How (and when) to Appeal Your NJ Property Tax

Each year, homeowners in New Jersey are required to pay property taxes, but when the time comes for you to make that payment, you may be in for a shock. If you have an understanding of how your property tax is calculated, you will be able to investigate whether you’re paying too much, depending on the assessment of your home. The good news is that the taxable value of your home may be sky high, but there are steps you can take to decrease that value and save a few bucks on your property tax bill.

Before you can move further along in the appeal process, it’s helpful to know how your property tax is actually calculated. In NJ, there are two aspects of your tax bill: first, the taxable value of your home and second, the tax rate. Normally, the municipal tax assessor will review your home to determine the taxable value. The taxable value is 100% of the home’s “worth” or the amount it would be sold for on the open market. The taxable value will be multiplied by the tax rate to decide the property tax. Unfortunately, local officials set the tax rate, so you don’t have much control over that. You may be able to get the taxable value reduced if you believe it is set too high.

If you’re planning to appeal your property tax, one or more of the following must be true:

  • The tax assessor determined your property tax bill using inaccurate information. For example, the official may have assumed your home is 3,000 square feet when it’s actually only 2,500 square feet.
  • The current market value of your home is lower than what was actually concluded by the assessor.
  • Compared to similar homes in your community, the assessor may have determined the taxable value to be too high. It’s important to know whether or not your home is over-assessed, as some municipalities do not evaluate properties at 100% of the true value. If the assessment on your home is 15% higher than the market value, this would be a case in which an appeal would be acceptable. Before filing an appeal, contact your local assessor if you believe he or she has made a mistake. They will often correct it.

If you’re confused as to exactly what steps to take to appeal your property tax, keep reading!

  1. Request a copy of the card with the details of your house assessment from the local or county tax assessor.
  2. As stated above, know the details of your appeal and be sure that you can provide support. Also, compare your home to similar homes in the community to determine an appropriate taxable value for your home.
  3. Meet with a real estate attorney who has experience with tax appeals. Because each case has its own labyrinth of details, it may be unwise to try to handle it on your own. An attorney will understand the local real estate market and have knowledge of crucial deadlines and regulations specific to NJ.
  4. Collaborate with your attorney to determine whether or not you are going to appeal. Be aware that the appeal must be filed prior to the April 1st deadline. Once the filing is complete, a hearing before County Tax Board will be scheduled. It is crucial to comply with all of the deadlines and regulations to have a successful appeal. If you miss the date of your appearance before the Board, you will have to wait until the following year to refile.

If you submit your appeal, but do not agree with the final decision, you can take your appeal to the New Jersey Tax Court. If you haven’t yet, it would be helpful to hire a lawyer if you decide to take your appeal for further review. The appealing process can be difficult and involves many intricacies. Make sure that you do your research before making any quick decisions!


Should I Sell my Home in Winter? Tips from a NJ Real Estate Attorney

nj real estate attorney

Do the frigid temperatures and snowy weather turn you off from potentially selling your house during the winter season? Although spring and fall are the most popular times to sell a house, there are always going to be people searching for a new home in every season. With updated technology and on-the-go apps, homeowners are less likely to have difficulty in selling, regardless of the weather. Since there are less homeowners who attempt to sell in the winter, your market competition will sparse and buyers will have less options.

Putting your house on the market during the holidays doesn’t have to spell disaster.

Selling your house during the winter provides its own advantages; all you have to do is show off your cozy abode and create an enjoyable experience for potential buyers. Here are a few ways you can set up a welcoming environment despite the frightful weather that may be brewing outside.

1. Warm and cozy

A cold house will probably lead to a cold first impression for a potential buyer. Play to the buyer’s senses by heating up the house. Not only should the temperature be cranked up, but create an inviting mood. Add a warm touch to each room by adding an area rug in a cheerful hue, draping a blanket over the back of an armchair, or folding a comfy quilt at the end of a bed. Warm tones and a cozy mood will make all the difference in the prospective buyer’s showing experience. A few cookies out on the counter or warm apple cider cooking on the stove may be an invitation for the buyer to stay around and ask questions. If you happen to have a fireplace, be sure to get that fire crackling, as this will add ambience and heat!

2. Let there be light!

It’s perplexing to designers as to why the perfect lighting sets the mood for a house hunter, but it definitely makes a big difference. Areas in the house where the buyer is going to have a first impression, such as the entryway, should have warm, bright lighting. Roll up the blinds, open the shutters, and turn on all of the lights in every room. Because of daylight savings, darkness arrives sooner, and buyers are not going to want to see a dim house. If you do have a darker room, add a spotlight or two to give it some warmth. Winter days can be dreary, but with a warmly lit hearth, you’ll be sure that your house is a beacon of light.

3. The outside appearance matters, too

Yes, the indoor appearance of the house is crucial, but house hunters aren’t only going to be observing what’s on the inside. Begin by clearing all entryways of snow and ice. Make sure each path is clear so that the doors are easily accessible. Though your patio furniture may go into hibernation in the winter, buyers are going to want to see the potential of an outdoor patio or porch. Try adding a spotlight, taking your patio furniture out of hibernation, or placing a fire pit in the yard or on the patio to brighten up the outdoor space.

4. Emphasize specific spaces

If you have areas in your house that are more useful during the winter months such as basement playrooms, indoor exercise spaces, or a heated shed, be sure to bring attention to them. Clear the area of any unrelated items so that the room’s true purpose can be accentuated. Since winter is prime time for hosting parties and other festivities, whet the senses of potential buyers by setting up a holiday display. Decorate as you would to entertain so that guests can see the entertainment potential of a certain space in your home.

Trends in the New Jersey housing market are constantly varying, but as a home seller, it’s important to stay up-to-date on what will appeal to the most potential buyers. Obviously, you want your house to offer a unique look, but not so different that it turns off most buyers. In the winter, it’s easy to let things slide, such as keeping up with the cleaning, making necessary house repairs, etc., but you need to be sure to keep your house clean and inviting – even on the outside. By taking these tips and coming up with a few of your own ideas, you’ll be more likely to sell your house during the coldest time of year.

Applying for and Refinancing a NJ Home Equity Loan


Do you have a brilliant idea for a new house project?

Have you been trying to figure out how to pay for the new roof you’ve needed for a few years?

If you’re nodding your head, a home equity loan (HEL) or a home equity line of credit (HELOC) may be the answer you’re looking for.

A home equity loan can provide you with access to a large amount of money with which you can complete a project with the added benefit of borrowing against the value of your home. A home equity loan is essentially a “second mortgage,” with your first mortgage being the one that you used to purchase your home.

Because this kind of loan is locked in by your house, a home equity loan can be relatively easy to obtain from a bank or lender. The beauty of a home equity loan is that it can provide funds for virtually anything you want, as long as your home is worth more than you owe (in your first mortgage) – and you’ve built up enough equity.

Home Equity Loan Options: Lump-Sum or Line of Credit


A home equity loan as a lump-sum is like any other loan; you attain a large amount of money up front and then pay it back with fixed monthly payments. Your interest rate will be set when you take out the loan. With each monthly payment, the total that you owe on the loan will decrease.

A home equity line of credit works much like a credit card. You’ll be approved for a specific amount of money and then only use what you need. Following approval, you can borrow money in small amounts, but at some point, you’ll need to make larger payments to finish paying off the loan.

Because a home equity loan can offer a fixed and steady repayment schedule, it can be a valuable way to decrease debt or pay for large expenses. If you’re considering completing a home improvement project, a home equity loan could be beneficial, especially since it’s a one-time remodeling project that involves directly investing money back into your house.

Other valid uses for a home equity loan:

  • Paying for a college education (for you or your child)
  • Making a vehicle purchase
  • Eliminating credit card debt
  • Investing in the stock market or real estate

You can also use a home equity loan for any other one-time investment that has value. Additionally, you may want to consider refinancing a home equity loan. If you are looking to decrease your monthly payment or want to lock in a lower interest rate, refinancing would be helpful. In addition, if you want to change from an adjustable rate to a fixed rate or vice versa, you should consider refinancing. While completing the project (or paying for school, etc), you may discover that you need a bit more money than expected, and refinancing could allow you to obtain supplemental funds or potentially extend or shorten your repayment period.

If interest rates have lowered from when you first purchased a home equity loan or if you’ve dramatically improved your credit score, always be sure to check into refinancing. As previously mentioned, if you switch from an adjustable rate to a fixed rate while interest rates are low, you can guarantee that the interest rate will stay that low throughout the rest of the life of your home equity loan.

If you’re considering taking out a home equity loan or refinancing one that you currently have, visit your credit counseling attorney who has your best interests at heart. Here at Veitengruber Law, we can also connect you with trusted lenders with whom we have cultivated valuable professional relationships. From there, you’ll meet with a lending specialist who has experience with refinancing home equity loans.  Refinancing a home equity loan can save you money, provide access to money, and help you reach your financial goals!

What Does the Recent Tax Reform Mean for the NJ Real Estate Market?

It is not a “Happy New Year” for New Jersey residents and prospective homeowners when it comes to the new tax plan that was unveiled at the White House last week. Essentially, a tax increase is the way these homeowners are starting 2018, as the cap on state and local tax deductions is now $10,000. Not only did taxes go up, but the state housing market is also affected.

New Jersey residents pay one of the highest tax rates in the federal government but experience one of the lowest returns of federal spending of any state. At the center of the first federal tax code reform in 31 years is a steep corporate tax cut that proponents of the legislation hope will unleash the nations’ economy. Of course, to make up for dramatic corporate tax cuts, deductions are placed under the microscope. Unfortunately, some of these targeted deductions have been particularly beneficial to New Jersey residents in the past.

If a current or prospective homeowner was paying $10,000 with pre-tax dollars and they’re now paying $14,000, in reality they will have to pay about $5,000 to pay the additional difference of $4,000. Fourteen thousand dollars in real estate taxes doesn’t compare with the top 5 New Jersey towns when it comes to their 2016 Average Residential Tax Bill. The municipality of Tavistock comes in at number one with the 2016 average bill at $31,132.

As a current homeowner, you may wonder how this will affect your property value. The landscape doesn’t look very green. Nobody knows for sure; as real estate markets are affected by more variables than just real estate taxes. The most affected consumer lives in 1 of 7 New Jersey counties that make up the top 10 in the United States. These are the consumers who will lose the most in home prices across the nation.  At the top of the Average House Price Decline list is Essex County which will take a hit of 10.5%.

Some grim scenarios propose that high-income residents would migrate to other states, a slowdown in home sales would affect contractors and home building businesses and stores, and the already high-taxed state would see even higher taxes.

As mentioned before, there are many factors that enter into the real estate market and New Jersey realtors must continue to sell the same way even with the uncertainty created by the new tax plan. With a low-inventory market or, in other words, when there are more buyers than sellers, and when you write off your full real estate tax amount, the real estate market is much more stable. It has been considered a sellers’ market for some time now with sellers getting considerably more than just their asking price in many cases. Eager buyers may now delay making a move from renting to buying or purchasing a bigger home for their growing family. Those who invest in real estate and current landlords will be able to pass along these tax increases to their tenants.

Normally, if the economy holds steady, the real estate market follows suit or self-corrects. Of course, the true impact won’t be known until spring has sprung and the real estate market begins to bloom.

Make an Offer on Your Dream Home or Save for a Down Payment?


You’ve finally found your dream home and you think you’re ready to buy, but unfortunately it’s not as easy as ringing the doorbell and claiming the house. The decision to buy can be the start of a tricky dance between buyer and seller, typically with real estate agents acting as mediators. Your agent will be able to help you with questions you may have on the potentially daunting process of buying a future home, but this guide can help you get started.

When is the “right” time to buy a home?

Deciding on the right time to make an offer on a house can be an intimidating task, especially if the house appears to have all you ever wished for and more. Because a down payment can be an important part of buying a home, you need to be aware of your borrowing capabilities with and without a down payment when making a home purchase.

What is a down payment?

A down payment is a specific portion of the total cost of the house that the lender requires you to submit up front in order to qualify for a mortgage loan. The more money you are able to apply towards the down payment, the lower your interest and monthly mortgage payments will be. It is ideal if you can save up an amount that is at least 20% of the home’s price.

Is a down payment required?

Without question, it’s vital to wait to make an offer until you have a handle on your finances, as it makes the buying process easier. When you make an offer on your dream home, you should know how much house you can afford – meaning you’ve been pre-approved to borrow a set amount of money from a lender. Sellers are inclined to go with buyers who make a solid offer and have proof of exactly how they’ll come through on that offer. Depending on your finance history, credit report, asking price of the home and requirements set out by your lender, you may not be required to make a 20% down payment.

What is earnest money?

Most likely, you will be required to submit an “earnest money” check or money order, which will be held in an escrow account until closing, if the seller accepts your offer. Earnest money is a good faith deposit that the seller requests before they agree to sell their house to you. This deposit shows that you are serious about purchasing the house and that you are most likely financially capable of following through with paying off the house. The earnest money deposit (EMD) is typically listed on the Multiple Listings Sheet (MLS) and is usually submitted with the offer. Because it is possible to lose your EMD, it is recommended not to submit a higher EMD than what the seller lists on the MLS. The EMD can be lost if your contract with the seller is breached without an acceptable reason or if another potential buyer’s offer is accepted over yours.

How can I avoid losing my EMD?


Real estate breach of contract happens all the time – and it’s usually not something that the buyers could have seen coming on their own. Although your real estate agent is an expert in selling homes, it’s possible that they aren’t as versed in real estate law as a NJ real estate attorney. Trust in your real estate agent, but once you have a contract in hand, it is always wise to have it reviewed by your favorite real estate lawyer.

Working with both an experienced real estate agent and a real estate attorney won’t guarantee that you’ll land the home of your dreams, but it will increase your odds. Do you have questions about your real estate contract? Fill out this simple form and have your questions answered by a professional and experienced New Jersey real estate attorney.

How to Sell Your Home Before Your Lender Forecloses

nj bankruptcy attorney

Many times here on our bankruptcy blog, we describe situations where homeowners want to save their homes. Filing for bankruptcy sets the Automatic Stay into motion, which in turn prevents a home from being foreclosed upon. The length of the bankruptcy case and the anticipated outcome of a discharge of debts allows those homeowners (who desire it) the ability to adjust their debt-to-income ratio enough to keep their home via reaffirmation.

However, sometimes, a financially distressed homeowner doesn’t want to save their home. They may wish to downsize or move into a more affordable geographical location. Foreclosure, then, is not their ideal outcome, because they’ll end up with no money from the sale of the home, their credit scores will drop, and they could end up owing a deficiency judgment.

In these situations, selling the home is the desired outcome.

What’s the problem, then? Just sell the house and get on with things, right? The dilemma arises when homeowners have fallen behind on their mortgage payments and their lender is threatening to foreclose before they have a chance to get the house listed on the market.

If you do not want to keep your current house, but you’re simply short on time due to the immediate threat of foreclosure and sheriff’s sale, you’re in luck. You came to the right place, because we can help gain you enough time to get your property sold to a proper buyer rather than through a foreclosure bidding auction.

Why not just let your home go to foreclosure sale? A sale’s a sale, right?

Actually, no. Very, very much NO. However, many homeowners who’ve found themselves face-to-face with a foreclosure don’t realize they can take action toward an end goal of selling their home even when the home is actively being foreclosed upon. That’s right – this is possible even if you’re behind on your mortgage payments – or not making them at all.

Homes that sell via foreclosure auction or “sheriff’s sale” (find out why it’s called that here) almost always sell for significantly less than their real time market value. That is the #1 reason that you should consider trying to list your home for sale before sheriff’s sale.

For those homeowners who know they cannot continue living and maintaining their current lifestyle (i.e. high mortgage payments and property taxes), the last thing needed is the possibility of a deficiency judgement.

A deficiency judgement isn’t the only reason to avoid foreclosure.

By beating your lender to the punch and selling your home before they have a chance to pull the rug out from under you, you gain the opportunity for a substantially higher sale price. This will guarantee that all of your missed payments, late fees and interest is paid back to your lender, causing a domino effect of good results:

  1. Your foreclosure will be dismissed.
  2. You may end up with some equity in your pocket.
  3. Other dischargeable debts can be eliminated or greatly reduced.

Filing for bankruptcy in New Jersey should be viewed as a valuable tool that can be used to right a financial situation gone awry. The key to getting all of your ducks in a row, however, is working with the right NJ bankruptcy attorney. Timing is everything; don’t delay making a move on what can potentially turn into a disaster. Take action now, and you can walk right into a story with a happy ending.


Bidding on a NJ Foreclosure Property: The Lowdown

NJ foreclosure

Buying a home at a NJ foreclosure sale (or sheriff’s sale, as they are commonly called) can be a fantastic way to score a property at below-market price. While there are some risks and pitfalls to be aware of when bidding at a foreclosure auction, if you’re well-informed, you’ll likely come out of the process happy and (hopefully) successful!

Naturally, the most obvious advantage of purchasing a home via sheriff’s sale is the low price you’re likely to pay. Foreclosure sales are a great way to gain ownership of a rental property or a home you intend to “flip.” Homes that are being auctioned at a New Jersey foreclosure sale have been through the judicial foreclosure process that our state requires, and the lender has been permitted by the court to move forward with selling via auction.

How can I find out about upcoming NJ foreclosure sales?

This is one of the best parts about buying a foreclosed property in New Jersey. Sheriff’s sales are required to be advertised for a minimum of 30 days. You can find listings of upcoming sheriff’s sales in local newspapers for each county. Many jurisdictions also have sheriff’s sale listings online on their county court website.

How does a sheriff’s sale work?

In New Jersey, foreclosure auctions are controlled or led by the sheriff’s department of the property’s county. All local county rules must be followed, however, there are several general rules that are consistent across all counties, according to NJ law.

  1. NJ foreclosure properties up for sale must be sold subject to the first mortgage held on the property. This information can usually be found within the property’s first lien.
  2. Any NJ foreclosure sale will also be subject to any/all local state or federal liens on the property.

Because of the above information, all bidders at NJ sheriff’s sales would be remiss to fail to run a complete title search on the property in question before even considering bidding. Failure to do so could land you with a property that is deeply encumbered by multiple liens, for which you will be 100% responsible.

In New Jersey, foreclosure sales usually start with the lender being given an opportunity to open the bidding. Most lenders will start with a $100 bid. Bidding on the property continues via voice auction between all of the interested parties present at the auction.

The usual course of a NJ sheriff’s sale/auction continues with bidding the price of the property higher and higher until a highest bidder remains. If you are the lucky bidder, you will be required to pay a 20% deposit of your bid price.

Upon conclusion of the bidding, the sale is considered to have ended. However, the end of the sale triggers what is known as the Redemption Period. This is a ten day period during which the original owner (who was foreclosed upon) is allowed to “redeem” the property. This can only be done if the original owner can completely pay off the foreclosure judgement amount, including any additional fees and costs (and potential liens).

At the end of the Redemption Period, if the original homeowner does not choose to redeem the home, you will be given a sheriff’s sale deed. When you receive this deed, it is expected that you will make full payment of the balance of your successful auction bid. You’ll also have to handle any fines that accrued relating to the property, after which you will be able to officially transfer the title from the former owner to yourself!

NJ Foreclosure Sale: What is an Arm’s Length Transaction?

When a piece of real property is scheduled for NJ foreclosure sale (also known as and commonly referred to as the Sheriff’s Sale), an interested buyer, investor or “house hunter” may reach out directly to the homeowner. Even when a homeowner’s property is in foreclosure with the Sheriff’s Sale scheduled, they (the owner) have the legal right to attempt to sell the home.

A home that is in NJ foreclosure is likely to sell at Sheriff’s Sale for substantially less than its real value. This can end with the original homeowner owing the lender the difference between how much they still owed on their mortgage loan and the foreclosure sale price. This is called a deficiency, and although lenders do not always pursue a deficiency judgement from the court, sellers should know that it is always a possibility.

Armed with information about a potential deficiency judgement, a homeowner going through the foreclosure process is smart to attempt to find a buyer before the Sheriff’s Sale date. In fact, should the homeowner find an “arm’s length” buyer prior to the foreclosure sale, it’s good news all around. The lender doesn’t have to move forward with their sale, which saves them time and money, and of course, the original homeowner may very well receive a better offer outside of a Sheriff’s Sale. Lastly, the new buyer can feel good about purchasing a foreclosure property before it is up for public sale, eliminating the competition.

What is an Arm’s Length Transaction?

When a homeowner’s lender moves forward with foreclosure, the homeowner still retains ownership and the ability to sell the property before the Sheriff’s Sale, but there are several stipulations in order to guarantee that a seller in this situation can only sell to a party who is considered an Arm’s Length buyer.

For a transaction like this to be considered fair, New Jersey real estate laws state that both the buyer and the seller must not be in any kind of relationship that is closer than “arm’s length.” The following are examples of relationships that are not arm’s length, and therefore would not be ideal buyers before the Sheriff’s Sale:

  • Family members
  • Close friends
  • Employer/employee
  • Parent company/subsidiary
  • Trust/beneficiary

As long as the homeowner is negotiating with someone who is not acting in the homeowner’s best interest (for example, a parent buying the home below market value only to allow their child, the seller, to keep living there), the end result of a transaction prior to foreclosure sale is typically a good idea.

An Arm’s Length Transaction must involve two parties who are independently acting for their own self-interest. Also, the best and fairest deal that is close to the home’s market value should ultimately be the goal of this type of transaction.

Is it Illegal to Participate in a Non-Arm’s Length Transaction?

While it is not necessarily illegal to sell to a non-arm’s length buyer, when a homeowner is already immersed in the foreclosure process, it is advisable to follow the recommendations of an experienced NJ foreclosure/real estate attorney. Ask your attorney to hook you up with a reputable tax professional as well, because transferring property to a non-arm’s length buyer comes with additional tax implications.

Learn more about your rights during foreclosure!


What is a Cloud on a Title Report?

As much as we all love to capture images of the beautiful and interesting “cloudscapes” above us, we know too, that clouds can signal storms. This holds true figuratively as well as literally. A cloud found on a title report during a real estate transaction can be quite disconcerting as well as potentially predictive of an impending problem.

Here at Veitengruber Law, we like to make sure that our clients as well as our blog readers have a clear understanding of as much legal language as possible. We’re the first to admit that almost every area of the law is absolutely bursting with legalese that can make many legal processes mind-boggling. We deal with these terms on a daily (dare we say ‘hourly’?) basis, but we know that you probably do not – so we always try to view legalese through your eyes.

What does it mean if there is a “cloud on title?”

If you are in the process of buying or selling real property (real estate), one crucial step in the process is the title search. This step is typically performed by a real estate attorney or a title company. The earlier in your real estate process the title search is performed, the better, because discovering a clouded title right before closing will put a real damper on your excitement.

When a title search comes back as “clouded,” one of several main reasons is generally the cause:

Issues with probate

These issues usually arise with older homes who have had a multitude of owners. There are a lot more opportunities for error when previous owners have died while still in possession of the home. Locating the necessary death certificates and other documentation can prove to be rather time consuming.

Previous foreclosures

While foreclosure on its own isn’t a sufficient reason to cause a cloud on a title, if there were problems with the foreclosure procedure or the judgement, they may appear as a cloud on a title. In order to clear up foreclosure issues, it may be necessary to resubmit foreclosure documentation or potentially re-open the foreclosure case.


Although a rather uncommon reason for a clouded title, it is possible that the deed to the property was at one time recorded fraudulently. While rare, if fraudulent transfer of the deed has occurred, you’re in for a long road to resolving the matter.


The most common reason a property may have a cloud on its title is because the property has one or more liens attached to it. A lien is a notice indicating that the current owner of the home owes money to one or more creditor. Any outstanding liens must be cleared up before the property’s title will officially be called “clear.”

Paperwork/recording mistakes

Even though we’ve been living in the Technology Age for nearly two decades, it is only very recently that governmental agencies/bureaucracies have made the move to computerized record-keeping. This means that most past transactions of the property in question were likely done solely on paper, which is much more likely to lead to errors. Many recording errors can be relatively easy to fix, but some can prove to be quite challenging.

As you can see, a clouded title can often be rather difficult to fix. As you absolutely cannot move forward on your real estate transaction without a clear title, it is best to work quickly with a New Jersey real estate attorney who has experience with clouded titles. Attempting to fix the problem yourself or hoping it will go away on its own may very well end without the sale or purchase of your dream home.

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.