Disclaiming Your NJ Inheritance to Avoid Creditors

The news that you have been named a beneficiary in someone’s will is generally considered a positive thing; although you (hopefully) aren’t looking forward to the passing of your loved one, it usually feels good to know that they cared enough to bequeath part of their estate to you. There are times, however, when you may not wish to receive your New Jersey inheritance. Do you have the ability to say “thanks but no thanks?”

In New Jersey, estate law says that you can refuse to accept a gift, which in this case is your inheritance. This right to refusal is known as a disclaimer.

While it may seem strange that someone would choose to turn away inheritance money or life insurance proceeds, there are a few reasons for doing so. One of these reasons is avoiding creditors.

Do you have a lot of debt? Are creditors constantly calling? If so, you may worry that all of your inheritance money will go directly to paying off your debts. This is a very valid worry, because that is precisely what would happen if you accepted any kind of windfall while swimming in debt.

If you are attempting to disclaim your inheritance so that your creditors don’t have access to it, you may be hoping to divert that money to your children or other beneficiaries. Unfortunately, in New Jersey, it is illegal to use a disclaimer to get out of paying your creditors. If you choose to disclaim your inheritance under these circumstances, it is highly likely that your creditors will still be able to access the funds due to the Uniform Fraudulent Transfer Act.

Discussing your situation ahead of time with your loved one will give them a chance to protect the money that you are hoping to avoid giving directly over to your creditors. One way to do this is to set up a protective trust or to simply leave you out of the will altogether and instead name your children or other family members as beneficiaries. Your creditors have zero claims to any money that is inherited directly by your children.

Going to these lengths to avoid paying your creditors signals that you are significantly deep in debt. While we understand the desire to keep from handing a large windfall directly to creditors, we also must note that there are steps you should take to get out of debt, and the sooner, the better.

Your options for debt relief in New Jersey depend a lot on the specific details of your situation.

  • How much debt are you carrying in comparison to your income?
  • Are you living beyond your means?
  • What is your credit score?
  • Do you own a home that you wish to keep?
  • How many different kinds of debt are you carrying?

NJ debt negotiation and relief is available to you. Beyond refusing windfalls, disclaiming your inheritance and any other steps you’re taking to avoid paying your creditors, imagine if you didn’t have to worry about those creditors at all anymore. Ridding yourself of a large chunk (or potentially all) of your debt is very possible; your financial future can look anyway you want it to as long as you take the right steps, now.

 

 

Can I Close My Bank Account to Avoid Repaying a Payday Loan?

First, let’s be clear: Payday loans are illegal in the State of New Jersey. NJ state laws prohibit interest rates above 30% (which is exceptionally high already) and payday loan interest rates are much higher. Additionally, New Jersey banking laws prohibit the concept of advancing money based on a post-dated check.

What is a payday loan?

A payday loan is a very dangerous undertaking. It is process that is only entered into by those who find themselves in extremely dire financial straits.

The payday “lender” provides the borrower with a relatively small loan (usually less than $1,000). This cash loan is due to be paid back in full to the lender within a very short window of time – often when the borrower next receives a paycheck.

Those who are desperate for immediate money and don’t want to have their credit checked can often be fooled into thinking that a payday loan is the perfect solution to their problem. Borrowers who take out payday loans typically say that they don’t want to borrow money from friends or family, and their credit scores are usually already suffering, so taking out a proper bank loan isn’t on their radar.

Why do payday loans get such a bad rap?

In theory only, the concept of a payday loan is perfectly fine:

“You need rent money and your landlord is breathing down your neck about it. Due to unforeseen expenses this month, you’re short a few hundred dollars. If only you could simply borrow $400 to keep your landlord happy; you’ll have NO problem paying it back the next time you get paid.”

Sounds ok, right? The inherent problem with payday loans is this: if you are even a day late in repaying it, interest starts to accrue at an astronomical (up to 400%) rate. This, combined with the fact that by the time someone considers a payday loan, they are already having money trouble, leads the borrower down a path that can only end badly.

All payday loan borrowers talk themselves into believing that they’ll have the money to repay the loan on time. Most of them, however, arrive at their loan’s due date confounded and overwhelmed. Although they let themselves think their next paycheck would be enough to cover the cost of the loan plus their usual expenses, this is almost never the case.

Therefore, the average payday loan borrower ends up late in repaying their loan, either partially or in full. As soon as that interest starts building, their amount due climbs FAST. What started out as a $400 loan can end up as thousands of dollars in debt, leaving the borrower unable to even begin to make good on their promise to repay.

How can I get out from under a rapidly rising debt?

It can be an extremely scary feeling to know that your debt is rising higher and higher day by day at a rate that you can’t really even determine how much you owe. Drastic measures, like trying to close your bank account or moving away from the payday lender – will not solve your problem. Creditors can garnish your wages (up to a certain percent) until they get their money back, and unless you plan to leave the country and change your identity (not recommended) – they’ll go the distance needed to find you.

Although payday loans are illegal in New Jersey, that doesn’t mean that NJ borrowers aren’t taking out payday loans in neighboring states. If you’ve found yourself indebted to a payday lender, or if you are right now considering taking out a payday loan, you should consider filing for bankruptcy instead. Not only will this wipe out the money you owe to the payday lender, but many of your other debts can also discharged – giving you an opportunity to take stock of your money management with a clean(er) slate.

 

I Received a Bankruptcy Discharge – Why am I Being Sued?

Filing for bankruptcy can be a momentous decision for many people, and it usually isn’t a decision that is made lightly. Most people don’t want to have to file for bankruptcy and have genuinely tried in earnest to reduce their debts on their own.

Once you’ve decided to move forward with a bankruptcy filing, you’re likely to feel a certain sense of relief – especially as the case progresses and everything is going as planned. After your debts have been successfully discharged by your bankruptcy court judge, all of your dischargeable debts will be erased, lifting a heavy weight off your shoulders.

After a debtor receives a bankruptcy discharge, every creditor listed on their bankruptcy paperwork will receive notification of the bankruptcy. Creditors are no longer allowed to contact you to collect on debts that have been discharged. Just knowing that those aggressive phone calls are going to stop is a huge relief.

That being said, sometimes you may receive the unpleasant surprise of being sued by one of the creditors you thought you had seen the last of. This is a scary moment for anyone! Thinking that you’ve gotten out from under your debts only to discover that one of them is still after you for money is disheartening.

Can a creditor really sue me after my debts have been discharged?

Oftentimes, if a creditor is still trying to get you to repay a discharged debt, it means they didn’t receive proper notice of your bankruptcy. It’s also possible that your bankruptcy information was not shared through the right channels within the company – even if they did receive notice. Attempting to collect on a debt that has been discharged via bankruptcy is against the law.

Do I have to respond to a post-bankruptcy debt-related lawsuit?

This is where is gets kind of tricky. Even if you are no longer responsible for the debt in question, if a creditor has initiated a lawsuit against you, it cannot be ignored. Doing so will only prolong the lawsuit’s life.

Your bankruptcy attorney will be able to advise you on how to respond to any creditors who attempt to contact you after your discharge, including any that attempt to sue you for money you no longer owe. It is important to consult with your bankruptcy attorney to ensure that the debt(s) in question were actually discharged and you truly are no longer responsible for them.

An answer to any lawsuits should state the fact that you filed for bankruptcy, including a copy of your discharge and a list of all creditors. In doing so, virtually all lawsuits of this type will immediately dismissed by the court. Even if you inadvertently left a creditor off of your bankruptcy paperwork, generally all dischargeable debts will be forgiven as long as the creditor knows you’ve filed for bankruptcy.

Although you will almost never be responsible for any debt that was discharged, it is important to notify your lawyer if you are sued by one of your creditors after bankruptcy. Some debts are non-dischargeable, and you need to know what they are so that you continue making payments on them. However, chances are good that your NJ bankruptcy lawyer discussed any debts of this type with you prior to your filing date.

 

Will too Many Credit Cards Hurt my Credit Score?

While you may be worried that you have too many credit card accounts open, the truth is that there isn’t a magic number of credit cards that is “right” or “wrong”. With that being said, there are some important things to know about holding multiple credit card accounts at the same time.

The average credit cardholder has approximately 5 to 7 credit cards. This includes open and closed accounts. There is no cutoff number where we would tell you “You have too many credit cards,” because what we are more concerned about is your debt to credit ratio.

What Is a Debt to Credit Ratio?

Essentially, the debt to credit ratio means: how much of your total available credit (on all of your credit cards) have you used? In other words, if you have a total of $10,000 of credit available to you spread out over any number of cards and your current balances add up to $9000, you have a very high debt to credit ratio of 90%.

Why is this number important?

The reason why your debt to credit ratio number is significant is because it plays a big role in determining your credit score. Ideally, you want to keep your total credit card balances at 30% or less of the credit you have available to you.

You can have a really great debt to credit ratio with 10 credit cards (many people open cards in order to take advantage of different “points” systems), and you can also have a poor ratio with only one or two credit cards.

How Can I Improve My Debt to Credit Ratio?

While opening new credit cards would seem like the most logical strategy to increase your total amount of credit available, it is important that you don’t open multiple new accounts in quick succession.This will send up a red flag to credit reporting agencies because it may mean that you are borrowing money that you won’t be able to repay.

Try opening one or two new credit cards per year in order to gradually boost your total available credit. More importantly, make sure that you are paying your monthly minimums (or ideally, more) in a timely manner on a consistent basis. In fact, this is actually more important than your debt to credit ratio number. Your credit score is calculated by looking at a number of your financial habits, your income and your total debt. Approximately 65% of your credit score is based on how well you stay on top of paying your bills.

Additionally, your credit score will improve if you have a variety of types of credit. Credit diversity makes up about 10% of your credit score.

If you feel you have too many credit cards because the balances are way too high and you’re having trouble making payments, your problem lies in your debt to credit ratio rather than how many credit cards you have.

To reduce your total amount of credit card debt, you can choose one of many effective and proven methods. If you have already attempted to reduce your credit card debt and feel like you are drowning in debt you’ll never be able to repay – filing for New Jersey bankruptcy may be an option that you should consider.

Image: “Credit Cards” by Sean MacEntee – licensed under CC 2.0

5 Reasons a NJ Bankruptcy Discharge May be Denied

The desired ending to filing for bankruptcy in New Jersey, or in any state, is a discharge of most of your significant debts. To have your debts discharged means to have them “wiped out” or erased. All debts that are discharged via bankruptcy are no longer your responsibility.

A bankruptcy discharge gives struggling debtors a chance to start over with their finances by presenting them with a (completely or partially) clean slate. While it is usually not possible to eliminate all debts in a bankruptcy because some debts are nondischargeable, the discharge of some or many of your debts can be extremely helpful in getting back on the path toward financial stability.

If you have found yourself buried under a pile of debt that you cannot even imagine pulling yourself out of, filing for bankruptcy is probably the best option for you. Debtors who are struggling to even make minimum payments and sustain their lifestyle desperately need help turning things around.

By working with an experienced New Jersey bankruptcy attorney, you will have a much better chance of having your debts discharged at the end of your bankruptcy case. It is ill advised to attempt to file for bankruptcy without the help of a professional. NJ bankruptcy paperwork is copious, and it is easy to make an error in filing the proper documentation at the right time and to the proper institutions.

If the court denies your bankruptcy case in bad faith, your case will be dismissed. This means that you will not benefit from having any of your debts relieved. You are also prohibited from filing for another bankruptcy for at least 180 days. Because of this, it is crucial that you work closely with a bankruptcy attorney prior to filing and during your case. Your attorney will be able to advise you properly regarding situations and actions to avoid so that your case is not dismissed.

Working with an experienced New Jersey bankruptcy attorney will ensure that you avoid:

  1. Failure to meet the New Jersey bankruptcy eligibility requirements
    You can read about the NJ bankruptcy requirements here.
  2. Incorrectly submitting bankruptcy forms
    Although it may sound insignificant, failure on your part to properly complete any of the required forms within 14 days of your original filing date may lead the court to dismiss your case before it even gets started.
  3. Omitting important bankruptcy documentation and/or information
    This leads the bankruptcy court to suspect that you are being dishonest. You must be completely transparent in order to receive a bankruptcy discharge. If you fail to tell your attorney about property or assets that you own, your case may be dismissed on the grounds that you filed for bankruptcy in bad faith.
  4. Bankruptcy fraud
    This one almost goes without saying, but some people don’t realize exactly what bankruptcy fraud entails. There are many different ways to commit bankruptcy fraud, but in general, if you hide anything or lie on your bankruptcy petition (or in a hearing) – not only will your case be dismissed, but you will potentially face significant fines and even jail time.
  5. Failure to take credit counseling course
    Before your bankruptcy discharge, you will be required to take an approved credit counseling class. This must occur within the 180 days immediately prior to filing for bankruptcy. Failure to take this course will result in your bankruptcy case dismissed.

Because it bankruptcy discharge can positively impact your life so significantly, don’t waste the potential life-changing experience by making disastrous mistakes. Be sure that your bankruptcy paperwork is in order, that your behavior is up to snuff with the bankruptcy court, and that nothing is omitted from your petition. The only way to guarantee all of these things is by working with a successful New Jersey bankruptcy attorney.

 

Image: “Fraud Key” by Jake Rustenhoven – licensed under CC 2.0

 

NJ Mortgage Help for Single Parents

Going through a separation and divorce is never easy, but the complication level increases when you add children to the mix. Establishing a stable family life for your kids is something every good parent strives to do, and divorce can throw a wrench into even the best laid plans.

Supporting the expenses required as a newly single parent is a daunting task as you attempt to maintain as much constancy and normalcy for your children as possible. To that end, the marital/family home is most often where divorced parents elect for their children to remain living.

With that being said, finances don’t always stretch far enough for one parent on their own to pay the mortgage on that family home, along with all other monthly expenses. If both parents are able to pitch in financially to keep the children and one parent in the home, the chances of losing the home are lower. However, the threat of foreclosure for recently divorced single parents is real, and although frightening, it is not something that will go away if you ignore it.

If you are a single parent fighting to keep the home your children have thus far grown up in, you may be overwhelmed by the responsibility of making that monthly mortgage payment on your own. Missed payments are common after significant life events like job loss, illness, death, and, you guessed it – divorce.

The bank will never throw me out since I have young children, right?

Unfortunately, too many people simply give banks and lenders a lot more credit than they deserve. Your bank does not care if you have children, an elderly parent, three sick dogs and a chronic illness – their bottom line is money. You may think, “But there are people working at that bank; surely there is someone there with enough empathy to see that I am struggling.”

While that may be true – of course there are kind people working in banks and lending institutions – they must follow the instructions they are given by their superiors. A mortgage loan that is not being paid on time or at all WILL be sent into foreclosure by the lender. The question is not “If” but “When.”

How can I keep the bank from foreclosing? I just need a little more time!

The best move you can make if you’re in a similar situation is to take action before your home is foreclosed upon by your lender. You may qualify for a loan modification or refinancing. A New Jersey foreclosure and bankruptcy attorney should be the next person you call. Not many attorneys specialize in both areas, so it is important that you work to find a certified NJ attorney who has the experience you need.

Why do I need a bankruptcy attorney? I’m not broke and I want to keep my home.

An experienced NJ attorney who handles both foreclosure defense and bankruptcy matters will be able to stall your foreclosure by using the Automatic Stay. This tactic can only be utilized if the debtor files for bankruptcy.

Even if filing for bankruptcy was not on your top ten list of things to accomplish in life, it is a means to an end that has helped a multitude of people in your exact situation before.

 

Image: “Mother’s Moment” by Leonid Mamchenkov – licensed under CC 2.0

Filing for Bankruptcy as a New Jersey Business Owner

Starting and running a small business is a very challenging endeavor, even for the most business-savvy entrepreneur. In fact, most entrepreneurs start a number of businesses before they find one that takes off. Sometimes, a business venture simply doesn’t pan out, no matter how much effort you’ve put into it.

If you’ve started struggling to pay your business lease every month – now’s the time to really start considering your options before problems begin to surface in your personal finances as well.

When your business debts have become more difficult to manage but not out of control, you may be able to salvage things with some refinancing and debt negotiation. On the other hand, if your debts are virtually unmanageable and you see no light at the end of the tunnel, filing for bankruptcy may truly be your best choice.

As a business owner, should I file for chapter 7 or chapter 13 bankruptcy?

Whether you’re filing for bankruptcy on your own or as a business, you can file for either chapter 7 or chapter 13. In both cases, you’ll have to meet certain qualifications in order to file. For example, the only instance in which you’re permitted to file chapter 13 in New Jersey as a business is if you are a sole proprietor. Corporations, partnerships and LLCs (Limited Liability Company) are not eligible for chapter 13 bankruptcy.

You can, however, file for a personal chapter 13 bankruptcy at this time, even if your business doesn’t qualify for chapter 13. In doing so, you’ll be able to keep the business assets while you repay debts through what is called a reorganization plan. This is the best bet if you want to continue running the business after you file for bankruptcy. This option may be appropriate if you made some mistakes along the way that you have now remedied, making it more likely that the business will succeed. If you don’t meet the requirements to file for chapter 13, your business may qualify for chapter 11.

Any business entity has the right to file for chapter 7 bankruptcy. If you the sole owner of the business, you will also be required to file for a personal chapter 7 bankruptcy simultaneously. This is due to the fact that sole proprietors are legally the same entity as their business. Additionally, a business that files for chapter 7 will not receive a discharge of their debts.

Again, if you wish to continue operating the business after the bankruptcy, you’ll want to file for a personal chapter 7. This will wipe out your liability for said business’s debts, which may allow you to get a better hold on things and start over with less debt overall.

If your ultimate goal is to close up shop and move on to greener pastures and your company is a partnership, LLC, or corporation, you can file for chapter 7 as a company. In doing so, you will essentially turn over all of your business assets to the bankruptcy trustee to be liquidated. This means all of your business property will be sold in order to pay back the debts you accrued that you couldn’t repay.

For more information on filing for bankruptcy as a business, request your free case evaluation at the bottom of our website’s home page. Veitengruber Law can help you determine which NJ bankruptcy is right for your unique situation.

 

Image: “Store Closed” by Chris Chan – licensed under CC 2.0

Should I File for Bankruptcy Before or After my Medical Procedure?

If you plan to file for bankruptcy and you also have plans to undergo a medical procedure, you will most likely benefit from delaying your filing until after you have had your procedure. Bankruptcy only discharges debt incurred prior to filing; if you first file for bankruptcy and then add medical bills incurred at a later date, those medical bills will not be covered by your existing bankruptcy agreement, even if you are unable to pay your medical bills.

Medical debt is eligible for forgiveness under both Chapter 7 and Chapter 13 bankruptcies, which are the two most common types of individual bankruptcy filings. Chapter 7 bankruptcy is a complete forgiveness of debt, whereas Chapter 13 bankruptcy includes a plan for partial repayment of the debt and forgiveness of the remainder. Which type of filing is best for you depends on your income, amount of debt, and types (and the value of) assets you have in your possession.

It is generally inadvisable to generate debt with the intention of having it forgiven through bankruptcy; it can be determined that the additional charges were incurred fraudulently, and such debt will be exempt from the bankruptcy agreement. If you’re about to petition for bankruptcy, it would be unwise to go on a shopping spree or take off on a blowout Vegas vacation, for example. However, medical bills are not subject to this type of scrutiny. There’s no cap or limit on how much medical debt can be forgiven in a bankruptcy.

There is, however, a limit on how often one can file for bankruptcy. The number of years varies, depending on the type of bankruptcy filing and how the debt was discharged. If you have previously had debt discharged in a Chapter 7 filing, you must wait eight years from the date you filed for that bankruptcy before you can qualify to file for another Chapter 7 bankruptcy. If you filed a Chapter 7 and now wish to file for a Chapter 13, there must be at least four years between your Chapter 7 date of filing and your new Chapter 13 case if you are looking to discharge more debt.

These are just a few examples, but as you can see, no type of bankruptcy filing can be arranged back-to-back to cover new debts, medical or otherwise. This means that if you file for bankruptcy, then incur more medical debt, you’ll be saddled with it until you can pay it, or until enough years have passed that you can qualify to file for an additional bankruptcy discharge.

You will have the option of filing for a Chapter 13 bankruptcy before four years have passed since your Chapter 7 discharge, but only if you are looking to reorganize your remaining debts. These remaining debts cannot be discharged for another four years.

Finally, if you are currently receiving ongoing medical care that will be resolved in a matter of months, it is most likely advisable to wait until your course of treatment is complete before filing for bankruptcy. The debts incurred during your treatment can all be included in your bankruptcy filing, and will be eligible for complete forgiveness.

 

Image: “Medical/Surgical Operative Photography” by Phalinn Ooi – licensed under CC by 2.0

Purchasing a New Jersey Home from a Bankrupt Seller

In today’s housing market, there are still a significant number of homeowners who are in danger of foreclosure. These homeowners usually owe more than their home is currently worth, so they are said to be “upside down” or “underwater.” If they are unable to refinance, and cannot keep up with their payments, they will be foreclosed upon, and are likely to declare bankruptcy at that point.

Should you pursue a short sale on a home that is awaiting foreclosure?

If you already own a home, are pre-approved financially, have plenty of available cash, and at least several months to spend devoted to the complicated process that is a short sale on a foreclosed home, only to have the seller declare bankruptcy and possibly even cancel the whole thing, then yes, a foreclosure might be the right gamble for you.

Beware, though, because as stated, it is highly likely that the seller will declare bankruptcy before the sale is completed, greatly reducing the likelihood that a short sale will close. Short sales rarely yield substantial profits for the seller, so the seller was likely pursuing a short sale in order to reduce the damage to their credit that would result from a foreclosure. However, if they’ve decided to go ahead and file for bankruptcy, the negative effect it will have on their credit is likely to overshadow any benefit from the short sale.

If they were to continue with the short sale despite having filed for bankruptcy, the seller could actually be negatively affected. Their filing for bankruptcy places their belongings, including their house, into a bankruptcy estate, so they don’t have the power to close a short sale easily. If the owner is determined to complete the short sale–normally against the recommendation of their bankruptcy attorney–they will need to pay said attorney an extra fee to pursue permission from the court.

If they obtain permission to close on the short sale, the owner will need to move out of the home much more quickly than if they were to wait out their bankruptcy proceedings. The only potential benefit to the owner comes from the peace of mind that may result from having avoided foreclosure.

With all these complications, it may seem like it’s not worth it to pursue short sales in foreclosure situations at all. However, there are a number of benefits that might be quite appealing: competitive pricing, smaller down payment and closing cost, and a shorter escrow period, to name a few major advantages.

So, if you are going to attempt to purchase a house that has been foreclosed upon, or a house that is in bankruptcy court, don’t go it alone. You will need the expertise and guidance of an experienced bankruptcy attorney. Your real estate agent will be happy to help you find advantageous listings, but consult with a bankruptcy attorney to have help navigating the complicated process to follow. A real estate agent is NOT an attorney, and can in no way fill that role.

Never skip inspections! They may be even more necessary in a short sale situation, but never less so. A 2011 survey conducted by Harris Interactive reported that 72 percent of U.S. homeowners agree the home inspection they had before they purchased their current home helped them avoid potential problems; 64 percent of respondents reported that their home inspection saved them money.

While it is a bit of a gamble to invest in an inspection when you don’t yet have signed contracts, it’s a much bigger gamble to sign papers on a home you haven’t had inspected. If a homeowner didn’t have the money to pay their mortgage, it’s unlikely that they’ve been able to keep up with regular maintenance. If you can’t arrange an inspection, and you don’t have hundreds of thousands of dollars to spend on potential repairs, don’t close the deal on a property, no matter how enticing the price tag.

The takeaway: if you have the time and money to spend on a home that may never be yours, and you find a house that is listed at a price that might make it all well worth the hassle, then take your attorney with you–and buckle up for a wild ride!

Image: “Mortgage Rates” by Mark Moz – licensed under CC by 2.0

 

Can I Receive Hurricane Sandy Forbearance if I Filed for Bankruptcy?

Homeowners in New Jersey and all along the Atlantic coast will be hard-pressed to ever forget Hurricane Sandy – a deadly “superstorm” that hit the eastern seaboard in October of 2012. Assessed as the second-costliest hurricane to ever hit the United States, estimates of Sandy’s damage (in the US alone) are approximately $72 billion. The only hurricane in US history to cause more damage was Hurricane Katrina.

New York and New Jersey were the hardest hit states, with gale force winds that reached 90 mph and heavy rain (up to 12 inches in some locations) which led to flooding and significant structural damage of homes, businesses, beaches, boardwalks, roads, and more. Power outages were widespread and lasted for weeks in some places. For the first time since 1888, the New York Stock Exchange closed (on October 29 and 30) due to weather. Even Halloween was postponed in New Jersey, much to the chagrin of kids across the state.

As we hyper-focus on the damage done by Hurricane Sandy to New Jersey alone, we know that nearly 400,000 homes suffered damage from the storm, many were without power for an extended period of time, and 37 people died.

Relief efforts to clean up and rebuild the damaged areas of New Jersey were impressive, and some (but not enough) federal aid monies were approved for the state. Some of that federal aid was disbursed extremely slowly which means the aftermath of Hurricane Sandy is still felt today, nearly five years after the storm.

Residents along the New Jersey shore sustained the most damage – both from flooding and high winds – to their homes and properties. The fact that five years has passed should mean that everyone in NJ has recovered from the storm; unfortunately that just isn’t the case. Although many people and organizations dedicated extraordinary man hours and donations toward the recovery effort, there are homeowners who still remain displaced and/or are facing foreclosure.

The good news is that Governor Christie recently signed a bill (S-2300, A-333) that will potentially offer some much needed help to those who are still struggling post-Sandy. The bill specifically grants Sandy victims with a mortgage forbearance period of up to three years. In order to receive the forbearance, homeowners must have been approved for help via the Reconstruction, Rehabilitation, Elevation and Mitigation Program OR the Low-to-Moderate Income Program.

Affected NJ homeowners struggled for years trying to rebuild their homes after Sandy. Without enough funds to make their homes habitable again, a multitude of these residents had to rent alternative housing. Paying rent while still paying the mortgage on their now damaged property pushed many homeowners into bankruptcy.

Many homeowners filed for the protection offered by the Automatic Stay in the hopes that funding would be released before their bankruptcy case was finalized. Not realizing how long it would take for federal relief funds to be released, their bankruptcy cases ended long ago, and many of the homeowners chose not to reaffirm their mortgages.

Now that bill S-2300, A-333 has been signed, those who filed for bankruptcy and didn’t reaffirm their mortgages are wondering if they still qualify for forbearance. The good news is that a lender may not require that a mortgage be reaffirmed in order for the mortgage holder to receive forbearance.

Homeowners who’ve filed for bankruptcy without reaffirming their mortgages may have to provide their lender with a letter acknowledging that the mortgage debt was discharged in bankruptcy. This protects lenders/creditors from worrying that they’ll be sued when they try to collect on the debt again.

It’s very possible that lenders will not feel comfortable discussing the matter directly with the homeowner. They don’t want to seem as though they are breaking bankruptcy law by attempting to collect on a discharged debt. In this case, borrowers should work with a bankruptcy or foreclosure attorney in New Jersey to negotiate with their lender on their behalf.

 

Image: “Crooked House” by Don McCullough – licensed under CC by 2.0