New Jersey Bankruptcy Blog

Can I Keep An Additional Car In A New Jersey Chapter 7 case?

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New Jersey Lawyer Explains When A Person May Keep An Additional Car In A Chapter 7.

Typically, a chapter 7 trustee will only sell an asset, such as a car, that is unexempt. Another part of this website explains the bankruptcy code exemptions in detail. The bankruptcy code allows a debtor a fresh start, by permitting an individual to keep certain property. The property that a person can keep is based on the bankruptcy exemptions. If the equity in property is unsubstantial, the New Jersey debtor can keep the property, such as a car. Equity is the property value minus a specific type of lien, such as auto financing. The bankruptcy auto exemption is $3,675.00, for one automobile.  A person may be permitted to apply an additional exemption to their auto equity in the amount of $1,225.00, plus up to $11,500.00 that is not used for their residence.
How does this work?   If the $11,500.00 exemption is not needed for one’s residence, the debtor can apply this exemption to any property, in any manner, including a car. For example, $2,000.00, $4,000.00 and $5,500.00 of the unused residential exemption may be applied separately to bank account funds, a motorcycle and a car, respectively. By way of another example, a person who owns a car with $10,000.00 of equity, may keep the auto, if they can use their $3,675.00 auto exemption, plus $6,325.00 of their unused residential exemption. If the exemption in property, such as a car, is more than the equity, the person may keep the car because it basically has no sale value. Also, if the financing balance is more than the vehicle’s value, the debtor may keep the car.
Keeping a car does not mean that the debtor meets the chapter 7 discharge criteria. The debtor must meet all of the chapter 7 bankruptcy criteria to obtain a discharge and eliminate debt. The chapter 7 criteria is explained throughout this website. One criterion for a chapter 7 discharge is that the debtors’ household income is less than their necessary and reasonable household expenses. If a person owns an additional car that is not needed and is considered a luxury item, the finance payment for such a vehicle may not be used as a necessary expense. Also, based on this scenario, even though the debtor is unable to pay the finance payment, the trustee and/or the bankruptcy court will not take the car, if the auto is fully exempt, or has no equity. Furthermore, based on the chapter 7 criteria, the debtor should not be able to pay for the luxury auto financing.
In the event that a debtor is not current with his car payments, the New Jersey finance/lease company will be permitted to take the vehicle, even though the trustee and/or the court may not take the vehicle. Under this scenario, the finance company may ask for court permission to repossess the auto, or repossess the auto  after the case is complete.
Robert Manchel may be contacted at 866 503 5644.

Can I keep An Additional Vehicle In A New Jersey Chapter 13?

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New Jersey Lawyer Explains When a Debtor May Keep An Additional Financed Vehicle In A Chapter 13

The debtor is required to pay all of their household disposable income to the trustee, each month. The funds that are required to be paid to the trustee is the net household income after payment of all necessary and reasonable expenses that are needed to live. Some of the expenses that are needed to live are: food, clothing, mortgage, auto payments, auto insurance, etc. Also, the expenses must be reasonable as determined by the judge and trustee. For example, a monthly payment expense of $1,500 for clothing of a household of 2 is unreasonable and excessive. Any disposable income must be paid to the unsecured (ie: credit card; personal loan) creditors.
Additionally, keeping and paying for certain property must be necessary for a New Jersey chapter 13 reorganization. Paying money to keep a residence is necessary for a reorganization. However, using income to pay for the financing of a fifth motorcycle is not necessary for a reorganization. Any disposable income, after such payments and expenses, must be paid to the unsecured (ie: credit card; personal loan) creditors, pro rata.
The determination as to whether a debtor may keep and pay the financing for a second vehicle, in New Jersey, incorporates the above explained two laws. The first question is whether the second vehicle is necessary for a reorganization. In other words, is the additional vehicle needed for the household? A husband and wife that work, both need their vehicles for transportation to work. Typically, the trustee will allow a reasonable auto payment for both the husband and wife, even if one spouse does not work.
There are many circumstances where there may not be a clear answer, such as the following, scenarios. Is a third vehicle that the debtors’ child uses for college, necessary and reasonable for the parents’ reorganization? What if the husband’s monthly auto payment is $700.00?  Suppose the husband has a third auto payment on a Harley Davidson, that he loves and must keep. Also, it is generally understood that after a bankruptcy filing, the debtor may not be able to trade in his car for an auto with a lower monthly payment.
The trustee’s dilemma is whether he should allow a debtor to pay unnecessary funds for a vehicle, which results in a reduction in the disposable income that would have been available to the creditors. However, if all of the creditors will be paid in full, the debtor can pay for and keep, as many vehicles as he wishes. If the creditors will be negatively effected by the payment of a third vehicle, the answer depends on the trustee and/or judge’s judgment and decision. Please note that a New Jersey trustee may settle these issues and allow the debtor to keep and pay for the additional vehicle, if he agrees to reduce some other expense and pay more funds to the unsecured creditors.
Robert Manchel may be contacted at 866 503 5644 to discuss your bankruptcy  concerns.

Can I Keep A Second House In A New Jersey Chapter 7 Case?

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New Jersey Lawyer Explains How A Second Property Is Handled In A Chapter 7 Case

Keeping a second house in a New Jersey chapter 7 case is much different than keeping a second house in a chapter 13. In a chapter 7, no monthly payments are required. Therefore, the court and trustee are not concerned about the debtor paying all of their disposable income into a chapter 13 plan. The bankruptcy laws simply focus on the chapter 7 criteria.
As stated simply and concisely, there are three criteria of a chapter 7. 1) The value of the debtor(s) assets, after reducing any secured debt, may not be substantial. 2) The debtor’s gross household income for the six months prior to the bankruptcy filing must be less than the average income of a New Jersey Household of the same size. Or, in the alternative, the debtor(s) have substantial, but reasonable and necessary monthly expenses that exceed the average monthly net income for the six months prior to the filing. 3) The debtor(s) projected future monthly net household income is less than the debtor’s household’s projected future monthly necessary and reasonable expenses. In other words, the debtors cannot have any disposable income, after payment of their necessary and reasonable expenses that are needed to live.
The debtor must include all reasonable and necessary expenses that are required to live, including, but not limited to the following: mortgage on the house the debtor resides: food; clothing; utilities; auto finance payment; auto insurance payment. The debtor may not use an unnecessary monthly payment on a second luxury  beach house as a legitimate, necessary and reasonable expense. In other words, the bankruptcy criterion requires the debtor to be in the red without the monthly beach house mortgage payment.
There is an exception to this rule, if the debtor’s beach house has a net monthly profit, In other words, if the debtor is earning a monthly profit from rent, after the expenses from the house, the debtor must include the rental income, minus the house expenses. Under this scenario, the rental income is deemed a profitable business.
If the beach house does not have a substantial value and the debtor meets all of the other chapter 7 criteria, the bankruptcy laws do not allow the court and/or the trustee to take the house. In other words, under this scenario, the debtor may keep the house through the New Jersey bankruptcy. However, based on this scenario, the debtor has insufficient income to make the necessary house payments to keep the house. Therefore, unless the debtor can somehow determine how to keep the house, the house will be lost through foreclosure, but not through the bankruptcy.
Robert Manchel, the NJ. bankruptcy practitioner may be contacted at 866 503 5644.

Can A Person Keep A Second House In A New Jersey Chapter 13 Case?

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NJ. Bankruptcy Lawyer Explains When A Person Can keep A Second House In A New Jersey Chapter 13

In a New Jersey chapter 13, the debtor must pay all of his monthly household disposable income, each month, to the trustee for 36 to 60 months. The disposable income represents the amount left over after all necessary and reasonable expenses are subtracted from the monthly household net income. Necessary expenses are expenses that are needed to live, which include, but are not limited to the following: mortgage; residential rent; utilities; auto finance payments; food; clothing; auto insurance; auto payment, etc. Also, the amount of the expense must be reasonable. For example, $3,000.00 monthly for food, for a household of two, is unacceptable.
The monthly disposable income, as explained above, must be paid to the trustee each month. At the request of the debtor, the monthly disposable income that represents the trustee payment, may be paid to creditors that are needed for a reorganization. This means that the disposable income used to pay the trustee, may include funds to be paid for mortgage arrears on the debtor’s house, or auto finance arrears on an auto that is needed for work. Also, certain creditors must be paid with the trustee payment funds, such as certain taxes and child support arrears. However, any additional remaining disposable income, each month, that is paid to the trustee, must be paid to the general unsecured creditors, such as credit card companies.
In general, the bankruptcy judge will not permit a debtor to use his disposable income to make a mortgage payment on a second beach house, that is used for vacations. Additionally, typically, the trustee will not permit trustee payment funds to cure the mortgage on a second beach house, as the second house is an unnecessary luxury item. However, if the second beach house brings in a monthly positive income cash flow, which brings in more money to the debtor, the judge may permit the debtor to use his income to pay the mortgage and keep the second house. Under this scenario, the additional monthly income benefits the debtor, his creditors and the bankruptcy estate.
Also, if the debtor is paying any and all his creditors, in full, through his chapter 13 bankruptcy plan, the debtor will be permitted to keep the second beach house and any other house or property, as the additional costs does not have an adverse effect on any creditor. Under this scenario, there would be no reason not to allow the debtor to keep the second house, as every creditor will be paid 100% of the total amount due.
 Contact Robert Manchel at 866 503 5644 to discuss your NJ. bankruptcy law questions.

New Jersey Bankruptcy and Credit Reports

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New Jersey Lawyer Explains About Bankruptcy And Credit Reports

A debtor’s credit report will reflect the bankruptcy filing. More specifically, each creditor entry should reflect that the account is in bankruptcy. Also, upon the filing, the public record portion of the credit report should reflect the bankruptcy case number, chapter filed and the date of the filing. If this information is not properly reflected on the credit report, the information may be corrected by sending each credit bureau an appropriate request, together with supporting documents.
At the completion of the bankruptcy process, the debtor will receive a court order indicating a discharge of certain debt. The debtor’s credit report should properly reflect this discharge, next to each creditor that is related to the discharged debt. Also, when the debt is discharged, the public record portion of the credit report should also reflect the status of the discharge. The debtor may pursue the same correction process as explained above, in the event that this portion of the credit report is inaccurate.
Depending on the credit bureau, a chapter 7 bankruptcy case may be on your credit report for seven years, from the filing date. A chapter 13 may be on your credit report for ten years from the filing date. It is a myth that a person is unable to obtain credit if a bankruptcy filing is on a credit report. A person’s credit score may be repaired relatively quickly, by applying the appropriate methods, which will allow for a lower interest rate, even though the bankruptcy notation is on a person’s credit report.
Robert Manchel, the NJ. bankruptcy attorney may be contacted at  (866) 503-5655.

The New Jersey Bankruptcy Process When Losing A House

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New Jersey Attorney Details The Bankruptcy Process When Losing A House

This blog pertains to individuals who are either unable to, or do not wish to, save their house from foreclosure.  A person may be unable to save their house, due to a loan modification denial or a substantial reduction in income. Sometimes people understand that their house cannot be saved through any option, including bankruptcy. A person may understand that saving a house is too costly, not worth the monthly payment, or would prefer renting at this time.
Although a chapter 13 may save someone’s house, a person may change their mind and decide to surrender their house, while in a New Jersey chapter 13. A person may modify their chapter 13 plan and surrender their house at any time. If a modified plan surrendering the house is filed with the court, the mortgage company will likely ask the court for permission to proceed with the foreclosure action. The court will likely grant the mortgage company permission to proceed with the foreclosure action. After such permission is granted, both the chapter 13 case and the mortgage foreclosure action will continue simultaneously. At this time, the homeowner, may continue to reside in the property, until the house is sold, at sheriff;s sale. Typically, the house is taken by the mortgage company and not the bankruptcy court or trustee.
A chapter 7 will not allow a person to save a house that is in foreclosure due to mortgage payment arrears. However, the filing of a chapter 7 will initially stop the foreclosure action. In a chapter 7, if the house does not have substantial equity, the trustee and the court will not sell the property. In other words, typically the bankruptcy court will not take the property and the house will be lost by way of the foreclosure action that is not connected to the bankruptcy filing.
If a chapter 7 debtor is in arrears with their mortgage payments, typically, the mortgage company will file a motion with the court asking for permission to proceed or commence a mortgage foreclosure action. Similar to the chapter 13 situation, the mortgage company will likely be granted permission to proceed with the foreclosure action, while the chapter 7 case continues. If the mortgage company does not ask the court for permission to continue the foreclosure action, the mortgage company will be permitted to proceed with the foreclosure action after the chapter 7 case is discharged.  A New Jersey chapter 7 case process is about four months to discharge. Ultimately, the house is lost by way of the mortgage foreclosure action and not by way of the bankruptcy case, court, or trustee.
Robert Manchel, the bankruptcy lawyer in NJ. can be contacted at (866) 503-5655.

 

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