Second Mortgages After Foreclosure: Who Pays?

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What is a second mortgage?

Oftentimes, when applying for a home loan, first time home buyers don’t have enough money to make a substantial down payment. Typically, lenders don’t like to grant loans for more than 80% of the price of a home. Lending so much money to a borrower is risky, so banks who do so will require that the buyers purchase private mortgage insurance (PMI). Mortgage insurance is expensive, so borrowers try to avoid it by applying for two separate mortgage loans. The first loan granted is usually for a maximum of 80% of the purchase price, while the second mortgage covers the remaining cost of the home – typically around 20%.

Who can get a second mortgage?

In order to be approved for a second mortgage (also referred to as an 80/20 loan), you must have a very good credit rating. Because you won’t be making any down payment, you are a higher risk to your lenders. A high credit score (above 700) puts lenders at ease, knowing that you have a solid credit history.

What happens to a second mortgage after foreclosure?

Even well-qualified buyers can experience foreclosure. As they say, “Life happens,” and a variety of factors may cause you to become unable to continue making your monthly mortgage payments even if you had great credit when you bought your home. For example, you may have experienced:

  • Divorce
  • Chronic illness
  • Accident or injury that permanently reduced your earning potential
  • Job loss
  • Unforeseen expenses (death or disability of a close relative, job transfer, etc)

Upon foreclosure of your home, your primary mortgage lender (80%) will sell your home at Sheriff’s Sale/Foreclosure Sale in order to recoup at least some of the money you borrowed but were unable to repay. Any sale proceeds that exceed what you owed your primary lender will be used to pay back your second mortgage lender.

Home sold at foreclosure sale almost always sell for less than they are worth. This means that second mortgage lenders often don’t see any proceeds from foreclosure sales. The second lender is left holding the (empty) bag, as the saying goes.

Will I have to repay the second mortgage if the foreclosure sale price is below market value?

Naturally, this is a pressing question for homeowners who’ve lost their homes to foreclosure. No one decides to go through foreclosure because they have plenty of money floating around. If you’ve lost a home to foreclosure, you’re understandably concerned about the potential of a deficiency judgment.

A deficiency judgment is a legal action that a lender can take against you for the amount of money they lost when your home was sold at Sheriff’s Sale. Many lenders will write off the loss due to the cost and hassle of mounting a legal action. However, some lenders do indeed pursue a lawsuit against defaulted borrowers whose homes were sold at foreclosure for less than the amount still owed.

How can I repay my second mortgage? I’m already in financial distress!

If your second mortgage lender has threatened you with legal action unless you pay up, you need to be proactive by retaining counsel. You can file for bankruptcy, which will automatically prohibit ALL of your creditors from attempting to collect money from you. Your NJ bankruptcy attorney can also take other action to settle your second mortgage debt if you wish to avoid chapter 7 bankruptcy.

Image credit: Chris Potter

Holiday Shopping When You’re Flat Broke

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Regardless of what holiday(s) you celebrate in December (Christmas, Kwanzaa, Hannukah), it’s traditional to exchange gifts with friends and family. It’s undoubtedly quite a magical time of year with gift giving adding to the excitement in the air. Finding yourself low on funds around the holidays can be stress-inducing, but you can enjoy the holiday season without spending a ton of money or ending up with a load of credit card debt.

First, it’s crucial to remember that the holiday spirit comes from within. Start the holiday season right by decorating your home while blasting Christmas music and drinking hot chocolate. If you don’t have a ton of decorations, you can create your own using recycled materials, which is another great way to get into the holiday spirit!

As many Americans have noted in recent years, Christmas has morphed into a new holiday called Giftmas, with a bright spotlight on way too many presents. To help your family take a step away from the materialistic focus, start a tradition (or several) that’ll be a great experience for your family without costing much.

Inexpensive or free holiday ideas include:

Volunteer to help those less fortunate than you. Not only is this an incredible bonding experience, it helps children (and adults) put everything into proper perspective. While your family may be struggling financially this year, there are plenty of others who are much, much worse off.

Do something, (anything) fun that doesn’t cost a lot of money. Have a Christmas picnic (if you live somewhere warm), have a movie night, play board games as a family, make holiday treats together, drive around town to enjoy all of the Christmas lights, go out for Chinese food, etc. You get the idea. Find a low-cost idea that makes your family happy, and enjoy the heck out of it.

Give homemade gifts. If your extended family members are also into the idea of saving money this holiday season, consider exchanging thoughtful presents that you each make by hand. You can use recyclable materials combined with some affordable supplies from the craft store. Not only does this save money, but these are often the gifts that people treasure above all others because they come from the heart.

Gift your services or expertise. If you possess a special skill (like knitting, woodworking, sewing or painting), give the gift of your services free of charge. Also consider offering your physical help to someone less able-bodied – (like help with grocery shopping, gardening, doing home repairs or walking their dog). Hiring someone to help out with these tasks can be expensive, so offering your services free of charge can mean a lot.

If you have some money in your budget and do plan to do some holiday shopping, save money by using DIY wrapping paper from materials you already have lying around. Stick to buying one gift per person when possible, but make it a meaningful gift, like a luxurious pen, personalized ear buds, a cozy blanket or a meaningful piece of jewelry.

Since it’s so easy to let holiday shopping get out control once you start, make a list of everyone you intend to buy a gift for and keep track of what you buy. In doing so, you won’t wake up one day in January to a massive holiday hangover without an easy cure.

Image credit: William Ross

NJ Student Loan Forgiveness & the Brunner Test

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A plausible solution for student loan debt is urgently needed as the dollar amount of outstanding college debt approaches $1.4 trillion. That astronomical number means that student loan debt is now second only to mortgage debt in our country.

Currently, money that was borrowed to pay for college is considered nondischargeable in a chapter 7 bankruptcy. This means that, for most people dealing with (what feels like) crushing student loan debt, there is essentially no way to get out from under what may be $50,000 + in debt.

Has the cost of college gotten more expensive?

The cost of four-year college tuition in New Jersey has increased by 41% in the last decade. Additionally, living on campus at a NJ college or university is now nearly 25% more expensive than it was ten years ago. These numbers are even higher for out-of-state students who attend college in New Jersey.

It now costs NJ students an average of $24,000 for ONE YEAR of college tuition, fees, room & board, books & supplies and living expenses.

With that being said, there are proponents of an idealistic plan for two and four year college tuition to be free. Opponents of this utopian plan believe that offering free college won’t fix the problem because the problem ultimately stems from wages being too low.

What other factors have caused the student loan debt crisis?

There is evidence that the largest group of people who’ve defaulted on student loans are those who are earning the lowest income post-college. Data indicates that some of these defaulted borrowers are struggling because they didn’t finish college, and therefore didn’t obtain a degree. This leads to difficulty finding a job that pays enough for them to pay off their loans. Although there are a few student loan repayment programs that are based on earnings, they need serious improvements if they are to make a dent in what is quickly becoming the “student loan crisis.”

Hopefully there will be positive changes coming to the process of paying for a college degree that enable more people to finish college without being bogged down by debt. Until then, the only way to rid yourself of your student loans through bankruptcy is by demonstrating “undue hardship.”

What is undue hardship?

Relating to student loan repayment, the only reason you may be able to discharge your student debt is if repaying your loans would prevent you from being able to do literally anything else, like pay bills, buy food, etc. In New Jersey, the three part Brunner test is used to determine if a debtor demonstrates undue hardship that is significant enough to justify a discharge of student loan debt.

What is the three part Brunner test?

New Jersey bankruptcy court will require you to prove that the three following statements are true as relating to your finances:

  1. You will not be able to maintain even the most minimal standard of living (for yourself and any dependents) if you have to repay your student loans. The answer to this must be based on your current income and expenses.
  2. There is sufficient evidence to prove that #1 (above) will prove to be true for all or most of your student loan repayment time period.
  3. You have made a good faith effort to repay your student loan(s).

Most courts are fairly strict when it comes to the Brunner test, however, if you feel that you honestly would qualify for a hardship ruling in your favor, it is worth discussing the matter with a NJ bankruptcy attorney. As your initial consultation will be free of charge, you have nothing to lose by making a phone call and learning more about your options.

 

Image credit: COD Newsroom

USPS Mail Identity Theft: What You Need to Know

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As our world becomes more and more saturated with technology, it’s now possible to do almost anything online. You can check your bank account balance, transfer money and pay your bills. Heck, you can even run a business online these days.

Even as we move deeper and deeper into the Information Age, there are still a number of people (and companies) who send and receive important information the “old fashioned way” – via the US Postal Service. Most of us still check the mailbox regularly, and it’s fair to say that the majority of Americans receive at least several pieces of “snail mail” every day.

What, then, should you make of your mailbox being empty for several days in a row? While not receiving any mail isn’t really that unusual once in awhile – if the trend continues beyond a single consecutive day, you should look into the reason.

As it turns out, there is a new identity theft scam making its way around the country that combines the use of both technology and old fashioned “snail mail” to take advantage of unsuspecting victims. The first clue that you may have been a victim is simply an empty mailbox.

While you may celebrate when there’s no mail (after all, no mail means no bills, right?) – the real reason may be quite sinister, and one that requires immediate attention. Ignoring your lack of mail may lead to a ruined credit report and a plunging credit score.

Here’s how this particular identity theft scheme works:

  • The identity thief typically applies for a credit card in your name, using your personal information, including your mailing address.
  • The thief then uses the USPS website to place a hold on your mail. The thief pretends to be you, but no authorization is ever required.
  • You stop receiving mail, as your identity thief plans to act as you and retrieve your mail from the post office when the credit card arrives. Again, no identification is required for them to pick up your mail from the USPS.
  • If the thief is successful, they will have a credit card in your name. The mail hold will be removed so that you will begin receiving mail at home again, and (they hope) you will be none the wiser.

This identity theft scheme has been just recently brought to light, and the lack of security surrounding the USPS electronic hold system is being investigated, according to representatives from the postal service.

In this technology-driven world, we all have to prove our identity online multiple times a day – even signing into Twitter can be difficult if you use a different computer or device. Accessing our most valuable personal information, (bank accounts, PayPal accounts and credit card statements) requires that we prove our identity through the use of complex passwords and security questions. Hopefully, the US Postal Service will soon have similar security measures in place in order to prevent just anyone from picking up “their” new credit card, all the while pretending to be you.

Until then, we want you to be aware of this problem so that your identity is not used by someone else. If this has happened to you (or you suspect that it has), acting quickly is of the utmost importance. Report the fraudulent activity, file a police report, and get in touch with a New Jersey credit repair attorney immediately.

Image credit: Matt

NJ Wills: What is Probate?

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Most people go to great lengths to avoid even thinking about their own mortality and that of their closest loved ones. Admittedly, processing the fact that you or someone very near and dear to you will inevitably pass away can be overwhelming and sad.

Our best advice to those who are struggling with the concept of dying is to face it matter-of-factly. Being prepared for all of the details surrounding someone’s passing certainly won’t make it any easier in terms of missing them, but it will put your mind at ease regarding their estate.

What is an estate?

After someone dies, their estate consists of any and all assets (property of value) that they owned. Assets include things like real estate, vehicles, personal items, life insurance proceeds (in some cases) and money. If the deceased person owed any debts, the money in their estate will be used to pay these debts before anything can be dispersed to beneficiaries.

How do I start the process of sorting through my loved one’s estate?

If you were named as the executor of an estate that has assets, you’ll need to visit the surrogate court in the New Jersey county in which the decedent lived. This will start the NJ legal process known as probate, and it can be initiated 10 days after someone passes away.

What happens in probate?

In New Jersey, probate is necessary only if the deceased had assets in his or her name only. Official appointment of the executor will occur in probate court with the production of the will and death certificate.

If there was no will, an administrator will be assigned to the estate in probate court. As long as there are no protests of the will, surrogate court will then give full authority to either the estate executor or administrator. You can find a full list of the executor’s duties here.

Does an estate executor get paid?

In New Jersey, estate executors or administrators can be paid for their duties, which can, in certain cases, be quite time consuming. The amount they can receive is limited to 6% of any income to the estate, plus 5% of the total gross value of the estate.*

How long does it take to probate a will?

The length of time it will take for anyone’s estate to move through the probate process is dependent on how large and complicated the estate may be. On average, moderately sized estates typically make it through to the end of NJ probate within a year. More extensive and complex estates can languish in probate for up to a decade.

For more information about New Jersey probate laws call or contact our office today. In addition, take this time to make an appointment with us to draft your own estate plan.

Image credit: Bosc d’Anjou

Legal Help for NJ Veterans Facing Foreclosure

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As we honor those who served our country this Veteran’s Day, it’s important to know that there are thousands of homeless veterans in our country. Furthermore, there are over a million veterans who are in danger of facing foreclosure in the near future.

Why are so many veterans homeless?

This question is a good one, because many people in New Jersey and across the nation simply do not understand that so many veterans are struggling. The reason most homeless veterans lose their homes is due to a lack of affordable resources. Those veterans who are struggling financially need legal assistance to save their homes.

Sometimes, a veteran may face a seemingly smaller legal issue like the loss of a driver’s license. Studies show that veterans who lose their driver’s license end up with snowballing financial problems due to difficulty navigating the legal system in order to get their licenses restored. This leads to job loss due to the veteran not having a reliable way to get to work, which then in turn often leads to the loss of their home via foreclosure.

What assistance is available to struggling or homeless New Jersey veterans?

Across New Jersey, people are taking action to help homeless NJ vets. In South Jersey, a project entitled Operation Safehouse has volunteers building 60 cabin-like homes where veterans can live for up to two years while they are also given access to mental health assistance and work skill training so that they can eventually support themselves and move into their own permanent homes.

A similar program in Central Jersey, Community Hope, has been providing veterans with temporary housing for over a decade now, with an outreach program (Supportive Services for Veteran Families [SSVF]) in 15 NJ counties. Even though Community Hope helped over 750 veterans avoid homelessness last year and other programs like Operation Safehouse are popping up throughout the state, the number of  NJ veterans who are struggling continues to rise.

Veterans who fought the war on terror after 9/11 are feeling the effects of their time in combat and are dealing with severe PTSD that is preventing many of them from staying gainfully employed. Additionally, many post-9/11 vets living in New Jersey were so traumatized by their time on the front lines that they even struggle with keeping friendships and families together.

While the community organizations like Operation Safehouse and Community Hope are doing all that they can to support the emotional and physical needs of veterans, there is still a need for legal assistance that many NJ veterans simply can’t afford.

Are there any government programs or special considerations for veterans at risk?

If you are a veteran and you are at risk of losing your home to foreclosure, take the time to reach out to NJ foreclosure defense attorneys who are ready and willing to help you. Also, do your research on the special rules and exemptions you may qualify for as a US veteran.

You may be able to save your home from foreclosure if you’ve been able to maintain your employment but are still struggling with heavy debts that you simply can’t keep up with. In New Jersey, your VA benefits are exempt from the bankruptcy means test. This gives veterans a leg up when applying for bankruptcy in NJ.

In fact, in New Jersey, many disabled veterans are excused from even taking the means test. Filing for bankruptcy will push the pause button on your foreclosure, if you’re dealing with one, giving you time to formulate a plan that works for your current financial situation.

Image credit: S. AR University

 

Bankruptcy After Divorce: Can Property Settlements be Discharged?

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Couples who are going through a separation or divorce learn very quickly how expensive it is to split up a marriage. Firstly, the added costs of simply living in two different residences add up fast. In addition to separate living costs comes child support, alimony, equitable distribution, potential attorney fees (times 2), loss of part of your pension, and more.

In divorces where one spouse remains living in the marital home, they may be saddled with an order to pay their ex-spouse up to half of the equity in the home (if there is any). If this order comes as a surprise, paying it may be nigh on impossible, especially if it’s a substantial amount of money.

Some divorcing homeowners may wonder if they can discharge the home equity money they owe to their ex-spouse in a chapter 7 bankruptcy case. For example, if the party remaining in the home is ordered to pay $30,000 for equity in the home, would a chapter 7 bankruptcy erase that debt?

The answer to that question is no. Property settlements cannot be discharged in a chapter 7 bankruptcy, although any and all debts owed relating to the marriage (except for child support and alimony) must be listed in any bankruptcy filing. Any monies that you were ordered to pay to your ex for their portion of the equity in the home are not dischargeable in a NJ chapter 7 case. Filing for chapter 7 bankruptcy can help eliminate a number of other debts owed, excluding any debts owed as per the Property Settlement Agreement/Divorce Decree.

With that being said, there is another option for divorcing homeowners who are struggling financially and simply do not have the means to pay their ex-spouse’s  portion of the equity in the home.

In fact, filing for chapter 13 if you are struggling to stay financially afloat after a divorce can be a solution to a number of your money woes. As mentioned, shifting to a one-income household can be a challenging adjustment, especially if you make less money than your spouse does.

If you have fallen behind on any utility bills, property taxes, HOA fees or if you have rapidly rising credit card debt in NJ, chapter 13 will help you reorganize all of your debts, giving you as much as 5 years to get caught up. This includes mortgage debt – and filing for chapter 13 will protect your home from foreclosure.

Along with helping you reorganize your debts, the sum you’ve been ordered to pay your ex-spouse can be reduced or discharged entirely. The possibility of this is dependent upon your income and the combined total of all of your debts. The amount you’ll be required to pay toward divorce debts that are not support-related will be based on how much you can afford to pay. Beyond what you can afford within the given time frame of your chapter 13 repayment period, the rest of your non-support divorce debts will often be discharged, and you will no longer owe the remaining amount.

↓↓CRUCIAL INFORMATION BELOW↓↓

The experience of your bankruptcy attorney is of the utmost importance in a matter involving NJ bankruptcy after divorce. There are so many variables that will affect all aspects of your chapter 13 bankruptcy case. An inexperienced attorney can make expensive and disastrous mistakes. Look for a NJ bankruptcy lawyer who focuses their practice on helping people improve their financial future through debt relief and credit counseling.

Image credit: Fried Dough (flickr user)

After Foreclosure: Living in a Bank-Owned Home

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As we make our way toward the end of the 2016 calendar year, we’re creeping up on the 10 year mark of the start of the U.S. housing crisis that began in 2007. Many states in the nation have recovered nicely by this point, with some reports saying that the housing market is the best it’s been in a decade.

In New Jersey, though, foreclosures are still a significant problem. The garden state has yet to find solid footing in the wake of the housing crisis (also called the housing bubble), and even nearly a decade later is still a state with one of the highest foreclosure rates.

Although it appeared as if things were moving in the right direction for New Jersey’s foreclosure situation this year, as we reach the end of 2016, the recovery rate has slowed to a crawl and nearly 13,000 new foreclosures entered the court system in the final quarter of this year alone. Because of the long, mandated legal foreclosure process in NJ, this new influx of foreclosures has once again caused a significant backlog in foreclosure court. We’ve taken a step backward in our recovery from the housing crisis, with Atlantic, Ocean and Essex counties  currently showing the highest numbers of new foreclosure filings.

One of the effects that the decade-long real estate recession has had on New Jersey is neighborhood blight in areas hardest hit by foreclosure. In reference to the housing market, blight is the dilapidation, deterioration or decay of certain towns and cities (or sections of those towns).

The reason for this phenomenon is that so many foreclosed homes are not being sold at auction. Since New Jersey hasn’t fully recovered from the 2007 crisis, buyers and developers are still wary about purchasing questionable properties, especially in areas that are downtrodden or showing potential signs of blight.

When a foreclosed home fails to sell at sheriff’s sale, the lender or bank retains ownership of the property. These homes are called REO: “Real Estate Owned.” Often the term “Bank owned” is used interchangeably.

REO properties are often empty for significant periods of time, which can lead to vandalism, drug activity, disrepair and squatters. All of these factors combine to create blight, especially when several or many homes in a neighborhood become bank owned and uninhabited.

Smart lenders realize the depreciation that occurs when a property becomes vacant – which means if you are at the end of your home’s foreclosure process and your home becomes bank owned (or REO) – you may be able to continue living in the home until your lender can sell it.

While not all lenders are amenable to giving former homeowners a “free ride” living mortgage free in a home that is now an REO property, some lenders acquiesce to the fact that a cared-for property is much easier to sell than one that has been destroyed by defacement and crime.

Your NJ foreclosure attorney can talk to your lender on your behalf if you are too nervous to do it on your own. If your lender is not open to letting you live in the home scot-free, there may be room to negotiate a rental agreement. Naturally, your attorney will request a monthly rent amount that you can afford. Lenders often realize that getting some money is better than getting no money at all.

If and when your lender does sell your home to another buyer, you will be given eviction notice. At that time, you’ve reached the end of the line in your REO home, and will be required by law to vacate the premises, usually within 30-60 days. So, if you are lucky enough to continue living in your home after its foreclosure sale, put away as much money as possible each month, and scout out a new living arrangement that you can afford. When the time comes, you’ll have a nest egg and hopefully your financial future will look much brighter.

Image credit: Orin Zebest

You’ve Lost Your Wallet: What to do First

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If you’ve ever lost your wallet or even “just” a credit (or debit) card, you’re undoubtedly familiar with the ice-cold fear that runs through your body when you first realize what has happened. With identity theft and credit card fraud running rampant in society today, there’s no telling what might happen to your personal information, money and credit score when your wallet goes missing.

As soon as you discover that your wallet or purse has been misplaced or stolen, the absolute most important thing that you must do is: ACT QUICKLY. Do everything on the following list, and do it now. Whether you’re at work or up to your ears in finger paint at home with the kids – stop what you’re doing immediately, and:

  • Call your bank:  If you have a debit card (and who doesn’t these days?), the most time-sensitive thing you must do is alert your bank. You have your hard-earned money sitting in your account just waiting to be spent by the person who finds (or has stolen) your wallet. The faster you act, the better the end result will be for you. Most banks won’t hold you responsible for any transactions that occur after you report your debit card as stolen or lost – as long as you make that call right away. If you wait a day or two, you may end up liable for money you didn’t spend. Your debit card will have to be cancelled and you’ll be sent a new one with a new debit number, however it will still be routed to your bank account. The difference will be that the original debit card will no longer work, so no one will be able to use it.
  • Report your credit cards as stolen/lost: It used to be common practice to immediately cancel any and all credit cards that you’ve lost or have had stolen. Now we know that there is a better option – one that won’t wreak havoc on your credit rating. Make phone contact with all of your credit card companies, but instead of cancelling your card(s), explain that your wallet was stolen or lost. Credit card companies are able to freeze any activity on your cards without actually cancelling your accounts, which would send the wrong message to credit reporting agencies and potentially lower your credit score. Request that new cards be sent out to you. They’ll have completely different card numbers, making the original cards unusable, but your account will not be reported as closed or cancelled.
  • Place a fraud alert on your credit report file: Make a call to all three of the major credit reporting agencies – Experian, Equifax, and Trans Union – and let them know that your wallet was stolen or lost. Ask them to place a fraud alert on your personal file. This will cause a chain reaction (a good one) that will prevent anyone other than you from opening a new credit card or taking out a loan using your personal information. This step is especially important if your wallet contained your driver’s license or other personal identification information that may result in identity theft. If your social security card was lost or stolen, you’ll also need to alert the Social Security Administration and begin the process of getting a new card.
  • File a report with your local police: Although this may make you feel like you’re being overly dramatic, reporting a stolen wallet to the police isn’t done so that they can open a case to look for the thief. Naturally, (most) police officers simply don’t have time for that. The purpose of reporting a stolen wallet or credit card to local law enforcement is to create a paper trail of your loss. A police report is a solid piece of evidence you can use regarding any fraudulent charges on your stolen card(s) or identity theft.
  • Learn from your mistakes: Keep your credit cards in a safe place at home and only carry one with you when you need to use it. NEVER keep your social security card in your wallet. In order to avoid your debit card from going missing, always keep it safely inside your wallet in the same place. Tossing it in your purse or keeping it in a pocket is a good way to lose track of it quickly.

 

Image credit: Ryan Loos