Can I File for Chapter 7 and Chapter 13 at the Same Time?

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“Sometimes one bankruptcy isn’t enough.” – George Veitengruber, Esq.

As we’ve discussed before on our blog, there are time limitations put into place that prevent a debtor from receiving a second chapter 7 discharge unless at least eight years have passed since their first chapter 7 discharge. You also cannot be granted a chapter 13 discharge unless at least four years have passed since you filed for chapter 7, so where on earth can we possibly be going with this?

Bankruptcy law disallows back to back bankruptcy discharges in order to avoid people abusing the bankruptcy system. With no restrictions, any debtor could theoretically bounce from one bankruptcy discharge to another, and that wouldn’t be fair to creditors, nor would the debtor learn any valuable lessons regarding their finances.

There are situations, however, wherein a debtor can file consecutive bankruptcy cases, but only when the desired outcome is not a second discharge.

Most people associate bankruptcy with ridding themselves of all of their debt, the closest thing to a financial “do-over” that exists in the real world. While a bankruptcy discharge can indeed be akin to a capital tabula rasa, giving debtors a clean slate isn’t the only function of the bankruptcy system.

For example, one of the most beneficial (and immediate) effects of filing for any type of bankruptcy is the automatic stay:

Automatic stay \noun\  a judicial order known as an injunction that halts any and all lawsuits as well as actions by creditors attempting to collect money from someone who has filed for bankruptcy

Many people file for chapter 7 when they have a significant amount of unsecured debt.

Unsecured debt \noun\ a debt that doesn’t have any collateral attached to it that a creditor could take for payment if the debtor defaults
Examples of unsecured debt: credit card debt, student loans, utility bills, medical bills, some taxes, and most personal loans

In filing for chapter 7 relief, many or all unsecured debts can be discharged at the end of the bankruptcy case, as long as the applicant meets the filing requirements and no fraud is at play.

Frequently, a discharge of all unsecured debts so significantly reduces the financial strain on the debtor that they are then able to resume paying their monthly living expenses without difficulty.

Sometimes, though, even after a chapter 7 wipes out a huge chunk of their debt, some people are still left facing a significant amount of non-dischargeable debts.

Non-dischargeable debt \noun\ money owed that can almost never be discharged via any type of bankruptcy proceeding
Examples of non-dischargeable debt: child support, alimony, student loans, income tax debt

Still other people, after filing for chapter 7 and receiving a discharge, are left with secured debt(s) that they want to continue making payments on in order to keep the property that secures the debt(s) in question.

Secured debt \noun\ a debt that has collateral attached to it that a creditor could take for payment if the debtor defaults
Examples of secured debt: home mortgage, auto loan, valuable personal property loan (mechanical equipment, furniture, tools, etc)

Whether the debtor is left with substantial non-dischargeable debt or secured debt(s) that hold important value (usually a mortgage and/or auto loan), filing for chapter 13 immediately after a chapter 7 discharge will allow for a reorganization of any subsequent arrears owed, allowing the debtor to bring the loan(s) current.

Veitengruber Law can navigate your path through multiple bankruptcies! If you thought your financial situation was too “messed up” to be fixed – think again. Even better – we want to help you. Please give our office a call if your debts have gotten out of control. Your consultation won’t cost you thing, so you’ve got nothing to lose.

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Will a Chapter 13 Bankruptcy Reduce My Child Support Payments?

Several decades ago, it was possible to have at least some of your child support arrears discharged by filing for bankruptcy in New Jersey. In the 80’s, Congress made changes to some bankruptcy laws because not all debts are created equal. Since then, child support debt can no longer be discharged via bankruptcy of any chapter.

Priority vs Non-priority Debts

Whether you are filing for chapter 7 or chapter 13 bankruptcy, New Jersey bankruptcy laws categorize all of your debts into two main lists: Priority Debts and Non-priority Debts.

Those debts that fall into the Priority category include:

  • Child support
  • Alimony
  • Money that you owe due to a court order
  • Money owed to the government

Priority debts are deemed such because of their great impact on others, and they are considered nondischargeable. In addition, child support is given precedence over all other types of priority debts due to the fact that the welfare and well-being of the debtor’s children are dependent on it.

Will the Automatic Stay Allow a Pause in Child Support Payments?

The normal course of action during a NJ bankruptcy case is that as soon as the case is filed, something called an ‘automatic stay’ immediately prevents any creditors from collecting money from the debtor. The stay is a legal injunction that was put into place to protect debtors from falling further into debt.

Relating to child support, the automatic stay has no power. In both chapter 7 and chapter 13 bankruptcies, the debtor is required to continue paying child support in full and on time throughout the entirety of their bankruptcy case. Failure to do so will actually risk a complete lift of the automatic stay, giving creditors permission to attempt collections again, potentially resulting in a huge mess.

If child support payments are a significant problem for you, filing for a chapter 13 bankruptcy in New Jersey is definitely a wise choice. While you must continue making child support payments (including any arrears), doing so will make your overall debt picture look much more promising.

How Will Paying Child Support Ease my Debt Load?

You may be asking yourself how you’ll be better off financially due to the high priority of making all of your child support payments. The courts look fondly upon debtors who take responsibility for and recognize the significance of their child support obligations. Therefore, as long as you are paying your child support on time, your other debts will be reduced in order to help you continue to pay that support.

This is great news for debtors with child support responsibilities because the amount of money you owe in credit card debt, medical bills and personal debts will be reduced. Chapter 13 bankruptcy will also help you reorganize all remaining debts so that you can afford your monthly payments.

Most debtors would naturally much rather support their children than pay off extraordinary medical bills or credit card debt. Filing for chapter 13 will help you do the right thing while reorganizing your payments, ensuring that you can do so without drowning in debt.

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Chapter 13 Bankruptcy & The Confirmation Hearing

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Filing for chapter 13 bankruptcy in New Jersey is a good idea if you accumulated a lot of debt because of temporary circumstances that no longer apply. For example: divorce, job loss or lay off, death of a wage-earning spouse, temporary disability/disease, or a serious injury that prevented you from working for a substantial amount of time.

As long as your circumstances have now righted themselves, you shouldn’t have a problem with a chapter 13 bankruptcy. You should hold a job that provides you with a steady and reliable source of decent income and have your life in order physically, mentally and emotionally (for the most part – none of us is perfect!).

Even with all of these factors in place, you may still be facing a wall of debt that you accrued while your life was upside-down. Rather than filing for a chapter 7 liquidation bankruptcy, in which you’d put your assets at risk, a better option under these circumstances is a chapter 13 bankruptcy.

A chapter 13 will help you to reorganize your monthly payments so that they are more manageable. This will be accomplished by lowering some of your debt totals, reducing interest rates, eliminating past due amounts and other compromises that your bankruptcy attorney will be able to negotiate for you. The end goal of a chapter 13 bankruptcy in New Jersey is to prevent you from losing any of your assets while satisfying your creditors, too.

What is a Chapter 13 Confirmation Hearing?

In order for your chapter 13 bankruptcy to be considered approved and finalized, it must go through a process called ‘confirmation.’ The New Jersey bankruptcy court will hold a Confirmation Hearing in order to determine whether or not your plan will be confirmed.

Who Attends the Confirmation Hearing?

  • NJ bankruptcy judge
  • Any of your creditors who wish to attend
  • Your bankruptcy trustee
  • Your New Jersey bankruptcy lawyer
  • You (depending on the requirements of your local NJ district court rules)

Who Can Object to the Confirmation?

Any of your creditors (people/companies to whom you owe money) and your bankruptcy trustee may object during the confirmation hearing. If there is an objection to your chapter 13 plan, the objecting party will explain to the presiding judge why they object and how they feel your plan should be changed.

If there is an objection, it will typically come from your mortgage or auto lender. These are almost always the largest loans owed by debtors. Objections from these two parties usually occur when your proposed chapter 13 plan doesn’t allot enough money to be paid to your mortgage or car loan.

What Happens if an Objection is Made?

Each party attending the Confirmation Hearing will have a chance to share their proposed plan for your chapter 13 bankruptcy. The judge will hear all arguments before making any decisions. Additionally, some NJ bankruptcy judges have concerns of their own during Confirmation Hearings.

If you and your creditors cannot agree on the terms of your chapter 13 bankruptcy plan, your NJ judge will almost always set a second Confirmation Hearing, giving ample time for everyone involved to come to an agreement. If there appears to be no possible reconciliation between you and your creditor(s) even at a second Confirmation Hearing, the judge will most likely make the decision for you.

You should never attend a Confirmation Hearing alone. While objections are often related to repayment amounts, complicated and confusing legal issues may also be raised that you may not understand. Be sure to retain a respected, experienced and reliable New Jersey bankruptcy attorney to ensure that the outcome of your hearing is beneficial to you.

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How to Convert a Bankruptcy from Chapter 13 to Chapter 7

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In a chapter 13 bankruptcy, debtors are able to reorganize their current debt load in order to make their monthly payments feasible. You should consider filing for chapter 13 if you have a steady  income but your debts are too much for you to handle. Chapter 13 bankruptcies allow you to keep all of your assets. You will still have to continue making payments on all of your debts; however, your debt timelines will be extended (typically over a three to five year period).

Sometimes debtors file for chapter 13 only to realize that they cannot even manage their agreed upon payments. If this happens, you should be able to modify your chapter 13 plan. For example, if part of your reorganization plan involves a monthly car payment – you could surrender your vehicle and your plan payment amount will go down. Of course, this is only possible if you can get by without a car, or if you have another vehicle that you can use.

If there are no effective ways to significantly modify your chapter 13 plan, you still have another option: bankruptcy conversion.

What is bankruptcy conversion?

A bankruptcy conversion equates to changing bankruptcy chapters.

How does a bankruptcy conversion work?

The first step in converting your bankruptcy is to speak with your bankruptcy attorney. This should always be your initial reaction whenever making any changes to your finances if you’re currently in bankruptcy. Your NJ bankruptcy attorney will be able to determine whether you will qualify for a chapter 7 or if it would be more beneficial for you to modify your existing chapter 13 plan.

As long as you have not received a chapter 7 discharge within the past eight years, you can “convert” a chapter 13 to a chapter 7 bankruptcy by re-filing some of your bankruptcy forms. You’ll be assigned a new trustee, and some of your assets will be sold in order to lower your debt total. At the end of a chapter 7 case, you’ll (ideally) be granted a discharge of all or most of your remaining debts that were not paid by liquidating some of your assets.

Will I qualify for chapter 7?

If you already successfully filed for and were granted a chapter 13 reorganization bankruptcy, you should be able to voluntarily switch to a chapter 7 at any time. You and your attorney will have to file a Notice of Voluntary Conversion with the court.

When a debtor is interested in converting their chapter 13 to a chapter 7, it is typically due to a significant life event that has altered their ability to make their previously agreed-upon payments. These life events include (but are not limited to) things like:

  • Divorce
  • Job loss
  • Foreclosure
  • Injury
  • Disability
  • Natural disaster
  • Eviction

If you’ve experienced one of more of the above situations, converting your chapter 13 bankruptcy to a chapter 7 liquidation bankruptcy makes sense and the bankruptcy court will likely grant you a conversion with no problems.

What if I previously filed for chapter 7 and was denied?

In the event that you have recently filed for chapter 7 but didn’t qualify, you may have to take the NJ Means Test. If your jurisdiction doesn’t require that you pass the Means Test, the court will request a written explanation from you disclosing why you need to convert to a chapter 7.

How much paperwork is involved in converting a chapter 13 into a chapter 7 bankruptcy?

Luckily, you do not have to completely start over if you want to convert to a chapter 7 bankruptcy. Some forms will need to be re-filed so that the court has your updated financial information, but your original bankruptcy petition will remain in place.

To learn more about converting from a chapter 13 to a chapter 7 bankruptcy, talk to an experienced New Jersey bankruptcy lawyer. Your specific case details are important and your attorney will be able to steer you in the direction that will get you to your desired financial destination as quickly as possible.

 

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Is Unpaid College Tuition Dischargeable in Bankruptcy?

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Unless you’ve been living under a rock for a significant stretch of time, you probably already know that student loans are very challenging to discharge via chapter 7 bankruptcy. It’s been that way since the 197os when Congress began putting limits on when graduates could discharge their student loan debt.

Prior to 1976, it was possible to discharge any student loan debt via bankruptcy. However, because so many students were failing to pay back their student loans, a law was passed with the intention of protecting federal investments. Initially, the law stated that a student loan would not be eligible for discharge within five years of its conception.

Slowly, through a series of tweaks to the law over the next two decades, the five year restriction stretched to seven years. 1998 saw the time restriction completely lifted and, in 2005, an amendment to the law was written to include private student loans, making the discharge of any type of student loan virtually inconceivable.

While it isn’t completely impossible to discharge student loan debt, to do so you must be able to prove that paying back your loan(s) will cause you ‘undue hardship.’ Proving undue hardship is exceedingly difficult to do, and those who succeed typically have some kind of severe physical disability that prevents them from earning a living.

What if I owe money directly to the school? Can I discharge that type of debt?

Ah, now here’s any interesting quandary! As it turns out, students or graduates who paid their college expenses (tuition, room and board, supplies) without signing any kind of loan paperwork or promissory note, actually have a decent chance of discharging any past due payments.

The key to whether or not your particular debt is dischargeable in bankruptcy has everything to do with nuance. For example, if you at some point received a bill from your college and failed to pay it, you technically owe the college money but not in the form of a loan.

Therein lies the nuance. Unpaid college fees such as tuition are not the same as unpaid college loans wherein you borrowed money and had a written agreement in place stating that you agreed to pay that money back. Simply failing to pay your tuition bill doesn’t magically turn it into a loan.

If you owe money directly to an institution of higher education that was never in the form of borrowed money to be repaid at a later date, you should be able to include it in your bankruptcy case and have it wiped out with a successful discharge.

However, pay close attention to the wording that your college uses in the near future, as some institutions have begun to change their paperwork/billing in order to make unpaid debts look like they were actually loans. This is an attempt to conceal the fact that your debt is dischargeable if you file for bankruptcy. These practices are not above board and your bankruptcy attorney must be diligent when reviewing any documents received from the school’s billing department.

Do you have unpaid college tuition debt that you feel should be dischargeable based on the description contained in this article? Do you have student loans that are causing you a great deal of financial hardship? In either case, Veitengruber Law can help you determine the best option for you:  a chapter 7 or 13 bankruptcy case, loan consolidation, forbearance, debt negotiation and more. Call now for a free one hour consultation.

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Can Filing for Chapter 13 Help Me Save My Home?

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Have you fallen behind on your mortgage payments and are now at risk of losing your home to foreclosure? Is keeping your home something that you want? Would making your monthly payments be feasible if the amount due each month was adjusted to fit into your budget?

Frequently, we see homeowners at risk of foreclosure who are desperate to keep their homes. Many times, the homeowner has already applied for a loan modification with their mortgage lender. Unfortunately, waiting for a loan modification to be approved can drag on and on for many months.

If you have applied for a loan modification, your mortgage debt (including past due payments and late fees) will snowball while you wait for your loan modification to be approved. Sadly, many loan modifications are not approved the first time around, especially without help from a debt relief attorney. Either way, while you wait for an answer, the amount of arrears will continue to climb, making it more impossible than ever for you to catch up.

We’ve worked with clients who’ve found themselves in this exact scenario. As we recently discussed in our last blog post, many people wait until the last minute to ask us for help saving their home from foreclosure.

Though Veitengruber Law does have last minute strategies that can often help postpone a foreclosure, today we’d like to present you with a way to stop a foreclosure early, giving you many options and the time you need to reorganize your your debts.

While most people associate bankruptcy with chapter 7, filing for chapter 13 may be exactly what you need if you’re facing foreclosure while attempting to obtain a loan modification.

Chapter 13 is a good choice for you if:

  • Your lender has filed a Notice of Default [missed payment(s)].
  • Foreclosure appears imminent.
  • You want to keep your home.
  • A loan modification would make your payments achievable.

How can a chapter 13 bankruptcy help me?

  • Filing for chapter 13 puts a stop to any foreclosure proceedings, known as an automatic stay. Your mortgage lender(s) (and all other creditors) are legally prohibited from collecting payments during the automatic stay period.
  • You are permitted to continue seeking a loan modification during your chapter 13 bankruptcy proceedings.
  • While you are seeking the modified loan, you will still be able to make payments (in the amount you can afford) so that you don’t fall further and further behind.
  • Any unsecured debts that you may have in addition to your mortgage loan can also be reorganized or modified to make repayment achievable. Some unsecured debt may even be dismissed altogether.
  • As soon as you file for chapter 13, you will start communicating with the bankruptcy division within your mortgage company. Oftentimes this results in a loan modification application that gets approved!

Consult with an attorney who specializes in debt relief and loan modifications to find out if a chapter 13 bankruptcy is right for you. Send Veitengruber Law a message now or call us at (732)852-7295 for more information about bankruptcy and foreclosure in New Jersey.

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Will a Gainful Job Offer Affect My Bankruptcy Case?

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So, you’ve found yourself way over your head in debt. You’re certainly not alone. If the fact that you aren’t alone in your financial distress doesn’t buoy your spirits, try this: Help is available.

Maybe you’re just able to keep paying your rent, utilities and living expenses. Anything above and beyond those payments has likely been put off repeatedly, like student loan debt, quickly compounding credit card bills, personal loans and medical bills.

It may appear to the untrained eye that you are doing ‘ok’ since you are able to remain in your home, pay your utility bills, and put food on your table. However, only you know exactly just how ‘not ok‘ your financial situation is, and with every credit card bill that you toss (unpaid) into the trash, your stress level is bound to increase. Your mental and physical health have undoubtedly begun to suffer due to a nearly constant feeling of worry.

Some people are in this or a very similar situation due to a lack of information about debt resolution. Oftentimes, we talk to people who (falsely) believe that filing for bankruptcy is only an option if you’re chronically unemployed and have essentially already lost everything, including your home. We are happy to rectify this misinformation!

If your income allows you to pay rent (or your mortgage) and feed your family but you have thousands of dollars of unpaid debt, you have a very solvable problem. Bankruptcy law focuses on helping struggling debtors just like you repay money and/or wipe out debts in order to get them back on track.

Don’t assume that you wouldn’t qualify for bankruptcy just because you have maintained a place to live and haven’t had your electricity shut off. If you have significant debts that you are simply unable to even make a dent in, bankruptcy is very likely a good option for you.

What if my job situation may improve in the near future?

First of all, congratulations on your perseverance! Secondly, a Chapter 7 bankruptcy would focus on your financial situation at the time of filing. If you successfully file for bankruptcy and subsequently obtain better employment or receive a raise, you don’t have to worry about losing any of that money to your bankruptcy trustee.

With that being said, there are strict laws in place that help prevent bankruptcy fraud. For example, you cannot legally accept a large sum of money (for example an inheritance) within a year after filing for bankruptcy. Debtors are also prohibited from repaying only  selective lenders prior to filing for either a Chapter 7 or Chapter 13 bankruptcy. This ensures that all of your creditors are paid back equally with none of them receiving preferential treatment.

However, as long as you are acting in good faith, you have the right to accept a better job or even a pretty significant raise after your bankruptcy has been filed. After all, the primary goal of bankruptcy laws is to eradicate your debts and see you on your way to a brighter financial future.

 

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