substantial amounts of money.

 

  • Would I even qualify for bankruptcy? In order to determine if you’d qualify to file a NJ bankruptcy petition, you’ll have to discuss your personal financial details with your bankruptcy attorney. In general, you will need to disclose: a list of all of your debts, any property you own (personal and real estate), pension(s), stocks, and life insurance policies. It is impossible for us to determine whether or not you’d qualify for bankruptcy without discussing your personal finance details with you.

 

  • Will I lose everything I own? This is one of the most common misconceptions held by many people regarding bankruptcy. In filing for chapter 7 bankruptcy, you’d be able to keep anything that is considered ‘exempt’ from your creditors. You can learn more about New Jersey state and federal bankruptcy exemptions here.

 

  • Does filing for bankruptcy involve me physically attending court? You will have to attend court for something called the Meeting of Creditors, which helps your bankruptcy trustee decide what assets to liquidate. The good news is that your New Jersey bankruptcy attorney will attend the meeting with you.

 

  • What will happen to my credit score? Filing for bankruptcy definitely does drag your credit score down. We try to look at it as “there’s nowhere to go but up!” A bankruptcy on your credit report is better than having a large number of unpaid debts that you’ve chosen to ignore.

 

  • Will I be 100% debt-free after a bankruptcy discharge? Chapter 13 will help you set up a payment plan that is achievable for you and will not involve liquidation of your assets. A chapter 7 discharge means nearly all of your debts will disappear, with the exception of student loans, child support/alimony, fines, and any debts (loans) that were acquired illegally.

 

  • Will Veitengruber Law help me repair my credit after bankruptcy? Absolutely! We will help you set up an appropriate budget so that you can stay out of debt. We’ll also walk you through the process of repairing your credit score. Veitengruber Law will give you a number of helpful suggestions that will steadily increase your credit score after your bankruptcy discharge.
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Friday Five: Cures for Your Holiday Spending Hangover

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Today on the Veitengruber Law Blog, we bring you another Friday Five. Our topic this Friday is getting out from under all of the debt that you may have acquired during the recent holiday season. Let’s face it: every year we vow to spend less next year, but when “next year” rolls around, it’s very difficult to resist showering our friends and family with prodigious piles of presents!

It’s great fun watching the excited expressions on our gift recipients’ faces, but come January, our own features scrunch into scowl lines and frowns as the credit card bills arrive in the mailbox. Rather than simply paying the minimum balances due and hitting the mental “Ignore” button, here are five proactive things you can do to pay off your holiday debt sooner rather than later:

  1. Suspend your spending: This has to be priority numero uno. Until you’ve paid your holiday credit card balances off, spend money only on necessities. Remember all of the gifts your friends and family showered you with, and enjoy them instead of buying more “stuff.” If it helps, set a goal and reward yourself: as soon as your holiday debt is gone, you can buy yourself something you’ve been coveting (within reason).

  2. Cut up your cards: For many people, getting those credit cards out of sight is imperative. If you really don’t trust yourself not to use them, by all means, cut them up and get back to using real money only. You might also benefit from simply taking the card(s) out of your wallet and putting them someplace safe in your house. This way, you’ll still have them if an emergency situation arises, but you won’t be able to make in-store impulse purchases.

  3. Make molehills out of mountains: In other words, focus on the card with the highest interest rate first. The higher the interest rate, the more you’ll end up owing on that balance, so it’s best to get it as low as you can, and quickly. Keep paying the minimum amounts due on any other cards while you tackle them in order of their interest rates.

  4. Return and be refunded: It may not be the most socially acceptable thing to do, but if you were gifted anything that you simply don’t like or won’t use – find out if you can return it! Even if the gift-giver didn’t include a receipt, you can often find out where an item was purchased, in which case many stores will give you gift cards rather than cash. Use these gift cards to buy things you need, which will free up more of your money for paying down your credit card balances.

  5. Bang out a budget: While it may seem like common sense, it’s often the simplest ideas that succeed. As you get close to paying off last year’s holiday spending debt, look ahead to the next holiday season. Something as easy as buying one gift card every time you get paid can make a big difference. (And who doesn’t like receiving gift cards these days?)

By putting these five simple tips into action, you will be able to get your holiday debt paid off in a reasonable amount of time, freeing up that money for living life! Planning ahead will mean that next year at this time, you’ll hopefully be able to pay off your holiday spending in a much shorter time frame.

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Facing Foreclosure During a Divorce

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Nearly everyone who has been through a divorce has had to deal with at least some level of financial struggle. For some people, divorce necessitated a complete money mindset makeover. One of the biggest transitions that has to be made when a couple splits relates to the marital home. If you are a homeowner who is currently going through a divorce, you may be wondering if your home will be foreclosed upon by your lender.

Most married couples enter into a mortgage agreement jointly, as they happily begin their lives together. Years later when the marriage is breaking up, it’s much less pleasant to have to disentangle yourself from a joint mortgage loan. Tempers flare, children may be involved, and communication can be complicated and tense.

There are many different answers to the question, “Who will keep the marital home?” However, sometimes neither party wants to or is able to keep up with the payments without the other partner. Of course, other situations may also prevent either party from remaining in the marital home, like new relationships and relocation for work, but the most common reason is lack of finances.

A very important thing to keep in mind as you move through your divorce is that your mortgage lender is not even slightly interested  in the state of your marriage. If you and your spouse signed for the home jointly – you are both equally responsible for the debt.

Although it may be quite difficult, it’s important to keep communication as open as possible when it comes to dividing up your marital assets and debts. Miscommunication on important financial issues can lead to devastating results.

If both parties move out of the marital home and both refuse to continue making monthly payments on the mortgage, the home will quickly go into foreclosure. Foreclosure is not a desirable outcome, especially if there are other plausible options for the property. Don’t let your pride or anger get in the way of making a smart decision that can help you avoid foreclosure!

Discuss with your spouse the idea that one of you remain living in the marital home. If this is a situation that you can both agree to, the spouse living in the home should plan to either assume the loan or refinance it in order to remove the other spouse from liability.

If you plan to go this route, find out if your mortgage contains a due on sale clause.

Remember that one spouse may be entitled to either child support, alimony or both after the divorce is final. This money may be enough to make staying in the marital home a reality for the support receiver, even if they don’t earn enough income on their own to pay the mortgage.

If one party remains in the home but fails to refinance or assume the loan – trouble could be nigh. If at any time, that person decides to stop making mortgage payments, the bank/lender will not care if the parties are happily married, platonic roommates, or divorced and divided.

The only thing that matters to the lender is whose name(s) are on the mortgage loan and promissory note. If both names remain on the documents, it doesn’t matter if you’ve been divorced for a decade – both parties will still be held responsible. Foreclosure of the property will be significantly damaging to both parties’ credit scores.

If you are dealing with foreclosure and divorce, find out what your options are now, before you end up facing a deficiency judgement and a rotten credit score. Ask us all the questions you want in your free consultation so that we can help you decide what steps you want to take next.

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My Car was Repossessed: Can I Get it Back?

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Just as your mortgage lender can take back your house if you fail to make the monthly payments (via foreclosure), your auto loan lender can take back your vehicle for the same reason. When this happens, it is called repossession, and lenders are not required to give defaulted vehicle owners any kind of warning before “repo-ing” the automobile in question.

If you are even a few days late on your car payment, you may be at risk for having your car repossessed if you have a sketchy credit history and low credit score. “Repo” men are professionals who are contracted by lenders to bring cars back that aren’t being paid for. Repossession can occur anytime and anywhere, as long as you’re not in the car at the time. If you’re not making your payments, you should be aware that your car can disappear at any moment.

My Car is Gone; Can I Get it Back?

If you’ve already experienced having your car repossessed, you may wonder if you can get it back, especially if you need the vehicle for work or other transportation. The first thing you should do if your car has been repossessed and you want to get it back is to hire an attorney. Your attorney will be able to ensure that you follow the important (and complicated) timelines in the repossession process. Failure to do so will indefinitely result in permanent loss of your vehicle.

Working with a credit repair or bankruptcy attorney, you’ll have several options available to you, which your attorney will be able to explain in detail. He will also help you determine which decision is best for your specific situation.

  • Reinstatement: If you missed a payment (or several) because of unusual or unforeseen circumstances that are unlikely to occur again, you may want to have your loan reinstated. Your attorney can talk to your lender about reinstatement, which essentially means giving you back your car in exchange for any late payments and most likely the cost of the repossession. Repossession professionals typically charge several hundred dollars per vehicle, depending on how difficult it was for them to take possession of the car.
  • Filing for bankruptcy: As long as your lender has yet to re-sell your car, your attorney can help you file for chapter 13 bankruptcy. You must show that you need the vehicle in order to remain financially stable. Notice of your chapter 13 bankruptcy will force your lender to return your car, and your loan will be reorganized per the terms of your bankruptcy case. You can also file for chapter 7 bankruptcy, which will prohibit your lender from taking your vehicle via repossession. However, in many cases, bankruptcy judges will grant special permission for lenders to repossess vehicles during chapter 7 cases.

If you cannot afford the payments on your current vehicle, filing for bankruptcy may be right for you. Do you have trouble making other payments in your life? Talk to your bankruptcy attorney about filing for chapter 7 or chapter 13. Your best best will be determined by your lawyer, who has your best interests in mind at all times.

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My Husband Never Listed Me on his Life Insurance Policy!

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Losing your spouse or significant other can become an even more painful life event if you discover that you are not named as the beneficiary on their life insurance policy.

Naturally, the passing of someone near and dear to your heart may not initially strike up thoughts of money. However, if you were dependent on the departed’s income in order to pay your bills and maintain your lifestyle, your attention will undoubtedly turn to the life insurance policy rather quickly.

Unfortunately, all too often, policy holders fail to update their beneficiary information after a significant change in life circumstances. This mistake can lead to great complications for those left behind, and is an error that can very easily be avoided.

A famous example of a life insurance mishap began almost a decade ago when Warren Hillman passed away unexpectedly. Although he had been married to his current wife for six years, his life insurance beneficiary information did not reflect that fact.

Having never updated his beneficiary form when he re-married, Hillman’s ex-wife was still listed as his beneficiary. Hillman hailed from Virginia, which, like New Jersey, is not a community property state. As such, his widow had little claim to the life insurance policy since she wasn’t named as beneficiary.

If you do live in a community property state, you and your spouse are considered to be equal owners of any and all income that both of you earn during the time of your marriage. Additionally, when your joint income is used to purchase something – you both automatically become joint owners of what was purchased – including life insurance policies. Even if your beneficiary forms aren’t up-to-date, your current spouse is entitled to receive life insurance benefits under community property law.

For spouses who live in non-community property states like New Jersey, life insurance beneficiary laws can be a little bit sticky, as Warren Hillman’s case exemplified. Even though his ex-wife remained listed on his life insurance policy, New Jersey law statute N.J.S.A. 3B-3:14 specifically states that a Final Judgement of Divorce between two parties shall automatically revoke either party’s right to receive the other’s life insurance benefits, even if they are named beneficiary when the other party dies.

This statute was put into place in NJ and other non-community property states precisely because of ex-spouses who forgot to update their paperwork after their divorce. Unless specifically stated in the couple’s Property Settlement Agreement, ex-spouses would no longer be entitled to each other’s life insurance benefits according to N.J.S.A. 3B-3:14.

However, in the case of Warren Hillman and many like him, his life insurance policy was initiated while he worked for the federal government. The Federal Employees’ Group Life Insurance Act goes against what is set out in any state laws like N.J.S.A. 3B-3:14 and states that the person listed as beneficiary at the time of death shall receive the life insurance benefits. Because of the ‘Supremacy Clause,’ federal laws always supersede state laws if there is a contradiction.

In the case of Warren Hillman’s widow, she did not receive any life insurance benefits. The Supreme Court ruled in favor of the ex-wife who was listed as the beneficiary.

Do you have up-to-date Estate Planning paperwork? Making the appropriate designations is crucial if you have had changes in your life that warrant doing so. If you need help making the necessary changes or if you want to prepare your first estate plan (will) – contact our New Jersey law office today. Consultations are free, and our results are priceless.

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