New Jersey Bankruptcy Blog

How To Save a House In a New Jersey Chapter 13 Case?

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SAVING A HOUSE IN A CHAPTER 13 CASE

CURING MORTGAGE ARREARS
A person may save their house from a foreclosure action in a chapter 13 bankruptcy case. The first option is to save a house by curing the mortgage arrears.  This requires the debtor to pay the total amount of the mortgage arrears, at the time of the filing, through monthly bankruptcy trustee payments. The amount that must be paid to the mortgage company, through the plan, each month, is the total mortgage arrears divided by the number of months in their bankruptcy plan. In addition to making trustee payments, the debtor must make their regular monthly mortgage payments, directly to the mortgage company, on a timely basis. A person may save their house, if he is able to make such monthly trustee and mortgage payments.

Please note that there may be additional funds that must be paid to other creditors, as well.

LOAN MODIFICATION PROCESS
The second option to saving a house in a chapter 13 case is to pursue a mortgage loan modification, within the bankruptcy case. Typically, the bankruptcy court allows a debtor approximately six months to pursue a loan modification, through the application process and the court’s Loss Mitigation Program. During this time, the foreclosure action and sheriff’s sale are stayed. Pending the loan modification process, the debtor must make monthly mortgage payments, directly to the mortgage company. Additionally, the debtor must make monthly trustee payments. The amount of the trustee payment varies based on numerous factors,  that are explained, in detail, in other portions of this website.

In most circumstances, the monthly trustee payment need not be sufficient to pay the total amount of the mortgage arrears through the life of the bankruptcy plan. However, if the mortgage arrears are enormous, the mortgage company may require the debtor to make a monthly trustee payment that is sufficient to cure all arrears over the life of the bankruptcy plan, in addition to paying regular monthly mortgage payments. Generally, in this scenario, it is unlikely that the debtor will be able to make such trustee payments. However, there may be circumstances that allow the debtor to pursue a loan modification, in such a situation, with affordable monthly trustee payments.

The loan modification process is typically facilitated through a website portal, which is used by the mortgage company and the debtor.  This process eliminates much of the communication issues that are usually related to the loan modification application process. The submitted loan modification documents are uploaded and held on the website’s server. Also, all communication between the mortgage company and debtor is saved on the website server for access.

If the loan modification is approved, typically, the monthly mortgage payment is changed and the arrears are incorporated into their future payments. This means that there are no longer any mortgage arrears. In this scenario, the debtor must file a modified chapter 13 plan and update certain schedules to reflect updated disposable income. The modified plan will remove payment of the mortgage arrears. Such modifications must also be filed, in the event that the debtor is denied a loan modification.

LOAN MODIFICATION AND CURE MORTGAGE ARREARS
A debtor may wish to pursue a loan modification and cure the arrears at the same time. This consists of combining the above referenced options concurrently. As a result, if the loan modification is denied, the person may save his house by continuing to make the monthly trustee payments that will cure the arrears. If a debtor pursues both options, the monthly plan and updated income and expenses must still be filed with the court upon the denial or approval of the loan modification.

GENERAL CHAPTER 13 INFORMATION THAT APPLIES TO ALL CHAPTER 13 CASES
The bankruptcy code requires every chapter 13 debtor to make monthly payments to a trustee for a period of 36 to 60 months. The amount of the payments depends on the debtors’ household income, expenses, type of debt and property values. A person cannot pick and chose which debt they wish to pay in a chapter 13. But rather, the bankruptcy code, coupled with the debtors’ intentions, dictate which creditors must be paid, through the bankruptcy plan. Certain types of debt, such as priority debt, must be paid through the bankruptcy plan. There are situations in which certain types of secured and/or unsecured debt may or may not be paid, through trustee payments.

This means that even though someone is filing a chapter 13 for the sole purpose of saving their house, he may be required to pay other debt, through the trustee payments, in addition to their mortgage arrears. If the debtor is unable to pay the necessary mortgage arrears through the bankruptcy plan, because he is also required to pay other types of debt, the debtor may not continue with the bankruptcy case. Such a plan is called unfeasible. Under this scenario, if the attorney is unable to resolve the feasibility issue, the case will be dismissed.

Contact Manchel New Jersey Bankruptcy Law at 866 503 5644 to discuss your bankruptcy questions.

What Are Some Benefits of a New Jersey Bankruptcy Case?

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Immediately upon a NJ. bankruptcy filing of any chapter, the Automatic Stay Provision of the bankruptcy code applies, thereby protecting the debtor (person filing) from the creditors’ collection efforts. This means that no matter what type of bankruptcy case is filed, no creditor may proceed or commence a lawsuit against the debtor for money or property.

The Automatic Stay Provision stops the following actions: creditors’ correspondence, such as telephone calls and collection letters; bank and property levies; wage garnishments; lawsuits; utility shutoff; auto repossessions; foreclosure actions; prevent drivers’ license suspension and/or reinstate drivers’ license, under certain circumstances; prevents sale of property; filing of liens; possible limited protection from support arrears; and, delay collection from student loan creditors.

The Automatic Stay works as follows. If the bankruptcy petition is filed prior to the creditor commencing a lawsuit against the debtor, the creditor may not file the lawsuit. Immediately upon the bankruptcy filing, the lawsuit process stops. If the debtor files a bankruptcy case, after the lawsuit is filed and before the answer is due, the debtor need not file an answer. If the debtor files the bankruptcy petition after the creditor obtains a judgment from the lawsuit, the creditor may not attempt to collect money on the judgment.

A finance company may not repossess an auto if a bankruptcy case is filed, after the debtor is behind with payments, but before the auto is repossessed. If the auto is repossessed and not yet sold, the bankruptcy filing, may allow the debtor to obtain possession of the vehicle, under certain circumstances.

CHAPTER 7

The chapter 7 process is about four months long. After four months from the filing, the debtor is completely out of the bankruptcy case, with an order of discharge. Discharge means that the debt is eliminated. The discharge order completely eliminates certain debt, including all unsecured debt. Unsecured debt is debt that is not connected to collateral or property, such as credit card debt and personal loans. A chapter 7 does not require any court or trustee payments.

The bankruptcy code has a list of specific types of debt that are not discharged, including, but not limited to, child support, alimony, some types of tax debt and student loan debt.

A debtor may eliminate a mortgage if he does not wish to keep his house. Additionally, auto debt may be eliminated, if you are surrendering your auto. A chapter 7 will not permit someone to save an auto or house if he is behind with payments.

A debtor may possibly eliminate liens, as well.

CHAPTER 13

A chapter 13 requires monthly payments to a trustee for 36 to 60 months. The number of trustee payments vary based on numerous factors.

A person that does not meet the chapter 7 criteria, due to excessive income, may file a chapter 13 to pay back and/or eliminate a portion of their unsecured debt.

Also, a chapter 13 may permit someone to save a house from foreclosure and a car from repossession. Chapter 13 offers various options to save a house from foreclosure. However, the most likely options are to cure the mortgage arrears through the bankruptcy plan or obtain a loan modification. An automobile may be saved from repossession by way of various options. The most used options are to pay the finance arrears through the bankruptcy plan or pay off the total financing balance through the bankruptcy plan.

Under certain circumstances, a debtor may be permitted to eliminate a second or third mortgage. A debtor may be able to eliminate a lien too.

Bankruptcy lawyer, Robert Manchel, Esq., is available for a free consultation.

What Happens to Welfare And Social Security Debt Benefits In A New Jersey Bankruptcy Case?

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Lawyer explains how welfare and social security debt and benefits are treated in a New Jersey bankruptcy case.

In many instances, New Jersey debtors have debts owed to state or federal governmental agencies, that arise out of various public benefit programs. Such benefits include welfare and social security. These debts may arise out of a an obligation to reimburse a specific entity as a result of an over payment which the debtor is required to repay.

Generally, the over payment of welfare and social security debts are “dischargeable” in bankruptcy, which means that the debt may be eliminated. However, the debt will not be “dischargeable” (eliminated), if the bankruptcy court determines that the debt was obtained through fraud. If such fraud was not specifically determined by a court prior to the bankruptcy filing, the bankruptcy court may determine the existence of fraud. The allegation of fraud must be found by way of a lawsuit that is filed in the bankruptcy court. The complaint is called a Complaint for the “Nondischargeability” of Debt.
What happens if the creditor, such as the social security administration, owes the debtor benefits after the bankruptcy discharge? The social security administration cannot hold back $6,000.00 of your future benefits because $6,000.00 was previously discharged in a bankruptcy case.

You may contact Robert Manchel at 866 503 5644 to discuss your NJ. bankruptcy law questions.

Can I Keep A Mobile Home In A New Jersey Bankruptcy Case?

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Bankruptcy lawyer explains how a New Jersey chapter 7 and chapter 13 bankruptcy works, with a debtor that owns a mobile home.

A residence under the bankruptcy code includes real property, which is a house, or personal property that is used as a residence, such as a mobile home.The determination as to the property that the debtor is permitted to keep in a chapter 7 is based on exemptions. The amount of money that must be paid to unsecured debt in a chapter 13 is based on the value of assets, such as a mobile home, the applicable exemptions and disposable income.
The bankruptcy code has numerous sections relating to real property. Real property is land and all improvements that are fixed to the land, such as a house. A mobile home, that is used as a residence, is not real property under the bankruptcy code. However, the exemption 11 U.S.C., section 522 (d) (1), specifically covers real property and personal property in which the debtor uses as a residence. Therefore, a mobile home applies to this exemption. This provides substantial protection to a person that resides in a mobile home, as a mobile home typically has less value than a typical house.
If a mobile home is completely exempt, the debtor may keep their New Jersey mobile home. The 11 U.S.C., section 522 (d) (1) exemption is $23,675.00. This means that a person may keep their mobile home, in a chapter 7, if the mobile home’s value, minus the mortgage is $23,675.00, after subtracting the mortgage payoff and 10% of the projected cost of sale. For example, a mobile home valued at $40,000.00, minus a mortgage payoff of $10,000.00, has equity of $30,000.00. The court permits a projected 10% cost of sale, which is 10% of $40,000.00, or $4,000.00. $30,000.00, minus $4,000.00 is $26,000.00. $26,000.00, minus the $23,675.00 exemption is $2,325.00. Therefore, technically, the chapter 7 trustee may sell the house and receive $2,325.00 for the creditors.
If I modify the example above by changing the house’s value to $37,675.00, the debtor would be permitted to keep the mobile home in a chapter 7  and avoid the chapter 7 trustee’s sale of the property. $37,675.00 (house value), minus $4,000.00 (cost of sale), minus $10,000 (mortgage payoff), minus $23,675.00 (exemption) is $0.00. If the mobile home has a value of $35,000.00, in the above referenced example, the property will be fully exempt and the debtor will be permitted to keep the mobile home.
In the above referenced example, where the mobile home has a $40,000.00 value, the debtor will be able to file a New Jersey chapter 13 and save his mobile home. However, the debtor will be required to pay at least $2,325.00 toward his unsecured debt, as a result of the $2,325.00 “unexempt” equity in the mobile home. In the above referenced example, where the mobile home has a value of $35,000.00, the debtor would be able to file a chapter 13, keep his property, and pay nothing to toward his unsecured debt, as it pertains to his mobile home equity.
Although a person may file a bankruptcy case for the sole purpose of resolving mobile home issues and associated debt, the debtor must deal with all of his debt, according to the bankruptcy code. A chapter 13 debtor, who owns a mobile home, may be required to pay other debt based on the value of all of his assets, disposable income and type of other debt.
Please contact Robert Manchel, Esq., your NJ. bankruptcy attorney, at 866 503 5644.

What Happens To A Mobile Home Loan In A New Jersey Bankruptcy Case?

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Attorney explains the NJ. Bankruptcy law benefits of a mobile home loan.

Believe it or not the bankruptcy code allows additional benefits for a mobile home loan, in New Jersey, that is not permitted for a house residence mortgage. A mortgage on a mobile home may be “crammed down” in a chapter 13, even though a home mortgage cannot. As I explained, in other blogs, a cram down is changing the secured status of a loan to a partially secured portion and a partially unsecured portion. The secured portion is reduced to the fair market value of the mobile home, with the balance due on the loan to be changed to general unsecured. For example, if the value of a mobile home is $25,000 and the total balance due on the loan is $70,000.00, the secured portion may be reduced to $25,000.0. with the balance of $45,000.00, to be classified as general unsecured. The bankruptcy code does not permit such a change in a mortgage on a house, that is the debtor’s residence.
How does this benefit the owner of the mobile home? In general, a New Jersey chapter 13 bankruptcy debtor is only required to pay the secured portion of the mortgage, plus a reasonable interest rate, through the bankruptcy plan, over five years. In most situations, the debtor may either eliminate all of the unsecured portion or most of the unsecured portion. This means that the debtor in the above reference example will only be required to pay the $25,000.00 (secured portion), plus a fair interest rate. However, the $25,000.00, plus the fair interest rate must be paid within the five year bankruptcy plan. The amount that must be paid towards the $45,000.00 (unsecured portion) balance and any other unsecured debt is based on the debtor’s income, expenses, type of debt owed and asset values.
The determination as to the property that the debtor is permitted to keep in a chapter 7 is based on exemptions. The amount of money that must be paid to unsecured debt in a chapter 13 is based on the value of assets, exemptions and disposable income. This blog is limited to exemptions on a residence. A residence under the bankruptcy code includes real property, which is a house, or personal property that is used as a residence, such as a mobile home.
Please note that the bankruptcy code considers all of the debtor’s finances and assets. Therefore, even though a debtor has filed for bankruptcy protection to deal with his mobile home debt, he may be  required to pay other debts and creditors.
Robert Manchel will answer your bankruptcy questions at 866 503 5644.

The Tax Process In A New Jersey Chapter 13 Bankruptcy Case.

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New Jersey Attorney Explains The Tax Process Of A Chapter 13 Case

I have written extensively in other blogs about how to determine the amount of a debtor’s tax debt, the portion of the tax debt that is dischargeable and the amount that must be paid through a New Jersey chapter 13 bankruptcy plan. This blog explains the chapter 13 process of handling tax debt. The bankruptcy code applies the same laws and procedures to the IRS and State of New Jersey, Division of Taxation, which includes federal and state income tax debt.
In a New Jersey chapter 13, all tax returns must have been filed with the taxing authorities, including both federal and state tax returns. If any returns have not been filed, the trustee may ask for the case to be dismissed at the first scheduled Confirmation Hearing. Dismissal means that the case is thrown out. The trustee is responsible for administering the bankruptcy case and to ensure that the debtor pays the appropriate creditors, in the appropriate amounts.
The IRS and the State of New Jersey, Division of Taxation, must file a Proof of Claim with the court, reflecting the amount of debt owed for each year and the classification of the debt for each year. If the taxing entity’s proof of claim reflects that a tax return has not been filed with the taxing entity, the trustee will not permit the debtor to move forward with their case. The trustee will require that the taxing authority file an amended claim with the court, reflecting that all returns have been filed.
However, the trustee will typically agree to postpone the Confirmation Hearing to allow time for the taxing authority to modify their claim. The debtors’ attorney may forward the debtors’ returns to the IRS or State, directly, and resolve the matter without court intervention. However, if the parties are unable to resolve the matter, the debtors’ attorney may need to file a motion with the court objecting to their proof of claim. In most circumstances, all issues are resolved after the motion is filed with the court, and without the need for the judges determination.
If the taxing authority files a claim reflecting an incorrect classification or amount due, the debtors’ attorney may attempt to resolve the matter in the same manner, as explained. Under these circumstances, the Confirmation Hearing date, must be postponed to allow for the resolution of these tax issues. The trustee’s job is to ensure that the tax claim reflects that all returns have been filed and that the debtor has sufficient disposable income to pay secured and priority class tax debt. It is the debtors’ attorney’s job to ensure that the tax claim reflects an accurate figure, not the trustee.
Robert Manchel may be reached at 866 503 5644 to discuss your bankruptcy questions.

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