STOP a NJ Sheriff’s Sale and KEEP YOUR HOME

NJ sheriff's sale

In New Jersey, it can take a long time to foreclose on a home. There are a lot of options to explore before you get to the point of foreclosure. If, however, you find yourself unable to work with your lender to get a loan modification and a foreclosure commences, you may be facing a sheriff sale of your home. The good news is, even at the point that a sheriff sale has been scheduled, there are still ways to stop the auction and save your home. Veitengruber Law is here to offer valuable legal advice to get you through this time sensitive situation.

After it has been decided the home will go to sheriff’s sale, the lender or the homeowner can ask the court to adjourn, or postpone, the sale temporarily. Under NJ law, the adjournment can be requested for any or no reason at all, but the homeowner can only ask for adjournment twice whereas the lender can ask as many times as they want. These adjournments last for two weeks and give the homeowner time to consider their options.

In New Jersey, each county has its own adjournment procedures and sets its own costs for requests. Generally, the fee is small – around $28 – in most counties. All requests for adjournment must be made in person and the fee must be paid up front. The request can be made in a letter listing the docket number and sheriff sale number along with the property address and date of the sale. Some counties offer a standard form to request the adjournment. We can help you submit this request to make sure you are approved for your two week adjournment.

In limited situations, the homeowner can ask for additional adjournments. This formal request to the Court would only be granted for good cause, like if a sale of the home is pending or the homeowner is likely to be approved for a loan modification. Additional requests for adjournment can be costly and are at the full discretion of the judge, so it is important to try to work toward a solution within the time limits provided by your two allotted adjournments.

Once the sale of the home has been stalled or stopped, you have a few options to consider. Because you have missed more than three payments, the loan is declared to be in default and the lender will not just let you start paying again to catch-up on missed payments. These missed payments and late fees are combined with any real estate taxes or insurance that has been paid by the lender along with any legal fees to make up the “arrears.” The arrears must be paid before the lender will allow you to start making monthly payments again.

There are a few ways to pay off the arrears. The first is to pay them off in one lump sum, which can be difficult if not impossible for most people. The second is to negotiate a loan modification with your lender and have the arrears added to the principal balance of the loan. Even if you have tried and failed to get a loan modification in the past, with Veitengruber Law’s help it may still be possible to work out a loan modification. This could permanently close your foreclosure case and save your home. A loan modification is often the most ideal way to resolve a foreclosure case and we will do everything they can to work toward this goal.

The final option to repay arrears and end your foreclosure case while keeping your home is to file for Chapter 13 bankruptcy. Once bankruptcy is declared, a sheriff sale of your home will be immediately stopped. While the idea of filing for bankruptcy can seem intimidating, bankruptcy is actually a very useful legal tool to get back on top of your finances. A Chapter 13 bankruptcy will likely save your home from foreclosure and also give you options to mitigate your debts. If you also have excessive credit card debt or other debt from medical or other unplanned expenses, these debts can be managed within the same bankruptcy case. Working with an experienced  bankruptcy law attorney who also provides foreclosure defense services will help you determine the best way to save your home and get you on the path to a better financial future.

There are a lot of considerations to take into account when facing a sheriff sale of your home in New Jersey. We understand that this is a deeply personal decision and we will be there to support you every step of the way. Don’t assume you are out of options because a sheriff’s sale is scheduled. Contact us today for an expert assessment of your situation and save your home!

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Debt Limits in a Chapter 13 Bankruptcy

NJ bankruptcy attorney

For most people, the word bankruptcy doesn’t incite a positive response, especially if it’s a personal obstacle that you’ve faced. Despite its often negative reputation, bankruptcy does provide a second chance to start fresh. It’s not the easiest monetary maze to navigate, but in a Chapter 13 bankruptcy, a significant emphasis is placed on devising a repayment plan, which offers direction to a financially divergent individual.

When a debtor files a petition through the bankruptcy court, the bankruptcy case is initiated. Though there are various types/chapters of bankruptcy, Chapter 13 can only be filed by individuals. In order for you to qualify for Chapter 13 bankruptcy, your total debt cannot exceed a specific limit according to the bankruptcy law. At first glance, if your debt exceeds the set amount, don’t panic. It’s still possible to qualify for Chapter 13, and we’ll explain what that looks like.

Some parts of debts can be contingent, disputed, or not yet liquidated and therefore will not be combined with the rest of your debt. Unliquidated debt occurs when the amount that you may be required to pay has not yet been determined or cannot easily be determined. This can be a common occurrence in personal injury or auto accident claims. A debt that you are not mandated to pay unless a specific event takes place is known as contingency debt. If the event never occurs, you will not be obligated to pay the debt.

Every 3 years, the Chapter 13 debt limits are altered. Set on April 1, 2016, if your secured debts, such as mortgages and liens, amount to more than $1,184,200 or unsecured debt totals more than $394,725, you may not be eligible for Chapter 13. These amounts are not negotiable, but there are steps you can take in order to get your debt total below the limits.

Review and Separate Types of Debt

1.      Distinguish which debts are not counted into the debt limit.

You are not obligated to pay contingency debts unless the contingency event occurs. Be careful; cosigned debts are not contingent.
Example: You cosign on your sister’s car loan with the assumption that she will repay the debt. Legally, you are just as responsible for the debt, even if you and your sister are in agreement that she will be responsible for repayment.

Unliquidated debts are easy to understand, but know that breach of contract claims are not normally deemed unliquidated.

2.      Separate debt into unsecured and secured categories.

What is the difference between unsecured and secured debt? Connected to a property, mortgages and car loans are standard examples of secured debt. Since the borrower has an incorporated motivation to make payments, the property linked to the debt is said to “secure” the loan. If the individual ceases to make payments, the lender can take hold of the property that is associated with the loan.

Unsecured debt includes credit card debt and student loans. In other words, it’s debt that is unattached to property. The creditor can take action against the debtor, but they are not able to seize property to make up for ignored payments.

If you have secured property in bankruptcy, it’s possible to strip down a lien or part of a lien. Any portion that is removed turns into unsecured debt. The conversion of some secured debt to unsecured debt can assist you in remaining beneath the debt limit.

Other Filing Requirements

In order to file for Chapter 13 bankruptcy, it’s not only necessary that you meet the debt limits; there are a few additional requirements. It’s suggested that you have a steady, reliable income. This is crucial because a repayment plan occurs over the course of 3 to 5 years and you need to be sure that you will have a paying job throughout the life of your plan.

A credit counseling session is also mandated before an individual can file for Chapter 13. You’ll be required to submit a certificate that states that the counseling was completed before your bankruptcy case can be opened.

If you find that you do not meet the debt limits for Chapter 13 bankruptcy even after taking our suggested steps, there are other options that you can pursue. Chapter 11 bankruptcy offers reorganization and many of the benefits of Chapter 13 bankruptcy, but it’s typically less stream-lined. Chapter 7 would also be an option, but it only provides liquidation.

If you’re considering filing for Chapter 13 bankruptcy and have questions about the process or even more specifically, debt limits, be sure to contact our office. We offer all new clients a free, holistic debt evaluation, which will help you determine what action(s) will help your financial situation the most.

Planning a Wedding After You’ve Declared Bankruptcy

bankruptcy

Planning a wedding is a time of excitement and joy, but it can also be a time of significant stress. With the average wedding costing upwards of $25,000.00 in 2017, planning and paying for a wedding can be overwhelming for even the most financially stable couple. For couples going through bankruptcy, affording a wedding can seem nearly impossible. It is important to understand how bankruptcy will affect your ability to pay for a wedding, but also how it will affect the overall financial health of you and your future spouse. Fortunately, with the right planning you can still have the wedding of your dreams, even after declaring bankruptcy.

Financial stress is the leading cause of divorce, so it is important to get a handle on your finances before you decide to tie the knot. In declaring bankruptcy, you’ve taken the first step towards managing your debt to ensure a brighter financial future for you and your spouse. Keep in mind that bankruptcy exemptions are very specific and none of them cover expenses associated with a wedding. Because of this, and the potential stress and uncertainly that comes with bankruptcy proceedings, it is advisable to wait to plan a wedding until after a bankruptcy claim has been fully closed. That way, you can start married life with a clean financial slate.

Open communication and honesty about your financial history is very important as you plan your wedding. Whether you have liquidated your assets to eliminate your debt (Chapter 7) or reorganized your payments to creditors (Chapter 13), after declaring bankruptcy you will be able to get a good understanding of your new financial situation. Sit down with your future spouse and create a detailed budget including your income, expenses, and your expected payments to creditors if you have a Chapter 13 bankruptcy repayment plan. Figure out how much you plan on spending on your wedding and create a detailed wedding budget. Keep in mind that post-bankruptcy, it may be harder to obtain a loan to finance wedding purchases. Cut costs where you can so you can focus your financial resources on the aspects of your special day you couldn’t imagine going without.

It is also important to understand how a bankruptcy can affect your new spouse after you say I do. Contrary to popular belief, your credit—even if you have declared bankruptcy—will not directly affect the credit of a future spouse. Every person has their own credit score and these scores are not combined after marriage. However, bankruptcy may affect your future spouse in indirect ways. The only time a declaration of bankruptcy will affect a future spouse is when you apply for credit as joint account holders (like applying for a mortgage) OR when adding a spouse to an existing line of credit. It may become more difficult for you and your spouse to acquire joint loans, or you may have to pay higher interest rates on those joint loans.

Filing for bankruptcy can be a difficult and complicated process, but it doesn’t have to be. Don’t let bankruptcy get in the way of your happily-ever-after. Contact the qualified legal team at Veitengruber Law help you plan your debt free future.

Frequently Asked Questions about New Jersey Bankruptcy

Bankruptcy FAQs

Will the recently enacted bankruptcy laws make me ineligible for a fresh start?

It’s true that Chapter 7 bankruptcy laws have made it more difficult to qualify for a fresh start, but a healthy percentage of applicants do still qualify for this type of bankruptcy. Every situation is unique, however, so the best course of action would be taking advantage of the free Chapter 7 bankruptcy consultations we offer here at Veitengruber Law. This process allows us to present you with the options that will benefit you most over the long term.

Which type of bankruptcy filing will be best for me?

If a debtor files Chapter 7 bankruptcy, the law requires that the debtor relinquish all property in excess of a set monetary limit in order that it can be liquidated through sales to creditors. However, in most of these cases, real property is exempt. This is to permit the debtor to be somewhat well positioned for a fresh start.

Chapter 11 bankruptcy is designed for business and individual debtors who have taken on immense personal debt.

Chapter 12 bankruptcy is only available to family-owned fishing businesses and family farmers.

Chapter 13 bankruptcy is usually called a “debt adjustment” since a debtor is required to file a concrete plan to repay most or all of their debts within their current income parameters.

What are New Jersey’s specific requirements for filing bankruptcy?

In order to qualify for Chapter 7 bankruptcy in New Jersey, a debtor must provide a wide array of personal information regarding their financial status. These categories include, but are not limited to: all creditors and any collection agencies, secured claims, unsecured claims, any existing debt schedules, pensions, stocks, real estate holdings, and the value of the debtor’s life insurance policy.

Once you have arranged your free consultation, the experienced team at Veitengruber Law will carefully explain the applicable filing requirements. Additionally, your bankruptcy attorney at our firm will go through this list with you to be sure you’re prepared to go forward.

Will I be permitted to keep any of my property?

When filing for Chapter 7 bankruptcy, a debtor is permitted to retain property that either state or federal law has declared exempt from the claims of creditors. The debtor is given the option to choose which set of exemptions is more advantageous, but often the federal laws are more favorable.

 

Will I be permitted to own anything once I have filed for bankruptcy?

Absolutely. It’s a common misconception that anyone who has filed for Chapter 7 bankruptcy is prohibited from owning anything. Bankruptcy is not intended to be punitive.

However, it’s important to note that if a debtor does come into an inheritance, receives a personal property settlement, or benefits from a life insurance payout within the first 180 days after filing for bankruptcy, this income or property will almost certainly be flagged as being owed to creditors unless it is specifically exempt.

Will I still be protected from discrimination despite my bankruptcy?

Federal law (No.11 U.S.C. sec. 525) protects you from discrimination from both governmental units and private employers due to your having filed for bankruptcy or failed to repay dischargeable debt.

Will I be required to appear in court?

Yes. Once you have filed your Chapter 7 petition, the court will schedule a formal Meeting of Creditors within 30 – 90 days. The Federal Court Trustee in Newark, Camden, or Trenton will conduct the meeting. Counsel will be present at your side to assist you as you answer questions intended to help the appointed trustee decide if you possess assets that should be distributed to your creditors. Additionally, the trustee will attempt to discern if you have filed your petition for Chapter 7 bankruptcy in good faith.

Will bankruptcy ruin my credit rating?

While it’s undeniable that having a bankruptcy on your credit report does damage your rating, it’s also true that over time, the bankruptcy itself can be less detrimental than a years-long history of unpaid debts and judgments against you. In fact, many people find that once they have filed for Chapter 7 bankruptcy, they receive offers for fresh credit cards and are even able to obtain them! Lenders are overall more likely to view you as less risky once you are free from your huge burden of debt. After all, they are guaranteed that you will not be permitted to file for bankruptcy for a minimum of six years.

Does bankruptcy erase my debts?

While bankruptcy will erase most of your unpaid debts, there are notable exceptions.

Bankruptcy normally does not adjust:

  • Alimony or child support obligations
  • Some unlisted debt
  • Loans obtained under false pretense
  • Fines
  • Debts resulting from willful and malicious intent
  • Student loans

Additionally, mortgages and any other liens that are not paid via the bankruptcy may be attached to the property. They will not be reattached to you personally until and unless you decide to reaccept the obligation. If the creditor sells the property, the bankruptcy completely absolves you of all obligation to repay the debt.

Are there other viable options for getting out from under my debt?

Once a debtor has been hounded by creditors and has realized that they have very little hope of paying off their debts, the promise of a fresh start through bankruptcy can seem like the only escape. While bankruptcy is the best course of option for a good portion of overwhelmed debtors, it can also greatly impact their credit rating and their ability to purchase large items such as a home or vehicle. Therefore; it is prudent for debtors to carefully consider less drastic alternatives.

This caveat is especially pertinent if the debtor’s financial problems are likely to be merely temporary, in which case creditors may accept smaller payments, or stretch payments out over longer periods of time. It helps the debtor’s credibility if they have demonstrated prompt payment habits in the past, or if they inform their creditors that they are facing potential bankruptcy. Creditors are eager to avoid bankruptcy if they may reasonably expect that the debtor will be capable of and willing to repay their debts over time; once bankruptcy proceedings have begun, they are unlikely to recover anything, or will only be able to garner a fraction of what they are truly owed. Creditors also often like to avoid court proceedings connected to bankruptcy because they are costly and time-consuming.
Veitengruber Law works with our clients to present them with every available avenue of debt relief so that they are able to make a fully informed decision. We will work together with you to get you to the other side of debt. To find out what debt relief solution is right for you, schedule your free consultation with us today.

 

Pre-Bankruptcy Credit Counseling: Is it Required?

nj bankruptcy

If you are contemplating or have already made the decision to file for bankruptcy, you may be wondering about the NJ pre-bankruptcy credit counseling course you’ve heard mentioned. Is it required to do pre-bankruptcy credit counseling before filing for Chapter 7 or Chapter 13 bankruptcy in New Jersey? Does everyone have to take the course? What are the stipulations and specifics? Let’s take a look at the nitty gritty details.


When do I have to take the pre-bankruptcy credit counseling course?


Within 180 days of filing for bankruptcy in New Jersey, you must show proof of credit counseling from a non-profit agency that has been approved by the office of the U.S. Trustee. This step is required if you plan to file for bankruptcy. Within 15 days of filing for bankruptcy, you have to file the certificate of completion your credit counseling agency presented you with. Additionally, any suggested repayment plan(s) that you developed with the agency will also be provided so you can present it to your bankruptcy attorney.


Is this really necessary? Who is profiting from this course?


You may be asking, is there more than meets the eye when it comes to pre-bankruptcy counseling? Some debtors are initially suspicious of taking the course, with thoughts like:

  • “Am I going to be charged more money for this course?”
  • “I am already paying a bankruptcy attorney to help me with this.”
  • “Is this just a ploy for the government to make even more money?”

The goal of bankruptcy counseling is to help you determine if filing for bankruptcy is really the right move for you. During the course, you’ll work through your finances with a certified credit counselor. They’ll be able to assist you in deciding if Chapter 7 or Chapter 13 is better for your unique situation, or if you can come up with an informal payment plan to help you overcome the debt without filing for bankruptcy. The repayment plan may not be realistic for you, especially if you have a low income and the bills are too high. You may not want to pay off high credit card debt with inflated interest rates or emergency room bills.

Even if either of the above stipulations in bold describe you, counseling is still required. Typically, the agency will prepare a repayment plan for you based on your income and debt, and then will review your available options for repayment. In the majority of cases, if you don’t have any other options besides filing for bankruptcy, the agency will confirm that no feasible options exist.


I’ll listen to what they have to say, but I’m not going to participate.


You are actually obligated to participate in the counseling, as well. This will be one of your first steps in getting your money mindset turned around. Your counselor will help you begin to formulate a working budget so that you don’t end up in this situation again. Whether you choose to follow the suggested repayment plan or not (if one was proposed during counseling), you do have to include it when filing for bankruptcy.


What kind of agency provides pre-bankruptcy credit counseling?


Here are a few tips when searching for a professional credit counseling agency:

  • Look for a non-profit agency that has at least 7 to 10 years of experience.
  • If you can’t afford the fees, ask around – some agencies are willing to renounce or lessen them.
  • Debtors who make less than 150% of the poverty level for a family of the same size, there must be a sliding scale fee or fees must be waived completely.
  • The agency should be a part of the National Foundation for Credit Counseling (NFCC) or the Association of Independent Consumer Credit Counseling Agencies (AICCCA).
  • It’s important to check with the Better Business Bureau to see what information they have on the agency you’re researching.
  • The agency must be approved by the Department of Justice if you’re specifically in need of pre-bankruptcy credit counseling.

I’m disabled; do I still have to take the course?


Pre-bankruptcy credit counseling is required whether you’re considering filing for Chapter 7 or Chapter 13 bankruptcy. The only people who are exempt from the course are those who are:

  • Currently on active military duty in a combat zone
  • Physically and/or mentally impaired or handicapped so severely that it prevents you from taking the course

If, for some reason, you intended to take the required course but became ill or encountered an emergent situation that prevented you from attending, you’ll need to petition your bankruptcy court to allow you to take the course after your case has been filed. Talk to your NJ bankruptcy attorney about this, if this situation arises.


What do I need to do to prepare for the credit counseling course?


Make sure you are knowledgeable regarding your current financial state before attending counseling. If you have already met with a bankruptcy lawyer in NJ, you can ask what they recommend you have with you when you begin the course. In short: anything you’d share with your bankruptcy attorney is applicable and should be mentioned and discussed during your credit counseling course.

It’s crucial to be mentally present during your credit counseling (avoid going on “auto-pilot” or “zoning out”) because it will help you reach your goal of climbing out of debt. Not only is it a practical way to deal with your debt outside of bankruptcy, but it can also help you to avoid adding even more debt to what you already owe.

Remember: your NJ bankruptcy attorney can assist you with setting up the pre-bankruptcy counseling course, as well as help you get all of your financial paperwork and information organized prior to attending so that you’re prepared. This will allow you to get the most out of the assistance the counseling will offer you.

Image: “Pieta House” by Joe Houghton – licensed under CC 2.0

What are the Duties of a Bankruptcy Trustee?

 

A NJ bankruptcy trustee is responsible for completing the administrative tasks of a specific bankruptcy case and is typically appointed by the New Jersey bankruptcy court. These individuals are not judges, but are sometimes lawyers, though that is not a requirement. The trustee’s jobs include (but are not limited to): management of all of the petitioner’s bankruptcy paperwork and documentation, leading the meeting of creditors, and handling the liquidation of the petitioner’s assets.

When filing for bankruptcy, you need to first gather the necessary information and paperwork, either on your own or with the guidance of your New Jersey bankruptcy attorney. Based on the New Jersey exemptions, it’s also important to figure out what property (of yours) is exempt from seizure. Once you have filed for bankruptcy, the bankruptcy court will take legal control of all debts and properties that are not free from New Jersey exemptions.

The next step in a NJ bankruptcy case is when a trustee will be assigned. His or her responsibility is to review your paperwork in a detailed manner, especially any possessions and exemptions you want to claim. You may contest any decisions or rulings made by your trustee. About one month after you’ve filed, the trustee will be responsible for calling a meeting of creditors. The debtor must attend this meeting.

A trustee either deals with Chapter 7 cases, where the profit is made from liquidating (selling) the petitioner’s nonexempt property, or Chapter 13 cases, in which the profit comes in the form of a repayment plan. Because the trustee receives a portion of what he or she can collect for the filer’s creditors, the trustee has a powerful incentive to collect as much as possible for the creditors.

Regarding Chapter 7 cases, there are typically no non-exempt assets. If there are non-exempt assets, you will have to release non-exempt property, or the cash equivalent of its market value, to the trustee. This takes place following the meeting of creditors. The trustee will then split the proceeds from selling this property to the creditors. In some cases, if the property does not have a high value, the trustee may turn the property back over to you.

Regarding Chapter 13 cases, the trustee is responsible for handling the most important piece of the puzzle – the repayment plan. The trustee will work with the filer to set up a repayment plan of his or her debts. While the filer is in the process of repaying creditors, the trustee will be responsible for collecting the monthly payments and distributing them to the creditors. The trustee will also give the petititioner occasional updates on who has been paid and how much is still owed to each creditor.

Because bankruptcy trustees have a significant role and power in the bankruptcy system, it’s important to start off on the right foot with the trustee that is assigned to your case. A working relationship with your trustee will be vital, especially if you are involved in a Chapter 13 case. Be meticulous and honest when completing the bankruptcy forms and make sure you let the trustee know immediately if you’ve made a mistake. Open communication will make the bankruptcy process easier for both you and the bankruptcy trustee.

Image: “November 9th” by Kate Hiscock – licensed under CC 2.0

What Everyone Should Know About Chapter 13 and SSDI Benefits

Many times, individuals whose only income is Social Security Disability Insurance benefits (SSDI) have difficulty keeping up with paying creditors and debts and may have to file for Chapter 13 bankruptcy. There can be a deep internal struggle with choosing this path due to the fear of losing their SSDI benefits.

The Social Security Act provides protection to Americans who become disabled and have worked long enough and paid Social Security taxes. Disability benefits are available to those (previously and currently) employed workers and their survivors who have paid into the system and can no longer work. These benefits, although helpful, equate to only a portion of what a working individual previously earned.

If an individual receives approval to collect disability benefits, the amount of the benefit is not determined by the severity of the disability or their earnings when they were employed. The Social Security Administration calculates the amount of Social Security taxes an individual has paid on their income over the many years they’ve worked and averages them. A formula is applied to this average using percentages called “bend points.” As a result, any person’s benefit payment will only amount to a percentage of what their earnings were while working. Payment benefits paid to individuals and/or their survivors through SSDI payment ranged from $700-$1,700 per month in 2017.

In almost all cases, this protection will not be overruled by bankruptcy. The most common protection for these benefits, by statutory definition, is that Social Security income is excluded as income being available to repay creditors. In other words, these benefits are not calculated as disposable income or financial assets to determine payment amounts used to pay back unsecured creditors.

42 U.S.C. 407 (Section 207 of the Social Security Act) provides protection in the form of a broad federal non-bankruptcy exemption. The statute provides that “none of the monies paid or payable or rights existing under this subchapter [of the Social Security Act] shall be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of bankruptcy or insolvency law.” Other federal laws allot exceptions to this protection outside of bankruptcy for established child support or alimony obligations, federal taxes or other obligations to the federal government. Most times, even debtors that have these responsibilities will still have protection of their benefits in bankruptcy. However, other bankruptcy laws, such as priority creditor laws, may require these responsibilities be paid from another income source.

To reiterate, in several instances, Congress has clearly stated that Social Security benefits should not be included in determining financial assets that are used to compensate creditors in a bankruptcy case. Additionally, the Social Security Administration has said it will not honor court orders to turn over an individual’s Social Security benefits to a bankruptcy trustee.

The Social Security Administration has very strict guidelines on what their benefits can be used for as they were created to assist disabled individuals with basic needs such as food, clothing and shelter. Because of this, you should keep your SSDI benefits in a separate checking or savings account and keep accurate records of income and expenses, so they are traceable. Commingling of your household income and your Social Security Disability benefits may cause confusion and complications. Keeping these monies separate will help you avoid losing protection of those benefits.

Still have unanswered questions or have a unique case not addressed here? Please schedule a free consultation with Veitengruber Law in Bordentown or Wall, NJ to learn how you can continue to receive your income from disability payments while filing for bankruptcy.

Image: “Surprise” by Tobias Scheck – licensed under CC 2.0

Can I Accept a Cash Gift While in Chapter 13?

chapter 13 bankruptcy

Filing for a chapter 13 bankruptcy in New Jersey means you’re taking steps to right your financial situation, which may have gotten off-kilter. Some of your debts will be reduced or eliminated through the bankruptcy process, and your remaining debts will be reorganized in such a way that makes them manageable.

After your chapter 13 case has ended, you and your bankruptcy attorney will agree to a repayment plan that is typically laid out over a 3-5 year period, making your monthly payments much lower. Once you’ve been granted a chapter 13 reorganization, you are generally not permitted to take on any new debts until you’ve successfully paid off your existing debts.

Incurring a new debt after filing for chapter 13 bankruptcy is only allowed if you get specific court permission, and this will be granted in very select circumstances only. So, if you’re contemplating buying a new car or making another relatively large purchase, be aware that court approval is needed first. If you fail to get court approval before taking on more debt during your bankruptcy repayment period, your case can be dismissed.

I need a working car; what are my options while in bankruptcy?

With all of that being said – you’ve found yourself in a pickle. While you’re exceedingly grateful for the opportunity of a chapter 13, you may now discover that your vehicle has “died,” and the best financial choice is to replace it rather than to continue making expensive repairs. This is a valid example of when you could petition the court to be able to take on an auto loan, but BE CAREFUL.

Before doing so, pour through all of your financials with a fine toothed comb. You must be absolutely certain that you will be able to make the new loan payments in addition to your debt repayment plan as laid out in your chapter 13 case.

Another question that many debtors have involves receiving a cash gift after filing for chapter 13. Let’s say that your mother, who knows your family needs a working vehicle so that you can get to work and earn money, wants to help you out by gifting you some or all of the money needed to buy that vehicle.

Can I accept cash gifts while in bankruptcy?

Yes, in short. But, before you accept any money from anyone, you are required to report it to your bankruptcy trustee. Any incoming money, above and beyond your paycheck, whether via gift or other windfall (inheritance, etc), is considered to be additional income in the eyes of the bankruptcy court.

Unless you receive only a very nominal gift (for example, $50 in a birthday card), it is of the utmost importance that you report any and all cash gifts while you are working on paying off a chapter 13 bankruptcy.

If your question has not been answered in full here, please contact your NJ bankruptcy attorney, who is best equipped to answer specific questions about your unique case details.

Can I “Cramdown” my Mortgage in a NJ Chapter 13 Bankruptcy?

While it may invoke images of a young parent’s attempt to eat dinner in between meeting the constant needs of a new baby, the term “cramdown” actually has nothing to do with food (at least in our context).

Debtors who file for a chapter 13 bankruptcy have determined that they can no longer stay above water paying their monthly expenses for their current lifestyle. Chapter 13 applicants typically have a dependable job with a decent income, and they are able to pay back at least a portion of the money they owe to creditors.

During NJ chapter 13 bankruptcy proceedings, a reconfigured payment plan will be laid out for the debtor that will allow them to avoid losing valuable assets. A home loan modification and a reorganization of other unsecured debts may also be part of a chapter 13 plan.

What exactly is a “cramdown?”

Another very effective strategy employed in many chapter 13 reorganization plan is called a “cramdown.” In order for a debtor to “cram” a loan down, it must be a personal property loan, like a loan for a car, home furnishings or appliances, or investment property. An important restriction here is that, unfortunately, mortgages on principle residences cannot be crammed down.

Here’s how it works:

Let’s make it easy and use a car loan as an example. These types of loans are often crammed down in chapter 13 cases due to the rapid depreciation of all vehicles immediately upon being purchased.

If a debtor borrowed $30,000 to buy a car a number of years ago, and today still owes $20,000 on that loan, it’s important to learn the current market value of the car. Let’s say the vehicle is only “worth” $15,000 now (we’re using easy figures for this example – your numbers may vary). Even though the debtor technically owes $20,000 to the creditor, a chapter 13 allows them to cram that balance down to the amount the car is actually worth. In this case, the debtor will benefit from a reduction of his loan balance by $5,000, only owing the current value of the vehicle, or $15,000.

This same process can be applied to other personal property loans that are currently upside down. To be upside down on a loan means that a debtor owes more than the property is currently worth. The cramdown strategy can only be used during a chapter 13 bankruptcy.

The amount “left over” when a loan is crammed down in a chapter 13 will be treated like the rest of the debtor’s unsecured debts, which include loans for things that are not physical property. A portion of a debtor’s total unsecured debts can be discharged, but only after they have completed their chapter 13 payment plan (which is usually spread out over 3-5 years).

The most common types of unsecured debts in New Jersey today are credit card debt and medical debt. Other examples include personal loans, student loans, alimony arrears and child support arrears. Not all debt is dischargeable in bankruptcy. Discuss your specific debt with your bankruptcy attorney.

In addition to the lump sum reduction in the amount due on a loan, a chapter 13 bankruptcy cramdown allows many debtors to reduce the interest rate they are currently paying on some (or all) of their personal property loans.

There are other benefits to a loan cramdown as well as some limitations and timelines that must be closely adhered to. Talk to your New Jersey bankruptcy attorney to learn more, and to find out of a chapter 13 bankruptcy could be the answer you’ve been seeking.

Can my Landlord Evict me if I File for NJ Chapter 13 Bankruptcy?

Living paycheck-to-paycheck is the way of life for many Americans, and unfortunately, it doesn’t seem as though this has the potential to change any time soon. With the Mortgage Crisis of 2007 having lasting effects on the US real estate market, many former homeowners were forced to give up their underwater homes and downsize. Many of these people did not take on a new mortgage, but decided to become renters – at least until the real estate market righted itself.

The new renters brought on by the Mortgage Crisis (which had aftershock effects lasting well past 2010) plus those Americans who were already renting prior to 2007 combined to create a large population of US renters. While some renters have since been able to secure mortgages, a plethora of tenants feared losing yet another home to foreclosure and have continued to rent property in NJ.

The struggle of not knowing whether or not you’ll have enough money to cover your monthly living expenses is real. As of the end of 2016, nearly 11% of New Jersey residents were living at or below the poverty level, which is an excessively high number. For these New Jerseyans, figuring out how to stretch their low income to pay for food, housing and utilities is a daily burden that weighs on them constantly.

As a renter in New Jersey, filing for chapter 7 bankruptcy no longer prevents a landlord from initiating the eviction process. New legislature in 2005 protected homeowners but not tenants in chapter 7 cases. Those renters who need to file for bankruptcy to get out from under crushing debt cannot do so with a chapter 7 without risking eviction.

Although chapter 13 bankruptcy doesn’t completely wipe out debts like a chapter 7 discharge does, the good news for NJ renters is that it offers protection from eviction. All back rent that you owe your landlord can be included with your other debts when you file. A chapter 13 bankruptcy can save you from eviction by creating a payment plan wherein you will repay your landlord the arrears you owe over a set period of time that is considered reasonable.

As long as you continue to make all of your chapter 13 repayments (made through your bankruptcy trustee who then pays your creditors/landlord) along with your current rent payments, you cannot be evicted due to being behind on your rent. Your chapter 13 repayment plan will be structured in such a way that you can afford in comparison with your unsustainable living expense schedule prior to filing for bankruptcy.

It’s important to note that in order for you to avoid eviction via chapter 13 bankruptcy, you must be able to prove that you have enough income to afford your repayment plan with enough money left over every month to be able to make your current rent payments on time and in full. In addition, any landlord may evict a tenant who has endangered the property in question through illegal activities such as drug use, drug distribution or breaking the lease agreement in other dangerous ways, even if they have filed for a NJ chapter 13 bankruptcy.

 

Image: “Evicted” by Gideon – licensed under CC 2.0