What To Do When You’re Unemployed with Credit Card Debt

Many across the US have experienced job loss or income reduction as a result of the coronavirus crisis. Figuring out how to pay for basic needs and monthly utilities is one thing, but deciding how to handle credit card debt is another thing entirely. Any amount of credit card debt is concerning, but if you are working with a high interest rate, things could go sideways quickly. Here are 4 tips to getting through unemployment with credit card debt.

 

1. Budget to Prioritize Bills and Debt Payments

 

There are some obvious things you have to pay from month to month: mortgage or rent, utilities, groceries, student loan payments, and car loan payments. Look to see where you can cut back in your budget. Unlimited data or international calling can be cut from your wireless plan. If you are locked into a contract, see if you qualify for a hardship plan with your carrier. The same goes for TV. Get rid of cable and stream videos online or drop premium channels. If you pay for services or subscriptions, suspend your account for the time being. All of these small changes will free up some of your budget to go towards the payments that matter—like your credit cards.

 

2. Only Use Your Credit Cards in Emergencies

 

While you are unemployed, you should only use your credit cards if it is absolutely necessary. You may think you can rack up some debt now and catch up on payments later, but the problem is you don’t know how long you will be unemployed. If you continue to carry a balance from month to month, the interest can add up quickly. Out of control credit card debt can tank your credit score. It is best not to use your credit card at all if possible.

 

3. Talk to Your Creditors

 

Keep in mind that credit card companies want to work things out just as much as you do. They want to get a return on their investment, after all. Their options to get these payments are limited. They cannot take your house or car away, put a lien on your unemployment check, or garnish your wages if you do not make the minimum payment. The best way for them to get payment is to work with you. Explain your situation and come up with a plan for how to catch-up on payments.

 

4. Bankruptcy May Be a Valid Option

 

If your unemployment spans long-term and you find you are unable to pay your credit card bills, bankruptcy could be an option for you. In most cases, Chapter 7 bankruptcy will allow you to completely get rid of credit card debt. Filing for bankruptcy is a big decision, but it can also give you a blank slate to start over on better financial footing.

 

If you are struggling under the weight of heavy credit card debt, you have options. Veitengruber Law is an experienced debt negotiation firm. We can personalize a solution to handle your debt issues based on your specific circumstances. Bankruptcy isn’t always the best option, but if it is for you, we will be there every step of the way.

What to Expect in a NJ Bankruptcy 341 Meeting

If you have filed for Chapter 7 or Chapter 13 bankruptcy, you will be required to attend a 341 meeting. Named after the section of the bankruptcy code that defines it, this meeting is where you meet with the trustee appointed to your case by the NJ bankruptcy court. The trustee will be able to question you under oath about your finances, assets, liabilities, and other things related to your bankruptcy case. Here, we will break down what you can expect and how we can help you prepare for your 341 meeting.

You will be joined in your 341 meeting by your attorney, the trustee handing your case, a court-appointed representative, and any creditors who choose to attend the meeting. Most of the time meetings are scheduled in clusters, so you may have a short wait before you are called for your meeting with the trustee. You will be permitted to refer to relevant documents during the meeting if needed.

341 meetings typically only last 10-30 minutes. In that time, the trustee will ask you some standard questions about your bankruptcy petition. The trustee will ask to see a photo ID as well as your social security card. They will also have you confirm on the record that the signature on your bankruptcy petition is yours. Additional questions can include:

  • Verifying your familiarity with the details of your bankruptcy petition.
  • Verifying the accuracy and completeness of the information in the petition.
  • Correcting any errors in the petition.
  • Ensuring all assets and liabilities are included.
  • Any previous bankruptcy petitions.
  • Information verifying employment and confirming the accuracy of your tax returns.

If any creditors are present they may ask some questions, but their scope is limited. Once the trustee has asked all of their questions, you will be free to go. Sometimes, the meeting will be deemed “not closed” if the trustee wants additional documentation. If you submit the required documentation promptly you should be able to avoid having to go to another 341 meeting.

Your attorney will be able to guide you through this process to ensure you understand the questions and provide full answers. You will meet with your attorney before the 341 meeting so they can go over necessary information with you and prepare you for any questions they anticipate will being asked. After the meeting is over, your attorney will let you know next steps going forward.

Veitengruber Law is experienced in handling bankruptcy cases. From your free consultation to the day your debt is resolved, we will be there for you throughout the entire process. We will help you prepare for your 341 meeting and provide caring, effective legal support throughout your bankruptcy case.

How Assisted Living or Long Term Care Can Lead to Bankruptcy

nj bankruptcy

According to the New York Times, the rate of people 65 and older filing for bankruptcy is currently three times what it was thirty years ago. Disappearing pensions, the all-time-high cost of medical expenses, and insufficient savings are all contributing to the financial instability of America’s elderly. It can be easy to underestimate how expensive long-term care and assisted living can be. When this happens, retirees find themselves unprepared to pay for the care they need. This can burden a family’s personal finances and in some cases lead to bankruptcy.

A lot of the issues impacting this crisis come down to sheer numbers. By 2050, there will be about 88 million adults over 65 living in the US. By this point, nearly 62 million of these people will need long-term care of some kind. The medical cost of this group is expected to be very high. A huge chunk of a family’s financial resources will be earmarked for long-term nursing care at home or an assisted living community. Family members will also need to find funds for co-pays, food, physical therapy, and medical equipment (walkers, adjustable beds and chairs, handicap accessories for the bathroom, etc.).

In 2016, the average yearly costs for senior care were:

$82,128 a year to stay in a nursing home

$43,536 a year to receive assisted living care

$20.50 an hour for in-home care

What’s more, many of these costs are increasingly the responsibility of elderly individuals and their family, as federal and state assistance for the elderly is consistently diminishing. Medicaid, for example, will cover most fees associated with short term stays in assisted living—but only for those who meet the program’s strict financial guidelines. Medicare also cannot be relied upon, as it will only pay up to 100 days per illness, leaving the individual holding the bill for any additional long-term care requirements. Similarly, even those with long-term care insurance can find their care is not covered under a policy’s conditions, exclusions, and benefit limits.

Nearly a quarter of long-term care costs are paid directly by individuals and their families. What this means is that when a senior can no longer care for themselves and must move into an assisted living facility or receive in-home care, the burden often falls on their family to pay for it. For many, financial contributions to mortgages, college costs, and retirement savings mean there is little disposable income to cover the cost of their parents’ long-term care. When a family cannot afford a loved-one’s care out of pocket, they are now forced to use their own personal and/or retirement savings. Some adult children of today’s older Americans are taking out personal loans to cover care expenses.

For many American families, it simply is not possible to cover the rising cost of long-term care for an elderly loved one. Bankruptcy can result when medical debt becomes unmanageable. Veitengruber Law is a full-service estate planning, debt management, and bankruptcy law firm. We can help you plan for the future, make your debts more manageable, and discuss your options when medical debt becomes overwhelming. Bankruptcy can help alleviate stress from medical debt and help you get your finances back under control.

Filing for Bankruptcy: Should I Wait Until After the Holidays?

nj bankruptcy

The holidays can be a stressful time of year for anyone, but it is especially stressful for those struggling financially. If your debts are too much to bear and you are considering bankruptcy, it can be hard to decide when is the best time to file. Should you file before the holidays to eliminate your anxieties, or is it the best plan to focus on enjoying the holiday season and figure out your finances in the new year? Every bankruptcy case is unique and the answer to this question will depend on the specifics of your situation.

Can Holiday Debt be Discharged?

In bankruptcy law, all the debt accumulated in the three months before and after Christmas is generally considered non-dischargeable debt. In other words, any money you spend on gifts, decorations, holiday parties, or travel during the holiday season is your responsibility to pay and cannot be eliminated through bankruptcy. With this kind of debt there are two options. The first option is to reaffirm this debt, which would allow you to make monthly payments until the debt is paid off. The second option is to redeem the debt, or pay the full balance. The exception to this rule is if the cause of the debt was an absolute necessity. In the case of necessary debt, even if it is accrued during the period of time surrounding the holidays, can be discharged during bankruptcy.

When trying to determine if you should file before or after the holidays, the best way to decide what to do is to take the means test. The means test is a set of steps you can use to determine if you should file for Chapter 7 or Chapter 13. Chapter 7 bankruptcy allows you to discharge many or all of your debts, while Chapter 13 bankruptcy, sets up a manageable monthly debt re-payment plan over a period of 3 to 5 years. One of the important areas of the means test is how much income you received in the six months prior to filing. If your income is above a certain threshold, you will not be able to file for Chapter 7 bankruptcy and will therefore be held responsible for more of your debts.

Chapter 7 

You will need to know precisely how much income you receive in the six months prior to filing – this include all incoming funds like child support, lottery winnings, inheritance money, survivor’s benefits and holiday bonuses. If you know you will be receiving a holiday bonus, it may be a good idea to file before you receive this extra income. If you file before you receive the bonus, it can raise your income and make you ineligible for Chapter 7 bankruptcy.

Your income taxes can also impact your filing status. In Chapter 7 bankruptcy, debtors typically have what is known as a “no asset” bankruptcy. This means that what you own is either exempt or worth too little to be sold off to help pay for your debts. Under no asset Chapter 7, if you file after January 1, the IRS will not be paid from the bankruptcy proceedings. This does not mean debt owed to the IRS is forgiven, but instead that you will have to agree to a payment plan to pay off any income tax owed.

If you do own any valuable assets when you file for Chapter 7 bankruptcy, any non-exempt item that meets the valuation criteria will be liquidated to pay your creditors. The IRS, as a priority debt, will receive payment before your other creditors.

Chapter 13

Chapter 13 bankruptcy presents three significant benefits to filing for bankruptcy after your income taxes are due.

  1. You will be protected from the IRS while you are repaying your debts.
  2. Because there is a decent amount of flexibility for repayment, you can choose to pay debts in order of priority.
  3. No interest or penalties will accrue during your bankruptcy case. If you want to take advantage of these benefits under Chapter 13 bankruptcy, you should wait to file in the New Year.

The holidays are a time to enjoy family, friends, and cherished traditions. If financial stress is keeping you from enjoying the holiday season, don’t suffer alone. Veitengruber Law can help you determine when and how to file for bankruptcy. Our legal team is experienced in bankruptcy law and debt management. We can answer any of your questions and help you decide which option is best for your specific situation, and we will be by your side throughout your entire bankruptcy case.

Joint Property Ownership and Bankruptcy in New Jersey

chapter 7 bankruptcy in new jersey

When you have unmanageable debt, sometimes the best way forward is through a personal bankruptcy petition. If you own joint property with friends or family members, things could get a little more complicated. If a family member co-signed for you or a parent added you to a bank account or deed as an estate planning tool, you will need to know how your bankruptcy will potentially impact this jointly-held property. There are a lot of variables when it comes to joint-owned property and bankruptcy. Here we look at what to expect as you move forward with your bankruptcy petition.

When you file for bankruptcy, your assets become property of the bankruptcy estate unless you can properly exempt it. Depending on how you file for bankruptcy, this could mean different things for your nonexempt property. Under Chapter 7 bankruptcy, the trustee managing your bankruptcy will have access to all property to which you have a claim. This property can be sold to pay your creditors. Under Chapter 13 bankruptcy, any property you jointly own with others will enter into the calculation used to determine how much you will need to pay your creditors.

Bankruptcy exemptions can be used to protect a specific amount of property under Chapter 7 bankruptcy or reduce the amount you will have to pay back your creditors under Chapter 13 bankruptcy. In most situations, if the property you jointly own has no equity or is fully exempt, it will not be impacted by the bankruptcy. If you can prove to the courts that the funds used to purchase the property were principally contributed by your co-owner, then you may be able to get the property exempt from your bankruptcy case to protect your co-owner’s interest.

There are some situations in which your jointly owned property will be considered part of the bankruptcy estate. New Jersey is a common law property state. This means that in most legal matters, each co-owner’s individual interest in joint property is treated as that person’s separate property. The courts will tend to view an jointly held property as owned equally by all parties. So if you own property with one other person, half of the properties value will be considered your individual interest. Therefore, only your portion of the joint asset will enter the bankruptcy estate and the trustee will be unable to take your co-owner’s portion to pay back your creditors.

It is important to note, though, that if you cannot get the property exempt or if the property has equity, your trustee may be able to sell the entire property. Even if your co-owner’s share isn’t part of the bankruptcy estate, your trustee could prove that the benefit of selling the property as a whole overrides any inconvenience or loss to your co-owners. If the trustee is able to get the courts to approve the sale of the property, the proceeds will need to be used to pay the co-owners their share.

In New Jersey, the courts have made it clear that if you are not in bankruptcy, creditors cannot force the sale of jointly owned real estate to settle what an individual debtor owes to their creditors. Therefore, by filing for bankruptcy you could unintentionally be putting jointly owned property at risk of being sold. Keep in mind also that a bankruptcy involving joint property could negatively impact you co-owner’s credit record. To avoid these consequences, it may be worthwhile to look into alternatives to bankruptcy.

The best solution to this issue is not to title assets jointly if you or your potential co-owners are facing financial difficulties. Of course, this isn’t always realistic and sometimes financial difficulties are unpredictable. If you are facing unmanageable debt and want to protect your jointly owned property and your co-owner’s interest, you have options. Veitengruber Law is an experienced bankruptcy law firm. We can help you understand all of your options and demystify the complexities of bankruptcy proceedings.

How Bankruptcy Impacts Your Inheritance

Making the decision to file for bankruptcy can be difficult, but sometimes bankruptcy is the best answer to your financial difficulties. Filing for Chapter 7 or Chapter 13 bankruptcy can be the tool that helps you get out from under massive debt. But the process of bankruptcy isn’t easy and it comes with some hard to swallow consequences. If you are expecting to receive an inheritance soon or if you have recently been the recipient of money or property from a loved one who has passed, you need to think about what bankruptcy can do to your inheritance.

In bankruptcy, there is a 180-day rule. Once you file, the first 180 days immediately after are critical to your bankruptcy case. In this time period, whatever income you receive becomes part of the bankruptcy estate. Any inheritance you receive during this time will also become part of the bankruptcy estate and what happens to that inheritance will depend on your specific bankruptcy case. It is important to note that you do not have to actually have possession of the money or property you are entitled to in your inheritance for it to be included in the bankruptcy. As long as you become entitled to the inheritance within the 180-day time frame, it will be included in your bankruptcy.

If your spouse receives an inheritance, it is not necessarily part of the bankruptcy estate. Your spouse’s inheritance will only be included in the bankruptcy estate if you are filing for bankruptcy together. If your spouse is not included in the bankruptcy case, then the inheritance should not be included. The only way the inheritance could become part of the bankruptcy estate is if it is used in conjunction with marital assets. The best way to avoid this issue is to keep your spouse’s inheritance totally separate from any shared assets.

You are responsible for notifying the bankruptcy trustee of the money or property you are entitled to under your inheritance. Even if you fear the inheritance may be taken during the bankruptcy to pay off creditors, you cannot withhold this information. Talk to a bankruptcy attorney about when and how to notify the bankruptcy trustee. There may be specific forms you need to amend for your case depending on whether the inheritance was money, personal property, land, or a structure.

Whether or not you will be able to keep this inheritance depends on if it falls under an existing exemption. In New Jersey, you can keep up to $1,000 of personal property and up to $1,000 of furniture and household goods. You are also entitled to keep your clothing and your burial plot. If married and filing jointly, you and your spouse can double the personal property exemption to $2,000. Your bankruptcy attorney will be able to help you understand what part of your inheritance, if any, is exempt. If your inheritance is not exempt, the court will liquefy the asset to go towards paying off creditors under Chapter 7 or it will be included in the calculation for your payment plan under Chapter 13.

If your loved one passes or you become entitled to the inheritance 181 days or more after you filed for bankruptcy, it is not part of the bankruptcy estate. Under Chapter 7 bankruptcy, your inheritance is yours to keep and it will not be used to pay off creditors. Under Chapter 13 bankruptcy, however, your inheritance could be calculated into your monthly payment plan. Unless it is exempt, your bankruptcy trustee can count it as income and determine how much of it should go towards your outstanding debts.

Bankruptcy can be a confusing and difficult process. Don’t become overburdened with stress over all the little details. At Veitengruber Law, we’re experienced in handling the intricacies of New Jersey bankruptcy law. If you are concerned about how bankruptcy can impact your inheritance, we can help.

How to Avoid Bankruptcy in Retirement

bankruptcy in retirement

Bankruptcy filings for retirees are rapidly increasing across the US. As poorly funded pensions and retirement savings shrink, retirees look to bankruptcy to put a stay on some of their monthly payments. Rising healthcare costs, adult children living at home for longer, and the financial inability to properly save for a retirement that extends into longer lifespans have all contributed to the rising senior bankruptcy rate. How can you avoid this trend and spend your golden years in peace? Here we look at a few ways to make sure you aren’t filing for bankruptcy after retirement.

1. Settle Your Debts

Regardless of how much you have invested into your retirement, if you’re carrying a mountain of debt into retirement you could end up financially strapped pretty quickly. Paying off as much debt as possible before retirement should be your number one goal. High interest credit cards are the most important to pay off, followed by your mortgage and car payment. The less debt you carry into retirement, the more money you will have to cover your living expenses. If you are struggling to tackle your debt and you are approaching retirement, sit down with a debt negotiation attorney to figure out what your options are.

2. Be Clear with Children and Other Family Members

It is very tempting to be generous with family members and other loved ones. However, you need to be realistic about when you can actually afford to help and how much this will impact your retirement savings plans. Parents should not feel obligated to pay for college, a wedding, or other big life events if they do not have the means to do so. The best thing to do is communicate these financial boundaries early. Adding more debt to your plate in order to help a family member can be disastrous for seniors looking at retirement. After all, if you do not prioritize your financial health over that of your loved ones, you could end up becoming a financial burden to them later on.

3. Downsize

Retirement comes with a lot of big life changes. More leisure time, the freedom to travel, and the ability to explore new hobbies come hand-in-hand with some harder lifestyle changes. With the inevitable reduction of income in retirement, retirees often find they cannot afford to keep up with their day-to-day expenses. Buying a smaller home or renting and downsizing to one vehicle instead of two or three can help you establish a leaner budget before retirement. This should make it easier to embrace a reduced retirement income.

4. Be Smart About Social Security Benefits

The biggest concern most people have about retirement savings is running out of money. Getting a part-time job to boost your retirement portfolio can help buoy your finances in retirement. Most retirees need about 80% of their pre-retirement income to maintain their lifestyle. Your Social Security benefits will mirror the average of your pre-retirement wages. It is important to keep in mind that your social security benefits will likely not cover even half of your retirement expenses. The longer you can go without tapping into social security, the better your financial situation will be in retirement. Even if you have the option to start using your Social Security, only do so when it is absolutely necessary.

5. Invest!

The shakiness of the market over the last two decades has many Americans making uber conservative investment decisions about their retirement. Investing doesn’t have to be scary. In order to keep up with cost of living adjustments and to give yourself a generous nest egg to work with in retirement, it is important to invest savings into a diversified portfolio of common stocks. Especially if you are a few decades away from retirement, it is a good idea to use the time you have to put your assets into money market funds. Investing your money, as opposed to letting it sit in a bank, can make all the difference for your funds in retirement.

Many seniors and those approaching retirement age have anxieties about the financial realities of retirement. Veitengruber Law can provide the services you need to establish a robust retirement plan. From asset protection and debt management to bankruptcy litigation, we can help you get the peace of mind you need. We also work with a diverse network of professionals who can help you invest, downsize, and make a comprehensive retirement plan that will be effective. Don’t wait until you are enjoying your golden years to have second thoughts about your retirement plan. Take action today to secure your financial future.

Secured vs Unsecured Debt: Understanding the NJ Bankruptcy Petition

New Jersey bankruptcy

At the beginning of every bankruptcy case, the person filing will need to complete official bankruptcy forms. The cover document, known as the petition, will include identifying information like your name, address, and the chapter of bankruptcy you are filing. The petition will also include information about your income, your creditor claims (or debts), and assets in specific forms called schedules. Classifying creditor claims can be complicated. All of your debts will need to be listed as either a secured or unsecured claim. It’s important that you properly label each debt. Here, we look at how to list creditor claims in your bankruptcy paperwork.

Secured Claims

In order to have a secured claim in bankruptcy, you must have two things: a debt that you owe and a lien or security interest on property that you own. Examples of secured debt are a mortgage, a car payment, or another collateralized debt. If you fall behind on payments or are unable to keep up with the terms of your contract, the lien can allow the lender to recover the property through foreclosure or repossession. The lender will then sell the property and use the proceeds to pay down your account balance. Secured claims are typically voluntary, but a creditor could obtain an involuntary lien against your property. A creditor could secure an involuntary lien against your property through a lawsuit, whereas if you fall behind on your taxes, the IRS automatically has the right to a tax lien against your property.

During bankruptcy proceedings, a creditor with a secured claim has an advantage. A bankruptcy charge will remove your obligation to pay a debt, but it will not remove a lien on your property. Because of this, a creditor can still opt to take back the property if the loan does not get paid. Therefore, if you file for bankruptcy but you don’t want to lose your property, continue making payments to the lender until the debt is paid off. It is possible to get rid of specific types of property liens in bankruptcy. One option is to get a legal judgement on the grounds that a lien negatively impacts your bankruptcy exemptions. Another option is to wipe out an unsecured junior lien through Chapter 13 bankruptcy.

Things can get complicated, though, if there is significant equity in the property in question, as you will be able to protect a certain amount of equity in bankruptcy. Under Chapter 7 bankruptcy, the trustee will likely try to sell the property. However, the trustee has to make enough in the sale to pay off the loan, return any exempt funds to you, and pay off creditors. The trustee will likely not sell the property if there is not enough equity to pay something worthwhile to creditors. On the other hand, a Chapter 13 bankruptcy will allow you to keep any property with significant equity, as long as you can afford high monthly payments towards the nonexempt equity in the plan.

Unsecured and Priority Claims

With unsecured claims, there is no lien involved in the debt owed. It is, however, important to know if the claim is priority unsecured or nonpriority unsecured. Priority unsecured claims are not dischargeable and will take precedence in repayment plans over nonpriority debts. Examples of priority claims are alimony, child support, tax obligations, and debts from personal injury or drunk driving lawsuits. Priority debts cannot be discharged in a Chapter 7 bankruptcy and you will still be responsible for paying back the full balance. In Chapter 13 bankruptcy, you will have three to five years to pay back the balance in full.

Nonpriority unsecured claims are dischargeable with the exception of student loans. Before these debts can be paid with bankruptcy funds, all priority debts must be taken care of first. Examples of nonpriority unsecured claims are credit card debt, medical bills, and personal loans.

Filing for bankruptcy includes a lot of detailed, complex paperwork. Determining how to categorize your debts can be confusing for the average consumer. Veitengruber Law offers a total approach to debt relief. Our experienced legal team knows how to expertly demystify the bankruptcy process so that our clients have a clear understanding of what is happening – every step of the way.

What Debts Must You Pay During Chapter 7 Bankruptcy?

Chapter 7 Bankruptcy

Chapter 7 bankruptcy is a useful tool to get out from under different kinds of dischargeable debts. Credit cards, medical bills, and personal loans all fall under debt that can be discharged as long as you meet specific Chapter 7 income requirements. It is important to note that while a Chapter 7 bankruptcy can get rid of a lot of your debts, there will still be debt you are responsible for paying during and after the bankruptcy process. It can be confusing to determine what you are still responsible for during and after bankruptcy. Here, we look at the debts you must keep paying even while filing for Chapter 7 bankruptcy.

Post-Petition Debt:

You will likely still receive bills while your bankruptcy case is pending. If the debt in question was incurred after you filed for bankruptcy, it is not included in your case and you will be responsible for paying it. These debts are called “post-petition” debts and they typically include child support, alimony, utilities, rent, homeowner’s association (HOA) fees, insurance, and most taxes. The court will determine on a case by case basis if any of these kinds of debts included in the filing will qualify for a discharge. Whereas most utility bills incurred before filing are dischargeable, child support payments are not and you will continue to owe on your outstanding balance after the case for these debts.

Secured Debt:

Secured debt typically occurs with the use of credit purchase of expensive property. In these cases, the lender typically requires collateral to use in case you cannot meet required payments on the loan. A mortgage or car loan are common examples of secured debt. Whether or not you should continue to make payments on these loans depends on if you plan to keep the property associated with the loans. If you give the property used for collateral back to the lender, then the loan will likely be discharged with your bankruptcy case.

If you want to keep the property in question, you should keep making regular payments through your bankruptcy and after. If you do not continue to make payments, even if you are in the middle of bankruptcy proceedings, the lender could use their rights to take back the property through foreclosure or repossession. There will be a temporary stay (more on that below) to prevent your lenders from taking legal action during bankruptcy proceedings, but lenders can file a motion to proceed even during a bankruptcy. Regardless, once the bankruptcy case has closed, the lender is free to pursue their legal rights to repossess the property if you have not kept up with payments.

Payment Responsibility:

In the event you cannot discharge all of your debt, you will still get a brief payment break on the debts that you cannot discharge, like student loans, taxes, and court fines. During the automatic stay, creditors will not be able to attempt to collect on your debts. Once the temporary stay has lifted, however, you will be legally obligated to resume payments on all non-dischargeable debts. How much you will owe on these debts post-bankruptcy depends on whether or not you plan to or are able to keep the property associated with the debt.

Filing for bankruptcy can be confusing and intimidating. At Veitengruber Law, we have years of experience working with clients throughout bankruptcy filings. We can help demystify the process so you can make confident and informed decisions about your financial future. Our experienced legal team will guide you through the legal ins and outs of a bankruptcy so you know exactly what to expect.

How to Buy a Home After NJ Bankruptcy

NJ bankruptcy

Buying a home is at the core of the American dream. The advantages are clear: tax incentives, stability, investment, and being independent of a landlord. Since the housing market crash of 2008, banks have become much more scrutinous of potential homebuyers’ credit history. Do you have to give up on your dream of home ownership if you’ve had a NJ bankruptcy discharge? You may be surprised to learn that owning a home is a real possibility.

In chapter seven bankruptcies, an individual’s assets are liquidated and used to repay their debts, with any remaining debts are discharged, or cleared. This will give you a clean financial slate to start over with. In a chapter thirteen bankruptcy, you can keep some assets but you will have to abide by a payment schedule for repaying your debts over three to five years. After the time period is over, your remaining debts are often dismissed. There are several different types of home loans that have different requirements for post-bankruptcy discharge.

New Jersey Housing and Mortgage Finance Agency (NJHMFA) Down Payment Assistance (DPA)

If you are a potential first-time home buyer you may want to look into the NJHMFA Down Payment Assistance program. It provides $10,000 towards a down payment and/or closing costs. The DPA is considered a second loan with no interest or payments. Once a buyer has lived in their home for five years, the loan is considered paid. There are several qualifications that must be met in order to participate in the program:

  • You must wait 24 months after chapter seven or chapter thirteen bankruptcy discharge.
  • You need to have a FICO credit score of 620 or above and meet debt-to-income requirements.
  • Only homes purchased in New Jersey are eligible.
  • The DPA must be paired with an NJHMFA first mortgage loan which is a 30-year fixed interest, government-insured loan through participating lenders.
  • The property must fall below purchase price limits.
  • The borrower’s income must fall below limits of 140% of median area income.

Qualifying for $10,000 interest-free is a huge incentive to acquiring an NJHMFA loan. After your bankruptcy discharge you can work towards meeting these requirements and getting your credit score above 620.

Federal Housing Authority (FHA) Loan

If you’re not a first-time home buyer or don’t otherwise qualify for the NJHMFA loan, an FHA loan is your next best bet. An FHA loan is a government-insured loan which has less requirements than conventional loans.

In regards to chapter seven filings, you’ll need to wait two years after the date of discharge (with a notable exception). If you can prove that you filed for bankruptcy due to no fault of your own, you can apply for a twelve-month exception. These circumstances may include illness, divorce, or theft. You will also need to demonstrate responsible financial behaviors in the months following the discharge.

Chapter thirteen filings require ongoing payments for three to five years so if you wish to purchase a home during that time, you will need to involve the court in your loan application. This is where a skilled bankruptcy attorney like George Veitengruber can assist you and present your purchase in the best possible light. First, you must make twelve months of payments to creditors. You will need to show the court that the reason you filed for bankruptcy was an anomaly.

Conventional Loans

Conventional home loans have tougher requirements for post-bankruptcy home buyers. Both chapter seven and chapter thirteen bankruptcies require a waiting period of 48 months after discharge to apply. In the exception of bankruptcy that was beyond your control, the waiting period can be reduced to 24 months. A conventional loan requires a twenty percent down payment on a property. Down payments of less than twenty percent are subject to mortgage insurance, which can be removed after the 20% has been paid. Conventional loans also traditionally require a higher credit score than an FHA loan.

The good news is that bankruptcy does NOT mean the end of your financial independence. You can rewrite your story and craft your new future. Since each of these loans requires a waiting period, take that time to plan carefully rebuild your credit so that you can embark on your new home purchase with a solid financial foundation.