Chapter 13 Archives

Social Distancing, Bankruptcy and Foreclosures in New Jersey

Mortgage companies were proceeding against home owners in arrears before we all knew what Social Distancing was, and they will continue after the Coronavirus goes away. However, at least in New Jersey there is a 90 day moratorium on foreclosures. Eventually, the pandemic will pass and the mortgage companies will again want to be brought current or the foreclosures will resume. In that event, there may be several ways of addressing the mortgage arrears. In light of the devastating impact of the Coronavirus, some lenders may be more willing to modify a mortgage or perhaps defer a few of the missed payments rather than modify the whole thing. Bankruptcy will also remain an option. Through a chapter 13 bankruptcy a homeowner can resume their regular mortgage paymewnts and generally compel the mortgage company to accept payments over a period of time, usually five years. So while it may be a struggle to get through the next few months, the good news is homeowners should be able to retain their homes.

HOW MUCH WILL MY CHAPTER 13 BANKRUPTCY PAYMENT BE?

"How much will my Chapter 13 bankruptcy payment be?" is a question I am often asked. While it is a simple question, the answer is not simple since the amount is determined by a number of factors. First, is the Chapter 13 purpose to pay mortgage arrears? If so, the total amount of the arrears would need to be paid over three to five years. Do you owe any priority debt such as taxes. That also must be added to the amount that is to be paid. What if you could afford to pay even more. The court looks at you monthly income and expenses to determine not only if you can afford to pay the mortgage arrears, etc., but also to see if you can pay something to other creditors such as credit cards and medical bills. Another major consideration is the nonexempt equity in your assets. Normally having equity in your home or other assets is a good thing, but in a bankrutpcy it could result in you having to pay something to your creditors. You can protect some equity in assets, but if your equity is more than you can protect, that can also increase your monthly payment. There are a number of factors that your attorney must consider in putting together a confirmable plan.

Am I eligible to file a Chapter 13?

"Am I eligible to file a Chapter 13?" is a question I am often asked. Bankruptcy code section 109, entitled "Who may be a debtor" provides many of the requirements. To file a Chapter 13 you cannot have more than $1,257,850.00 in secured debt nor more then $419,275.00 in unsecured debt. Since this is Federal law these rules apply regardless of whether you file bankruptcy in New Jersey, Pennsylvania or anywhere else. In addition you must have completed a credit counseling course within 180 prior to the filing. You must be an individual. Also, you are not eligible to file a Chapter 13 you had a Chapter 13 within the prior 180 days and your prior case was dismissed for willful failure to obey court order or to appear in proper prosecution of a case. In addition, if you dismiss a chapter 13 bankruptcy after the creditor has filed a motion for relief from the automatic stay, you cannot file another Chapter 13 for 180 days. However, if your prior bankruptcy was dismissed by the court, and not at your request, you can refile. There are other rules that come into play, such as good faith. It is best to consult with an experienced bankruptcy attorney to confirm eligibility

Bankruptcy Benefits For High Income Earners

When you have a high amount of credit card debt, bankruptcy is often a good solution even if you are a high income earner. In a bankruptcy the court considers equity in assets and income compared to expenses in determining whether you can eliminate the debt or whether you have to pay back some or all of the debt. I sometimes have people come into my Cherry Hill, New Jersey or Philadelphia, Pennsylvania office that believe bankruptcy is not an option because they "earn too much money". While the high income may prevent the individual from filing a chapter 7, they can file a chapter 13 bankruptcy. Depending on disposable income after taking into account reasonable and necessary living expenses, the disposable income would be used for a period up to five years to pay the creditors. Depending on total debt and income, you may be able to pay a reduced amount, like 40% of the debt. However, even if you have to pay the debt in full, you can pay it over 5 years without interest. This results in a significant savings. Short term, the payment is going to be less than you were paying monthly. Long term the savings is even greater because if you are paying minimum payments on a credit card, it will take approximately 22 years to pay off the debt. In Chapter 13, it is only 5 years. Even a high income earner should consult with an experienced bankruptcy attorney if they are struggling with high credit card debt.

CHAPTER 13 BANKRUPTCY CONFIRMATION HEARING

When a chapter 13 bankruptcy is filed the court automatically schedules two hearings. The first is a meeting of creditors. The debtors are required to attend this meeting with the chapter 13 trustee and their attorney. Creditors are invited to come but they rarely do. The other hearing is the confirmation hearing. The debtors' do not have to attend this hearing but their attorney does. In New Jersey the hearing will take place at the Federal courthouse in Camden NJ, Trenton NJ or Newark NJ. The purpose of the hearing is to have the court approve the chapter 13 plan regarding repayment to creditors. Often the confirmation hearing will need to be adjourned to address the claims filed or other issues raised by the trustee. Except in unusual or complicated matters if the Chapter 13 trustee is satisfied with the plan and objections have been addressed the trustee will recommend confirmation and the judge will enter an order approving the chapter 13 plan

Eliminating Divorce Obligations in Bankruptcy

A Chapter 13 Bankruptcy can eliminate obligations from a Judgment of Divorce that cannot be eliminated in a Chapter 7 Bankruptcy. Neither will eliminate domestic support obligations such as child support or spousal support. However, if there are other obligations relating to a property settlement agreement or an allocation of liabilities, those obligations can be reduced or eliminated in a chapter 13 but not in a chapter 7. This is because the exception to discharge section that applies to chapter 7 basically makes all divorce related liabilities nondischargeable but the exception section for chapter 13 only applies to domestic support obligations. Because of these differences, if you are filing a bankruptcy after a divorce, it is imortant to discuss with your attorney all obligations under the Judgment for Divorce because it may make more sense to file a chapter 13 when at first blush the case may seem appropriate for a chapter 7.

what is a chapter 13 confirmation hearing and does the debtor have to attend.

When a Chapter 13 bankruptcy is filed in New Jersey a notice is sent by the court to schedule two hearings. The first is the meeting with the trustee that the debtors and their attorneys must attend. Creditors are also invited but rarely attend. The other hearing scheduled is the Confirmation Hearing. Typically only the attorney attends although occasionally the debtors will need to attend. In New Jersey the hearing will take place in Camden NJ, in Trenton NJ, or in Newark NJ. The hearing is to determine whether the court will approve the Chapter 13 plan that was filed. The trustee will consider the amount of the claims filed by the creditors, the income of the debtors, the equity in the assets of the debtors and the feasibility of the plan to determine whether or not to recommend confirmation to the judge. It is important that payments are made each month leading up to the confirmation so that the trustee can see you actually have the ability to make payments. Once the case is confirmed the creditors and the debtors are bound by the plan.

Priority Claims in Chapter 13 Bankruptcy

Chapter 13 is a type of bankruptcy often used by debtors to save their home by paying mortgage arrears over time. However, when filing Chapter 13, a debtor is obligated to pay priority claims in full through the bankruptcy as well. Priority claims include domestic support obligations such as child support, certain types of taxes, claims for personal injuries from a motor vehicle accident when driver was intoxicated, and other types of claims are priority claims. In certain circumstances, this obligation could make retaining the home more difficult since instead of paying just the mortgage arrears, these priority claims must be paid as well. However, it could also make keeping the home easier since it may be more affordable by stretching these payments out over five years.

Chapter 13 Bankruptcy Codebtor Stay

Section 1301 of the Bankruptcy Code is entitled "Stay of Action Against Codebtor". If an individual files a bankruptcy while living in, say, Pennsauken, NJ and his ex-wife, living in Philadelphia, PA had cosigned for a credit card while they were married, can the creditor pursue the ex-wife since she is not in bankruptcy? Not when a Chapter 13 is filed. Section §1301 of the bankruptcy code provides a "Codebtor" Stay in Chapter 13 Bankruptcy. A "Codebtor" Stay protects a vehicle from being repossessed and protects a debtor's residence from a foreclosure sale when only one of the individuals responsible for the debt files Chapter 13. A "Codebtor" Stay does not apply to Chapter 7 bankruptcies or business debts. There are other exceptions. For example, although a liability on a personal tax return would seem to be a consumer debt a number of cases have held that the co-debtor stay does not prevent the IRS from pursuing the spouse that did not file a bankruptcy on a joint return.

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