New Jersey Bankruptcy Blog

What Credit Card Creditors Do In A New Jersey Bankruptcy Case?

April 29, 2016 by Robert Manchel

NJ. Lawyer Explains What Action Credit Card Creditors Take In A New Jersey Bankruptcy Case.

This blog is limited to banks and other creditors that collect debt on behalf of credit card debt. The term “creditor” as used in this blog refers to such creditors, only. The creditor’s participation in a New Jersey chapter 7 bankruptcy case is different from a chapter 13 case. In a chapter 7 case, upon the filing, the court sends all creditors a notice of general information related to the bankruptcy filing.
Typically, the creditor takes no action, whatsoever, in connection with a chapter 7 case, with no distribution of assets or money, Generally, the creditor will appear at any hearing and will not file any documents with the court. However, if the creditor believes that the debtor incurred certain debt with no intention or ability to pay, at the time of the charge, the creditor may pursue a Complaint for the Non Discharge-ability of the debt. Allegations of fraud are atypical.
The creditors involving a New Jersey chapter 7 case, with an asset distribution, is handled differently. In this scenario, the trustee notifies each creditor that they may be entitled to funds from the debtors’ assets. Thereafter, the creditors file a Proof of Claim, with the court reflecting various information related to the debt. The proof of claim includes the classification of the debt, the amount due, etc. After the trustee receives the asset, he makes the appropriate distribution to each creditor. In an asset case, the creditor may still pursue a Complaint for the Non Discharge-ability of the debt.
A Chapter 13 case requires all debtors to make monthly payments to the trustee. Upon the filing, the court sends notices to all creditors. The chapter 13 notices include additional information about the case and include a form proof of claim for completion. Each creditor must file a proof of claim with the court. Typically, the creditor takes no further action, whatsoever.
Generally, in New Jersey chapter 13 case, the amount that will be paid to each creditor is handled and enforced by the trustee and not each creditor. In other words, typically creditors take no action to enforce the amount that they may receive. Such creditors do not appear at any hearings or file any court documents that may protect their interests, or possibly increase the amount that is received. The trustee will ensure that each creditor is paid the amount that is required per the bankruptcy laws. Although very unlikely, the creditor may still purse an action of non discharge-ability if they believe that fraud was involved in the use of the credit card.
Robert Manchel may be contacted at 866 503 5644 to discuss your New Jersey bankruptcy law questions.

Can You Reduce Tax Liens In A New Jersey Bankruptcy?

March 26, 2016 by Robert Manchel

New Jersey Bankruptcy Lawyer Explains How to Reduce Tax Liens In Bankruptcy

I have drafted numerous blogs explaining how tax debt is treated in a New Jersey bankruptcy case. This blog deals with how income tax debt may be partially eliminated, in the event that the taxing entity has filed a lien against the debtor in the county recording office.
In general, there are four criteria that relate to income tax debt, regarding the Internal Revenue Service and the State of New Jersey, Division of Taxation. If the four criteria are met, the tax debt becomes unsecured, which may be dis-chargeable in bankruptcy. No. 1. The date of the filing of the bankruptcy petition must be more than 3 years after the tax return filing due date, for such years return. No. 2. The date of the filing of the bankruptcy petition must be filed more than 2 years after the returns were filed for such year. No. 3. The date of the bankruptcy filing must be more than 240 days after such years taxes are assessed. No. 4. If the taxing authority filed a county lien against the debtor for such tax year, the tax liability for that year will be classified as secured and may not be dischargeable. If fraud is involved, the taxes for such year may not be discharged.
Criteria Number one above relates to when taxes are due. In other words, the returns for tax year 2012 are due on April 15, 2013. Criteria number three above relates to the date on which the taxing entity assesses the taxes for each particular year. The assessment date is typically the date on which the returns were filed. However, the filing date may not be the assessment date in various circumstances. Also, the same years taxes may be assessed, again, if the taxing authority believes that the return is inaccurate. Also, the 240 day period, may be tolled (delayed) if a payment agreement was entered into with the taxing authority.
If the taxing authority files a county lien against a person for a particular tax year, the tax liability for that year may be partially dischargeable. The filing of a county lien classifies the debt as secured. In general, a bankruptcy debtor cannot eliminate secured debt. However, a debtor may be able to reduce the amount of the claim that is classified as secured. Ultimately, the debtor only need to pay the secured portion of the debt and may possibly eliminate the unsecured portion of the debt.
Initially, the lien may only be reduced if the first three criteria listed above are met. I will explain how to reduce or “cram down” the secured portion of the IRS’s claim. For example, we will assume the following facts for income tax year 2011, in connection with an IRS tax liability of $15,000.00. The debtor filed his 2011 tax returns on time and filed his chapter 13 bankruptcy petition on March 17, 2016. The IRS filed a $15,000.00 county tax lien against the debtor, in 2014, for the tax year 2011. We will assume that the taxes are assessed on or about April 15, 2012 and no fraud was involved.
The debtor may attempt to cramdown the lien into a secured and unsecured portion. The secured portion of the lien must be paid in bankruptcy. However, the unsecured may possibly be eliminated (discharged) if he meets the bankruptcy criteria, which is explained, in numerous other blogs. The secured interest may be reduced by the equity in all of the debtor’s property, at the time of the bankruptcy filing. This means all and not some of the debtor’s property.
Lets assume that all of the debtors property values, at the time of the bankruptcy filing, is as follows: sofa-value of $300; refrigerator-value of $100.00; pencil-value of $.01; car-value of $1,000, with an auto financing payoff of $200.00; house-value of $200,000, with a mortgage payoff of $201,000; TV-value of $75.00. Based on the above, the total IRS.’s secured interest may be reduced to $1,275.01, with the balance of $13,724.99. This means that the total amount that must be paid to the IRS, through the bankruptcy plan is $1,275.01. The balance of $13,724.99 is classified as unsecured and may be eliminated based on certain criteria.
Robert Manchel is available to answer your NJ. bankruptcy law questions at 866 503 5644.

When Is A Divorce Related Asset A New Jersey Bankruptcy Case Asset?

March 13, 2016 by Robert Manchel

New Jersey bankruptcy attorney explains how to determine when one spouses asset is considered another spouses bankruptcy asset.

One criteria of a New Jersey chapter 7 bankruptcy filing is the value of the filing person’s assets. A person is entitled to a fresh start in a chapter 7. The fresh start allows a person to keep a certain amount of property to move forward with their life. However, there is a limit as to the amount of assets a person may own. Although, very unusual, if the value of the person’s assets is beyond the acceptable amount, the trustee may sell certain assets or a portion of various assets. The property that a person may keep in a chapter 7, is determined by bankruptcy exemptions, which is explained, in detail, in numerous other blogs.
Also, the value of a person’s assets may increase the amount that must be paid to creditors in a New Jersey chapter 13 bankruptcy case. If the debtor has substantially valued assets, he may be required to pay more money towards his general unsecured debt, such as credit cards and personal loans. The analysis as to whether a debtor must pay more money in a chapter 13, as a result of owning valuable assets, is based on the same application of exemptions that is used in a chapter 7 case.
Typically, the bankruptcy court and the trustee determine which assets the debtor owns by way of the legal instrument reflecting ownership of the specific asset. For example, the individuals on a deed reflects the ownership of that property and the individuals on an automobile title reflects the owners of the car. Furthermore, the person whose name is on an investment account, is the owner of the account and the individual’s name that is reflected on a bank account, owns the money in the account. However, there may be numerous exceptions to this rule. An example of one possible exception, is using all of Mary’s money to buy a house that is solely in the name of John.
Another exception to the typical determination as to who owns an asset pursuant to New Jersey bankruptcy law, is as follows. In a New Jersey divorce, a husband may be entitled to his wife’s asset, even though the asset is solely titled in his wife’s name. Per New Jersey family law, one spouse may have a right to a partial interest in the other spouse’s asset, although no portion of the asset is titled in that particular spouse’s name. However, please note that the ownership rights to various marital property depends on various factors and that one spouse may not have an interest in the other spouses asset, as a result of marriage. Typically, under New Jersey bankruptcy law, the right of such an interest is triggered after the filing of the divorce complaint.
For example, Mrs. Smith is the sole owner of an investment that she acquired during the marriage. Mr. Smith has a one half interest in the investment, under family law, and only he files for chapter 7 bankruptcy protection, two days after she filed a divorce complaint. Under this scenario, the chapter 7 trustee will consider as a bankruptcy asset, all of Mr. Smith’s interest in Mrs. Smith’s investment. Therefore, if he is entitled to 50% of her $50,000.00 investment, pursuant to family law, his chapter 7 trustee will bring his $25,000.00 interest into his bankruptcy estate, for analysis. Mr. Smith may apply his applicable exemptions to the $25,000.00, which may result in the trustee disbursing all or a portion of the funds to creditors. Please note that there are numerous exceptions to the above examples.
Robert Manchel, Esq., may be contacted, at 866 503 5644, to discuss all of your bankruptcy questions for the State of New Jersey.

Difference Of Paying Auto Financing And Auto Lease In A New Jersey Chapter 13

February 28, 2016 by Robert Manchel

Attorney explains the difference between auto finance and auto lease payments in a New Jersey chapter 13 case.

There are three different approaches to paying auto financing in a New Jersey chapter 13 case. The fist approach is to continue to make the regular finance payments directly to the auto finance company during the plan. One may pay the arrears at the time of the filing through the bankruptcy plan, while making the regular payments directly to the company.
The second option is to pay the entire balance due on the financing through the chapter 13. The balance would include any amount that a person is behind with their payments at the time of the filing. The interest rate that must be paid, on the balance depends on various factors, such as when the auto was financed and whether all auto financing debtors are filing for bankruptcy. This option requires the payment of adequate protection, which is explained below.
The other option is to pay to the finance company, the retail value of the auto, plus a fair rate of interest, through the bankruptcy plan. The total amount that must be paid is not the balance that is due, but the amount of the auto’s sale’s value, if the dealer sold the car. The amount of the arrears is not relevant. This option is only permitted if the auto was purchased 910 days prior to the bankruptcy filing. The total amount must be paid through the bankruptcy plan and not directly. This option also requires adequate protection payments.
A trustee may not commence distributing payments to the finance company, through the plan for many months or years. During the period prior to receiving disbursements, the finance company is vulnerable to a loss if the debtor stops making payments, while the debtor is using the auto. In order to prevent such a loss, the finance company is entitled to a monthly distribution, from the trustee, that will at least cover the monthly depreciation of the auto’s value. The monthly payment is called adequate protection payments.
Typically, a New Jersey debtor continues to make regular monthly lease payments, directly to the auto lease company after the bankruptcy filing. If there are lease payment arrears, at the time of the filing, the arrears amount must be paid and cured, through the chapter 13 plan “promptly”. This means that in addition to making monthly lease payments, the trustee payments must be sufficient to cure the arrears within a certain time period that is deemed promptly, by the judge. Each judge may have a different understanding of the number of months or years that is deemed a “prompt cure” under the bankruptcy code. Therefore, the monthly trustee payments must be sufficient to pay the total amount of the pre-filing arrears within the time period that is required by that particular judge.
Contact the NJ.bankruptcy lawyer, Robert Manchel at 866 503 5644 to discuss your questions.

What Happens If I Owe Business And Personal Debt In A New Jersey Bankruptcy Case.

February 16, 2016 by Robert Manchel

Attorney Explains How A Person With Business And Personal Debt Is Handled In A New Jersey Bankruptcy Case.

As I explained in my other blogs, two people who owe a joint debt, in New Jersey, both owe 100% of the debt. This means that the creditor may sue each person for the entire debt, or any percentage of the debt. By way of example, a creditor may receive 80% from one co-debtor and 20% from another, or 40% from one co-debtor and 60% from the other. Obviously, the creditor may not obtain more than the total amount due on the debt.
A corporation “Corp” and limited liability company “LLC” are separate and distinct entities. For the purposes of this blog a corporation “Corp” and limited liability company “LLC” are synonymous and both will be referred to as a “Corp”. A “Corp” has similar characteristics of a person, regarding many creditor and debtor legal issues. The same explanation in paragraph one above applies to a “Corp” that owes a joint debt with a person. In other words, a creditor of a joint debt, with a person and “Corp”, may sue the person for the entire debt and/or the “Corp” for the entire debt. Additionally, in this scenario, the creditor may sue the person and/or “Corp” in any percentage for the outstanding debt.
A person that is operating her business, that is not designated as a “Corp” is treated as personal debt and not as separate debt. For example, the debt due to a business, such as John Doe’s Lawn Service, that did not establish a “Corp with the state, is a debt that is owed solely by the personal owner and not the business.
In New Jersey, a “Corp” may file a chapter 7 to liquidate the business or a chapter 11 to reorganize the business. However, a “Corp” cannot file a chapter 13 to reorganize. A person can file a chapter 7 to liquidate and a chapter 13 to reorganize. Additionally, a person is also permitted to reorganize through a chapter 11. However, typically, a person would only file a chapter 11, unless the debt is substantial, Typically, chapter 11 filing fees and attorney’s fees are considerable.
If a person owns a business that is not related to a corporation, the person may resolve all business and personal debt through a single bankruptcy filing. Under this scenario, a person may file a chapter 13 or 11 to reorganize the business and personal debt, or a chapter 7 to liquidate the business and personal debt. If a person owes joint debt with a “Corp”, the “Corp” and person must file separate bankruptcy cases to resolve each of their respective debts.
You may contact Robert Manchel, at 866 503 5644, for a free bankruptcy consultation.

Can I Get Rid Of A Homeowner Association Lien In A New Jersey Bankruptcy?

February 9, 2016 by Robert Manchel

Bankruptcy lawyer Explains How A Homeowner Association Lien Is Treated In A New Jersey Bankruptcy Case

There are two types of homeowner association (condominium association) liens in New Jersey. One type is derived from a lawsuit that is filed with the superior court of New Jersey, and subsequently filed as a lien on real estate in state court. This type of lien is explained in a separate blog. The second type of lien is created by filing the appropriate documents with the county register of deeds, where the real estate is located.
The state statute NJSA 46:8B-21, permits an association to file and record documents, with the county, reflecting the amount due to the association. The following explanation describes how such a lien has been treated in a New Jersey bankruptcy case, until recently. Until recently, such a lien would be considered a secured interest in the property that cannot be reduced or modified. In other words, the total amount that was due to the association per the lien, could not be reduced. Therefore, a debtor in a chapter 13 was required to pay the entire amount due on the lien to the association, through the monthly bankruptcy plan.
However, recently, NJ.bankruptcy court judge Christine M. Gravelle published her opinion that permits a debtor to modify the secured portion of such a lien to the amount of the lien representing the customary condominium assessment, against the unit owner, for the six month period prior to the recording of the lien. This means that if a lien was filed in the amount of $4,000.00 and the monthly assessment is $200.00 monthly, the secured portion of the lien may be reduced to $1,200.00
Please note that there are a number of exceptions to permitting a person to modify the lien as explained above, including, but not limited to, a debtor that has equity in the property. Also, the remaining balance of the lien in excess of the $1,200.00, in the above example is deemed unsecured debt and must be treated and possibly paid as an unsecured debt.
The judge’s opinion has been appealed and is presently in the appeal process. Also, as my readers know, if a specific issue has not been decided by appeal from the third circuit court, each bankruptcy court judge is not bound by this decision. This means that another New Jersey bankruptcy judge has the power to rule that such a lien may not be modified, which is how this issue has previously been handled. Or, in the alternative, a judge may decide to modify the lien, if he concurs with Judge Gravelles’ analysis.
You may contact Robert Manchel, at 866 503 5644, to discuss your bankruptcy law homeowner association questions.

Manchel
New Jersey
Bankruptcy Law