5 Mistakes to Avoid After NJ Bankruptcy

NJ bankruptcy

After your NJ bankruptcy, a common concern is how to re-establish your credit score. The real challenge is creating new financial habits so you don’t find yourself back in the same hole all over again. At Veitengruber Law, our holistic approach to financial health means our job doesn’t end after the bankruptcy is closed. We work with you to repair your credit and create healthier financial habits.

 

Top Mistakes to Avoid After a Bankruptcy Discharge:

 

1 – Ignoring your credit report

When rebuilding your credit subsequent to a bankruptcy discharge or reorganization, you will want to be very attentive to your credit report. Your creditors are supposed to report any discharged debts included in the bankruptcy to the credit bureaus. These reports should show a zero balance and include a note indicating the debt has been discharged. It is crucial to follow-up on this and ensure that all creditors are reporting to credit bureaus correctly. If discharged debt is being wrongly reported—as either a charge-off or an open account—late or missed payments can continue to show up on your credit. This can further damage your score and make it more difficult for you to get new credit.

2 – Applying for multiple new credit lines

It can be tempting after bankruptcy to rush out and apply for a gaggle of credit cards or loans in an attempt to quickly repair credit. However, it is important to give your credit score time to rebound before applying for new credit. The impact of a bankruptcy is strongest in the first year after filing, although it can stay on (and affect) your credit report for up to ten years. Instead of rushing into opening several credit lines at once, be patient and take the time to research your best options.

3 – Failing to read the fine print

When you do start applying for credit cards, it is important to remember that not all credit cards are created equally. Some credit cards will be more helpful to those rebuilding post-bankruptcy. A secured card, for instance, allows you to deposit cash as collateral up front to create a line of credit. That way, you are not able to charge more than your initial deposit. With any card you choose, it is important to read the fine print of your terms to make sure the card will work in your favor.

4 – Falling for credit repair scams

Many unethical “credit repair companies” make big promises about performing miracles to improve credit scores, but they rarely ever deliver the results promised. These companies rely on misinformation to scam those that don’t know much about how credit works. Some of their tactics may even be illegal. Keep in mind that if something seems too good to be true, it probably is.

5 – Making things too complicated

Ultimately, when it comes to rebuilding your credit after bankruptcy, you need to go back to the basics. What bad habits caused you to file for bankruptcy in the first place? An unflinching assessment of your spending habits will help you determine which factors led to the bankruptcy and determine where you need to make changes. Figure out what your credit-bingeing triggers are and work toward setting spending limits for yourself. Simple things like making on time payments, keeping debt to a minimum, and sticking to a healthy budget are excellent foundations of any financial strategy and will get you on the road to financial health quickly.

You’ve been through the hard-fought financial battle of bankruptcy and come out victorious on the other side. Now is the time to think positively about your financial future. Rebuilding your credit after bankruptcy takes time and patience, but you can use the knowledge and financial savvy you’ve learned along the way to move forward to a brighter future. Veitengruber Law is here to help. We are skilled in advising clients and creating easy-to-follow strategies to rebuild credit. Call for your free consultation today.

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Bankruptcy Balderdash Basics: Know the Lingo

bankruptcyNew Jersey is a great place to live. We have mountains and beaches and lakes, great sports teams, attraction such as Six Flags and Atlantic City, and we are conveniently close to Manhattan and Philadelphia. That being said, we also have one of the highest costs of living in the nation. That amounts to our residents having more debt than most of the country. Average credit card debt is the second highest in the US, and don’t forget student loan debt, higher property taxes and longer commutes. All of these factors contributed to nearly 27,000 NJ residents filing for bankruptcy between October 2017 and September 2018.

 


Just the word BANKRUPTCY can loom large. It’s without a doubt a very overwhelming concept to contemplate.


 

Ultimately, though, the process can provide help on many fronts such as relief from hounding creditors, stress, and uncertainty. Bankruptcy is a complicated process, and you should avoid trying to navigate it without a consummate professional by your side.

 

Going into your first consultation with a debt management attorney can feel almost as daunting as the bankruptcy process itself. Chapter 7, Chapter 13, Chapter what?! Trustees, claim forms …. before you know it, you’re swimming in jargon. Veitengruber Law wants you to feel at ease from the very beginning. Alleviate some of that apprehension by understanding the bankruptcy balderdash and get to know the lingo.

 

Chapter 7 Bankruptcy – Also known as a straight bankruptcy, it provides protection from creditors to individuals (or companies) who legally file for bankruptcy, providing for sale of certain assets to pay debts. Only certain possessions, up to specific dollar limits, can be kept when you file for Chapter 7. It’s an option for people with limited income. Chapter 7 is basically a liquidation of most of your assets – the proceeds of which are divided up among your creditors. Then, any remaining debt is “forgiven,” and you financially start anew with a clean slate. Keep in mind that you will be debt free at the end of the process, but the bankruptcy will remain on your credit report, making you a high credit risk for the next 10 years. That may be a more desirable outcome than drowning in debt, but you have to consult with legal counsel to have your personal circumstance evaluated.

 

Chapter 11 Bankruptcy – a reorganization bankruptcy, similar to Chapter 13, but used primarily by businesses and corporations.

 

Chapter 13 Bankruptcy – This option allows you to keep key assets such as your primary residence and your vehicle. Under this plan, the court gives you a repayment plan to satisfy your debts.  You’ll have between 3 and 5 years to pay off that debt by sticking to the plan. You are expected to keep to the repayment plan and be current with all of your debts through the end of the plan. A Chapter 13 bankruptcy stays on your credit report for 7 years.

 

Exemption rules – New Jersey has its own set of exemptions that you may use when filing for Chapter 7 or Chapter 13 bankruptcy. Exemptions determine what property (such as a residence, vehicle, retirement accounts, etc.) you may keep in a Chapter 7 bankruptcy, and how much you must pay to certain creditors in a Chapter 13 bankruptcy. You may use either the NJ state exemptions or the federal bankruptcy exemptions. You are not allowed to mix and match from both lists. If you choose to use the New Jersey state exemptions, you may also use any applicable amounts in the federal non-bankruptcy exemptions. Unless noted otherwise, if a couple is married and filing jointly in New Jersey, each spouse may claim the full amount of each exemption. The lingo for that is “doubling.” (You can see how it gets complicated quickly, and why it is vital to have expert counsel to guide you.)

 

Examples of New Jersey exemptions: burial plots, household goods up to $1,000, stocks valued up to $1,000, pensions, certain life insurance proceeds, some disability and health benefits.

 

Examples of Federal exemptions: homestead, jewelry up to $1,600, health aids, lost earnings payments, public benefits, alimony and child support.

 


This is by no means an exhaustive list, and each exemption has caveats, so be sure to discuss the best option for you with your legal counsel.


 

Proof of Claim – a form that creditors file with the court to prove that they have a valid claim against the bankruptcy estate. Before a creditor can get paid through your bankruptcy, they must file a proof of claim. When you file for bankruptcy, all creditors listed in your schedules receive notice of your case as well as a deadline to file their proof of claim. If a creditor doesn’t file a proof of claim, they can’t get paid through your bankruptcy. The debtor can also file a proof of claim on behalf of a creditor who has not done so on their own. This usually happens if the debtor specifically wants to pay that creditor through the bankruptcy. (Proof of claims must contain certain requirements, and are not always required in certain types of Chapter 7, so if you are in doubt, consult with an expert.)

 

Repayment Plan (Chapter 13 only) – a plan which lasts from three to five years, whereby you pay off some debts in full; other types of debts are paid in full or part depending on how much disposable income you have. Putting together a plan that the court will confirm, with the assistance of counsel, is key to your Chapter 13 bankruptcy’s success.

 

Trustee – a person appointed by the court to administer and oversee your case. The trustee reviews your bankruptcy paperwork (and supporting documents) to gauge accuracy in your petition. In a Chapter 7 bankruptcy filing, the trustee’s primary responsibility is to find and sell your nonexempt property to pay back your creditors. In a Chapter 13, the trustee does not sell your assets but reviews your repayment plan to make sure it is both realistic for you and fair to your creditors. After approval by both the trustee and the court, you make one monthly payment to the trustee, and he or she distributes your monthly payments to your creditors pursuant to your plan. Depending on your situation and the type of bankruptcy you file, you may also be required to attend certain hearings, in which your trustee will preside, before your case is completed. These can include: Confirmation Hearing, Meeting of Creditors, Reaffirmation Hearing, Hearing on Creditor’s Motion, and others.

 

Automatic Stay – the simple request for bankruptcy protection automatically halts most lawsuits, repossessions, foreclosures, evictions, garnishments, attachments, utility shut-offs, and debt collection activity, by way of injunction. There are numerous provisions and exceptions to the automatic stay.

 

Credit Counseling – required before a debtor may obtain bankruptcy relief under either Chapter 7 or Chapter 13. It involves education in personal financial management, and an overall assessment of your financial situation to see if bankruptcy is your only option. The process is used to help individual debtors with debt settlement through education, budgeting and the use of a variety of tools with the goal to reduce and ultimately eliminate debt, rather than discharge it through the court.

 

As you can see, there are a lot of choices to be made, and even more questions to answer. Don’t risk a misstep that could affect your entire financial future.  Call Veitengruber Law today for your free consultation.

 

The Ins and Outs of Chapter 7 Bankruptcy in New Jersey

chapter 7 bankruptcy in new jersey

Chapter 7 bankruptcy in New Jersey is designed to allow a debtor to liquidate their debts if they are unable to repay their debts. If you are overwhelmed by personal debt and have not filed for Chapter 7 bankruptcy within the past eight years, read on to find out if Chapter 7 bankruptcy might be the first step toward regaining financial health and freedom.

Who qualifies for Chapter 7 bankruptcy?

You must meet the following criteria to be eligible to file Ch. 7:

  • Your income must be lower than the median income in New Jersey. This is called the means test.
  • Your debts, excepting those that are non-dischargeable under any conditions (examples include income tax debt, unpaid child support, student loans, and alimony), can all be erased under Chapter 7. If the majority of your debt is dischargeable, Chapter 7 may be right for you.
  • You must undergo credit counseling. This counseling cannot be obtained more than 180 days prior to filing your petition.

Do I need an attorney’s help filing?

It is extremely important that your filing paperwork be entirely truthful and accurate. Unfortunately, debtors often make mistakes on their Schedule I form.

Schedule I is the form that you’ll fill out listing all of your income, including your spouse’s income and income from any and all other sources. Making a single significant error on this form will result in the immediate dismissal of your case.

It should go without saying that falsifying your bankruptcy paperwork intentionally carries penalties up to and including time in prison. Working openly and honestly with a qualified attorney will guarantee that your Schedule I paperwork is correct and truthful. Under no circumstances should you attempt to hide a source of income from your bankruptcy attorney.

How will filing Chapter 7 help me?

While any of the aforementioned non-dischargeable debts will remain your responsibility, the majority of debts will be erased. You will not owe creditors anything further.

What will happen to my major assets?

If your spouse owns your home jointly, or if you have kept current on your mortgage payments despite your financial situation, you may qualify to keep your home. Unless you can definitively prove you need your car or truck for your job, your vehicle may be repossessed to contribute to the repayment of your debts.

Once you’ve obtained credit counseling, you can file a petition for bankruptcy with the court. A trustee will then be appointed to you. You will be required to surrender all of your nonexempt assets and divide the proceeds amongst your creditors.

What are my options if filing Chapter 7 doesn’t provide me enough debt relief?

Sometimes even after a Ch. 7 discharge of debts is granted, you may still have a burdensome level of non-dischargeable debt remaining. While bankruptcy law has filing limits intended to prevent debtors from abusing the system and persisting in irresponsible financial habits, you ARE permitted to file for Chapter 13 if you are doing so in order to make your remaining debt manageable. While the result will not be a significant reduction in the amount of money you owe, your attorney will negotiate favorable repayment terms so that you will not be crushed by your debts.

Additionally, filing for Chapter 13 after you’ve filed for Chapter 7 will prevent your creditors and lenders from garnishing your wages, foreclosing your home, or repossessing your vehicle. Consult with your NJ bankruptcy attorney if you have been attempting to pay your debts for at least one month after your Chapter 7 has been granted and you are still struggling to make ends meet.

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.

How Does Inheritance Income Affect NJ Bankruptcy Rulings?

NJ bankruptcy

When preparing to file for NJ bankruptcy, it is very important to take a full and detailed account of all of your assets. This does not just include current assets, but future assets as well, e.g. any potential inheritances. Knowing how your inheritance income affects bankruptcy filings in New Jersey is important to understanding your rights while filing for bankruptcy.

You may have advanced notice of an inheritance if you are aware of your inclusion as a beneficiary in a will. Otherwise, an inheritance could come as a surprise. You could be included in a will without your prior knowledge or you could receive the inheritance through normal operation of law in the event that there was no will at the time of death. Regardless of how you came to receive the inheritance, it is important to understand if the inheritance income is part of your bankruptcy estate or not so you can make sound financial decisions.

Typically, after bankruptcy is declared, all assets and liabilities become part of the bankruptcy estate. The bankruptcy estate is then administered by a bankruptcy trustee. There are four ways to file for bankruptcy in NJ, but most bankruptcy claims fall under Chapter 7 or Chapter 13. Under Chapter 7, the trustee is responsible for determining which assets the debtor can liquidate (sell) to pay their creditors. Under Chapter 13, the debtor is not required to give up personal property in order to pay off debts. Instead, the debtor will be required to make monthly payments that will be split between all of their creditors. How much a debtor pays under the Chapter 13 payment plan will depend on the amount of non-exempt interest in real and personal property.

That being said, there are certain exemptions when it comes to whether or not an inheritance will be included in the bankruptcy estate. Debtors are entitled by law to exempt a certain amount of property from their bankruptcy filing. Under Chapter 7, a debtor is entitled to keep some specified property from being liquidated to pay creditors. Under Chapter 13, a certain amount of the debtors’ assets can be exempt from inclusion in determining a payment plan. There are different exemption amounts depending on the type of asset in question. Congress periodically makes changes to these amounts to account for changes in inflation so it is important to keep up with these changes. While there is no separate exemption for inheritances, debtors can include any inheritance income under their designated “wildcard exemption” (11 U.S.C. §522(d)(5)).

Is your inheritance eligible to be included in your bankruptcy estate?

All assets owned at the time of filing are part of the bankruptcy estate. Pursuant to NJ bankruptcy laws, property of the estate includes “all legal or equitable interests of the debtor in property as of the commencement of the case.” The timing of when an inheritance becomes part of a bankruptcy estate is crucial to understand and varies depending on what kind of bankruptcy the debtor is filing.

Under Chapter 7 bankruptcy, an inheritance is considered part of the bankruptcy estate if the debtor becomes entitled to the asset within 180 days of the date bankruptcy was filed. This is to include property which the debtor becomes entitled to acquire by inheritance. The 180 days starts the day bankruptcy is filed and ends with the date of death. The time frame in which the debtor receives the inheritance does not matter. The date of death is legally considered the date on which the inheritance enters into the debtor’s possession and therefore enters into the bankruptcy estate. This is to deter preemptive bankruptcy filings where the debtor intends to rush a bankruptcy claim in order to avoid having the inheritance affected.

Under Chapter 13 bankruptcy, any inheritance received after the bankruptcy filing date but before the case is closed or dismissed is considered property of the bankruptcy estate, regardless of the time it takes to close a case. Under Chapter 13, there are specific legal statutes designed to expand what is considered bankruptcy estate property in order to include inheritance that is acquired beyond the 180-day limitation observed under Chapter 7. Any inheritance acquired during the entirety of the bankruptcy case will be subject to the terms of the repayment plan.

It is essential in any bankruptcy case to determine which assets are protected and to acquire adequate pre-filing planning and analysis for your specific bankruptcy case. Whether you need to eliminate your debt in its entirety under Chapter 7 or you need to reorganize your payments to creditors under Chapter 13, the qualified and experienced attorneys at Veitengruber Law are here to help. If you are unsure of your rights, please call us for a consultation.

Top 5 New Jersey Bankruptcy Myths, Busted

New Jersey bankruptcy

Do you find yourself questioning the truth of the latest snippets of gossip you hear on the news? You’re not the only one, especially since many bits of information we hear travel through a variety of sources before reaching us. There’s no doubt that you hear and read financial updates or facts on the news, radio, newspaper, online, etc. How do you know what to believe?

The news media is always informing the public about foreclosure, bankruptcy, real estate matters, and many other points that can be relevant to the average person. The word “bankrupt” is becoming more common in our vocabulary today, but the bottom line is that there are numerous myths about bankruptcy. Whether or not you have faced bankruptcy in your personal life or you know someone that has, debunking these myths could be useful for you; you never know when they might come in handy.

Myth #1: Every possession will be taken away from you.

Fact: Good news: every state has laws to protect you, though they do vary from state to state. The laws that we’re talking about are called exemptions, which protect your home, family heirlooms, car, and retirement savings. It’s possible to file for Chapter 13 bankruptcy, which involves a repayment plan, in the case that you have more equity in your home than what is protected by the exemptions. Because of these laws, the debtor is entitled to retain most of his property, furniture, a decent amount of jewelry, and some money. You won’t lose all of your possessions if you file for bankruptcy.

Myth #2: Filing for bankruptcy will damage your credit for at least 10 years.

Fact: This is completely false. It’s important to distinguish that having bankruptcy on your credit report for 10 years doesn’t necessarily mean that it will have a totally negative effect. Not all things reported on your credit report are considered bad. Interestingly enough, our clients’ credit scores usually increase after filing for bankruptcy. Normally, a person will be able to re-establish their credit score within two to four years after filing. If this is not happening for you, you may be working with the wrong debt resolution specialist!

Myth #3: You can decide to list only the debt you want to eliminate when filing for bankruptcy.

Fact: Actually all debts must be included. It’s not your choice to dismiss a creditor just because you plan on continuing to pay their bill. You are able to make voluntary payments to family or medical service providers if you choose. Once your case has been dismissed, you can continue to pay off your debts.

Myth #4: Everyone will know that you filed for bankruptcy.

Fact: Yes, bankruptcy is a public record, and anyone could search your history, but the amount of filings each month is so large. Most likely, no one is going to find out that you’ve filed for bankruptcy. Obviously, celebrity bankruptcy filings are big news; we always see them in the media. Let’s think back, though: when is the last time you researched who filed for bankruptcy in your neighborhood?

Myth #5: Being married means both you and your spouse will have to file.

Fact: If both the husband and wife are in debt, then yes, it would be smart for both of them to file. There is no legal mandate that both spouses have to file. If you don’t have any joint debt, then there is no need for your spouse to file either. On the other hand, if both spouses need to file, they should do it jointly to avoid paying two fees.

If you have questions that haven’t been answered herein, please call us so we can help you further understand the NJ bankruptcy process.

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.

 

What to do When Your Client Files for Bankruptcy

NJ collections attorney

From the perspective of a company owner doing business with a client (or company) who files for bankruptcy: how can you go about getting (even some of) the money you’re owed?

The second someone files for bankruptcy of any type, the Automatic Stay slams down like a sledgehammer – coming between the bankruptcy filer and anyone they owe money to. The Automatic Stay protects debtors during the bankruptcy process by making it illegal for any creditor to make contact asking for money.

Why can’t I contact my client?

After all, you and your client likely signed a working contract wherein you agreed to provide services and they agreed to pay you X amount of dollars for said services. Even though you continued to provide your end of the deal, your client filed for bankruptcy and now you aren’t even allowed to contact them. This can be very frustrating for a business owner who is owed payment(s) – money that may very well be making or breaking the creditor’s own business.

The reason you can’t contact a bankruptcy client is because the Automatic Stay is a protective measure put into place by the bankruptcy court to protect struggling debtors. It gives them enough time and breathing room to gather their financial information and meet with their bankruptcy attorney and/or a potential NJ credit counselor to come up with a plan that makes sense for getting them back on their feet again.

Chapter 11 and 13 bankruptcies are filed with the intention of reorganizing monies owed into a more feasible and achievable payment plan. As soon as these bankruptcy cases are complete – you will once again begin receiving payment from your client. According to their debt reorganization plan, you may not receive the full amount due, but you will get paid.

That’s the good news.

The bad news is that the vast majority of bankruptcies filed today are chapter 7, which entails debtors liquidating assets and discharging many of their debts altogether. If your client files for chapter 7 bankruptcy, you may have to write off their past due amount as a loss. In any case, remember NOT to contact them at all until you receive notice that their bankruptcy case is no longer active in the NJ Courts system.


To contact a debtor while they are actively going through the bankruptcy process (if an Automatic Stay is in place) means that you risk being sued. You will have broken the bankruptcy code if you even attempt to contact a bankruptcy client.


 

What You Can Do:

  • File a Proof of Claim – Downloadable from the USCourts online and easy to fill out.
  • Attend the Meeting of the Creditors; also known as the 341 Hearing – At this meeting, you will be able to question your client. You’ll also be permitted to object to the repayment or reorganization plan if you deem it unfair.
  • Thoroughly review any plan that is formulated by the debtor and their trustee. If less than half of their creditors do not consent with the plan, it won’t be approved by the bankruptcy court.
  • Make sure you are listed on the Creditor Matrix.
  • Wait and see. Truthfully, most of your time will be spent waiting to find out the outcome of your client’s case. If the case is dismissed, or “thrown out,” you will once again be allowed to attempt collection. If an agreement or repayment plan was formulated, you will receive a notice about how much you can collect. Be sure that all of your contact information is correct with the bankruptcy court and your client’s bankruptcy attorney to ensure you will receive any and all payments.

 

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

Fear of Filing: What’s Keeping You from Bankruptcy Relief?

Without a doubt, money incites emotion.

What emotion depends on the specifics of your financial situation. Suddenly getting a substantial raise at work gives a feeling of success and relief. Coming into an unexpected windfall of money can evoke a sense of thrill and excitement. Steadily watching the number in your bank account dwindle inevitably leads to anxiety, stress, and panic.

Realizing your debt is higher than you can handle can provoke a fear that feels like you’re drowning. Learning that you have solid options to get out of debt when you thought it was an impossibility should instill a solid sense of comfort. Unfortunately, the thought of filing for bankruptcy comes with its own set of complex and confusing emotions.

Even though you may know and logically understand how the New Jersey bankruptcy process can eradicate a large percentage of your debts, you may hesitate to take the necessary steps to file. You’re not alone. In general, those who know they need to file for bankruptcy but are afraid to do so, are afraid of one (or more) of the following:

Ridicule/social embarrassment

Yes, it is more socially acceptable today to file for bankruptcy, but this fear isn’t unfounded. You may have some naysayers and Negative Nanceys if you file for bankruptcy. While they may tsk tsk behind your back, what’s most important is getting your financial life back on track. What will the naysayers have to cluck about when all of your bills are current and you’re able to rise above your strife? Keep your eye on the prize, and kick any and all negativity to the curb.

Job loss/difficulty finding future employment

In order to assuage this particular fear, it’s always a good idea to discuss a potential bankruptcy with your current employer before filing. An informed boss is much better than one who finds himself “hoodwinked.” As long as your higher-ups and HR department give you the green light, you’ve got nothing to fret about.

As for future employment, as long as you keep your nose to the grindstone and make the most of filing for bankruptcy, chances are good that a potential future employer will look at your overall financial picture rather than zero in on just one incident. Bankruptcy discharge is your opportunity to get a strong foothold where your finances are concerned. By using bankruptcy as a tool, you can get out of (and stay out of) debt, improve your credit score, and completely turn your life around.

Inability to buy a home/fear of losing your current home

It’s true that filing for NJ bankruptcy will lower your credit score temporarily. This does mean that making large purchases that will require a loan are off the table, but only in the short-term! By remaining steadfastly dedicated to cleaning up your financial past, a lender will see that you’ve made a lasting change. In just a year or two, you will be able to make large purchases again.

Losing your home is a huge fear for almost everyone when they think about bankruptcy, although this fear is largely unfounded. Now, if you should decide that your home mortgage is out of your budget – you can decide to go forward with a short sale or foreclosure in order to downsize. However, if you would be able to successfully make your mortgage payments if your other debts were gone or significantly reduced, filing for bankruptcy in New Jersey triggers the automatic stay.

Do you have other fears about filing for bankruptcy that weren’t mentioned here? Call us; talk to us. We can walk you through what you’re afraid of and help you understand the process. We’ll give you real, honest feedback, even if that means bankruptcy isn’t right for you.