Robert Manchel

General Information About Bankruptcy

February 12, 2012 by Robert Manchel

Bankruptcy is often viewed as an individual’s last resort when financial difficulties arise. And while we do not suggest that filing for bankruptcy would, or should, be anyone’s first choice, it is often, ultimately, the best, most comprehensive, solution to an individual’s financial problems. Certainly, if you find yourself facing overwhelming consumer or business debt, your first step should be to seek the counsel of a qualified bankruptcy attorney.
Unlike the numerous “debt reduction” or “debt consolidation” firms that flood our airways with advertisements, a licensed professional bankruptcy attorney is uniquely qualified to review your case and determine if bankruptcy is the proper course of action for you. Licensed attorneys have taken an oath to represent their clients to the best of their ability. Additionally, conversations with your attorney are confidential. Non-attorney debt firms do not have these same obligations. It is, therefore, better to speak with an attorney first, rather than last.
The process of filing for bankruptcy protection may seem relatively simple for the debtor, but it requires knowledge of very complex bankruptcy laws and regulations and should not be attempted without qualified legal representation. Failure to timely and correctly file required court documents can result in a case’s dismissal or the loss of property.
What follows here is a general overview of the bankruptcy process and requirements for an individual or married couple. There is more detailed information as well as clarification of a number of common misconceptions about bankruptcy which are addressed in more detail in following sections.
Bankruptcy Overview
When an individual, referred to as a “debtor”, files for bankruptcy, he is filing for “relief” or “protection” under the United States Bankruptcy Code. The creation of a Bankruptcy Law is provided for in the U.S. Constitution. An individual may file either under Chapter 7 of the Bankruptcy Code, referred to as “liquidation”, or under Chapter 13, which is often referred to as “reorganization.”
Many people believe that if they file for bankruptcy, they must give up all of their property. To the contrary, however, the Bankruptcy Code provides for what are called “Exemptions” under Section 522 of the Bankruptcy Code which allow for certain values a debtor may hold in various types of property such as real estate, household goods, automobiles, retirement funds, and other property.
Three types of debts are addressed in a debtor’s bankruptcy filing: 1) Secured Debts which include mortgages, car liens, tax and judgment liens; 2) Priority Debts which include unliened taxes, child and marital support obligations; 3) Unsecured Debts which include credit card debt, old utility bills, medical bills, pay-day loans and personal loans.
When a bankruptcy case is filed, the “automatic stay” goes into effect, pursuant to Section 362 of the Bankruptcy Code. This “stay” means that none of the debtor’s creditors may take any further steps to collect on a debt. They cannot call or write the debtor, they cannot file or continue a lawsuit, or execute on a judgment without first receiving the Bankruptcy Court’s permission to do so.
At the completion of a case under Chapter 7, the debtor’s unsecured debts are “discharged”, meaning the debtor no longer has a legal obligation to pay those debts. If the debtor wants to retain property that is subject to a secured debt, such as his home or car, he must continue to make those payments. (More on secured debts below).
At the completion of a Chapter 13 case, after the “Plan of Reorganization” has completed, the debtor also receives a discharge of any remaining unsecured debt. As with a Chapter 7 filing, the debtor must continue to pay secured debt to retain the property.
Robert Manchel, a New Jersey bankruptcy practitioner, will explain how bankruptcy can help you with your debt. Give our office a call at 866-503-5655.

Can I Keep My New Jersey Tax Refund If I Am In Bankruptcy?

February 7, 2012 by Robert Manchel

While in a Chapter 13, you are making monthly payments to a bankruptcy trustee. You pay your creditors whatever you can afford over three to five years (three years for lower income earners, five years for higher wage earners). You are required to commit your disposable income to the repayment plan during the repayment period. You are also required to pay as much to unsecured creditors as they would receive in a Chapter 7 bankruptcy.
Unfortunately, an expected income tax refund is property of the bankruptcy estate. Many filers are able to protect all or a portion of their income tax refunds by applying their bankruptcy exemptions to the expected refund. Generally, after using all of your available exemptions, the remaining unprotected amount is often little or nothing.
If you cannot protect your tax refund with exemptions, you are required to pay the non-exempt amount in your monthly plan payments. This is because your unsecured creditors would get this money if you filed a Chapter 7 bankruptcy.
Working closely with my office will maximize the amount of money you get to keep.
If you are expecting a large income tax refund, but need to file a Chapter 13 bankruptcy case, contact the NJ bankruptcy law expert, Robert Manchel, at (866) 503-5655 to discuss your options for bankruptcy protection. We can explain how the federal laws can protect your assets and discharge your debts.

Protecting Your Auto Through Bankruptcy Is An Option Explained By a NJ Lawyer

January 25, 2012 by Robert Manchel

Protecting a car through bankruptcy is an option that many people want to have.
A car loan, like a mortgage, is also a secured debt. However, car loans are treated much differently than mortgages by the Bankruptcy Code. There are a number of reasons for this, not the least of which is that a car depreciates in value from the moment it is driven off a lot, whereas homes tend to appreciate in value. Additionally, real estate, on which a mortgage is placed, is “unique” and has always been treated differently than personal property under the law. This does not mean that a person who files bankruptcy will lose or have to surrender his or her car. In fact, in the vast majority of cases, debtors are able to retain a car during bankruptcy.
In a Chapter 7 filing, debtors must file a “Notice of Intention” with regard to their secured debts. This form lets the secured creditor know what the debtor intends to do with the property on which there is a secured debt. For example, a debtor could decide to surrender the property and no longer pay the creditor anything. If, instead, the debtor decides to keep a car on which there is a lien, he must “reaffirm” the debt. In the simplest terms, a reaffirmation agreement operates as a new post-petition contract with the lender. Because the reaffirmation agreement is post-petition, rather than pre-petition, the debt represented by the reaffirmation agreement is not discharged. If the debtor later defaults on his payments, the creditor can not only repossess the vehicle, but can also proceed to sue the debtor personally.
Reaffirmation agreements can be a real benefit to the Chapter 7 debtor. If enough time passed from when the car was purchased to when the bankruptcy petition is filed, the debtor can reaffirm for the fair market value of the vehicle, rather than the amount owed, if the amount owed is higher. For example, if the car has a value of $5,000.00, but the debtor still owes $10,000.00 pursuant to his pre-petition financing, he can reaffirm for $5,000.00 only, lowering his monthly payments substantially. As this is a remedy unavailable outside of bankruptcy, it is very important to let your lawyer know when you purchased any vehicle on which you have a car payment, so that he may negotiate the best terms for you.
Reaffirmation agreements also help Chapter 7 debtors reestablish credit after the completion of their bankruptcy. Unlike other discharged debt, a reaffirmed debt on a car will be listed on one’s credit report as “paid as agreed”, so each payment can help a discharged debtor prove his or her worthiness to be extended credit in the future.
Chapter 13 debtors are also able to protect their cars through the Plan they file with the court. If a debtor is in arrears – behind on their payments – they can pay the arrears through the plan, and make their current payments outside of the plan, directly to the lender. For example, if a debtor’s monthly payment is $500.00 per month and he is 3 months late, the $1500.00 he owes to the lender can be “cured” through the plan – basically, spread out over 36 to 60 months, while he proceeds to pay the regular $500.00 payment directly to the lender. The Chapter 13 debtor can also reduce the total principal that is due the lender, in the same way that a Chapter 7 debtor can, by “cramming down” the amount which needs to be paid to the fair market value of the vehicle if it is less than the amount owed, and enough time has passed since the vehicle was purchased.
With all of the above, it is important to note that the Bankruptcy Code allows only a certain amount of equity value in a vehicle to be “exempted” by debtors. The necessity of owning a vehicle in order to commute to work and live one’s daily life is understood and addressed by the Code and the court. The desire to own a luxury vehicle, however, is not. A debtor with a Rolls Royce will have a hard time justifying retaining that vehicle when it could either be sold by the trustee to obtain significant funds for the unsecured creditors or when the payments previously made on that vehicle could instead be made to the unsecured creditors through a Chapter 13 plan.
Because the timing of the filing of the petition is crucial to a determination of whether a loan can be “crammed down” and because, in Chapter 7, a Notice of Intention must be timely filed, it is important that debtors communicate clearly with their attorney about their wishes regarding their cars. Additionally, it is important that any Reaffirmation agreement be reviewed, and negotiated if appropriate, by a competent attorney to make sure that the debtor is not only able to retain his vehicle, but can do so under the best possible terms allowed by the Bankruptcy Code.
Robert Manchel, NJ bankruptcy practitioner, will explain your bankruptcy options regarding your auto. Give him a call at (866) 503-5655 to discuss your personal situation.

Eliminating Judicial Liens Against Real Estate – Explained By a NJ Bankruptcy Lawyer

January 17, 2012 by Robert Manchel

One of the important ways that a bankruptcy filing protects a debtor is by giving him the ability to “avoid” judicial liens against his property, a process which cannot be accessed outside of bankruptcy. This process works as follows:
As noted above, a debt owed to an unsecured creditor is discharged through bankruptcy. When the debt is unsecured, that unsecured creditor has no claim upon the real estate or other property of the debtor. If, however, the unsecured creditor files a lawsuit and obtains a judgment and lien against that debtor prior to a bankruptcy filing, that judgment is a lien upon the debtor’s property. All liens against a debtor’s property survive the bankruptcy – unless they are successfully “avoided”.
For example, consider a debtor with a $100,000.00 house and a $90,000.00 mortgage. He has $10,000.00 in equity in his home. If he also owes a credit card lender $10,000.00 and that lender gets a judgment lien against him for that amount, that judgment becomes a lien on the real estate, secondary to the mortgage. Now the debtor has no remaining equity. If the debtor then sold his home for its $100,000.00 value, he would have to pay the mortgage as well as the judgment lien from the proceeds and so would receive nothing at the sale.
If that same debtor filed for bankruptcy prior to the sale of his home, he could file a Motion with the Bankruptcy Court to “avoid” the credit card company’s lien. He is able to do this in order to protect the exemptions which Section 522 of the Bankruptcy Code gives debtors in their property. If a judicial lien – such as one obtained through a lawsuit – impairs one of the exemptions provided by the Bankruptcy Code, a debtor has the right to have that lien avoided – or lifted.
Since the debtor is provided an exemption in his real estate, the lien “impairs” that exemption and it can be avoided. Once the lien is avoided, the debt is now simply an unsecured debt; the lien created by the judgment no longer exists. After having the lien avoided, if the debtor later sold his property for its $100,000.00 value, he would receive the $10,000.00 in equity.
In order to make sure that any liens that can be avoided are addressed, it is important that every debtor give their attorney all possible information concerning any lawsuits which have been filed against him. Often, however, due to stress and other factors, a debtor may not be aware of a lien. A bankruptcy attorney may perform a search of court records as well as the debtor’s credit reports to uncover any judicial liens that would be subject to lien avoidance. The attorney may then file a motion with the court, notify the creditor to allow them to answer the motion, and obtain an order from the Bankruptcy Court avoiding the lien. This order is then presented in the state court where the lien is recorded so that the lien is stricken.
Since liens survive a bankruptcy filing, if the avoidance motion is not timely filed, a debtor may find he is forced to pay a previously unsecured creditor even after his discharge. In certain instances, if the debtor is discharged without the Avoidance Motion being filed, he can request that his case be re-opened to allow for the filing of the motion.
Please contact Robert Manchel, a bankruptcy expert in New Jersey, at 1 (866) 503-5655 to discuss whether you can eliminate judicial liens and seek bankruptcy protection.

NJ Bankruptcy Attorney Details What Happens With A Car In Chapter 7

January 11, 2012 by Robert Manchel

One of the most common questions posed to me by potential Chapter 7 bankruptcy clients is, “Can I keep my vehicle after filing Chapter 7 bankruptcy?” The answer to this question, like most legal questions is, “it depends”. As a New Jersey bankruptcy attorney, it is my job to counsel clients on whether or not they can retain their car should they decide to file for Chapter 7 bankruptcy. When consulting with a client, I ask the potential filer the following questions:
Is the fair market value of the vehicle greater than the loan balance?
If you have equity in your vehicle it may be at risk for potential sale by the Chapter 7 trustee. Chapter 7 bankruptcy is designed to “wipe out” your unsecured debts; but there is a catch. If you own property in excess of the Bankruptcy Code’s exemptions, the bankruptcy trustee may sell some of it, with the proceeds going to your creditors. Bankruptcy law allows a filer to keep a certain amount of property away from those creditors. These laws are known as exemptions. In the state of New Jersey, a filer is allowed to have up to $3,450.00 of equity in a vehicle without losing it. If the vehicle has equity in excess of the exemption amount, the trustee may allow you to buy out the equity, and if that is not possible, the vehicle will be sold to pay creditors.
However, even if you have no lien on the vehicle, or are unable to exempt the full amount of the vehicle, the trustee may still abandon it (decide not to sell) if it is not worth much. This happens if the costs associated with selling the property and the trustee’s fee may mean that after the sale, there is little left for creditors. For example, if your vehicle has equity in the amount of $4,000, the trustee will probably let you keep it even though the value is in excess of the exemption amount, because there likely won’t be anything left over after the cost of selling it.
Is the fair market value of the vehicle less than the loan balance?
Many potential filers are “upside down” on their car notes, meaning that the fair market value of the vehicle is far less than the balance of the loan. In situations like these, you do not have to worry about the trustee attempting to sell the vehicle. However, if you wish to retain the vehicle, you must continue making regular payments to your finance company. This leads into the final and sometimes most difficult question to answer.Can you afford to continue making your car payments?
If you are unable to afford your monthly payment or if you just do not want the vehicle anymore, it can be surrendered. Surrendering a vehicle during bankruptcy means you give it back to the creditor and the remaining debt is discharged. You can simply walk away from the vehicle owing nothing. If you can afford to make the payment and want to keep the vehicle, then you can reaffirm the debt. By signing a reaffirmation agreement, you are agreeing to still be responsible for the entire loan amount after the Chapter 7 bankruptcy is discharged. This means that should you default on payments after the case is discharged, the creditor can repossess the car and you will be held responsible for the remaining balance
If you are worried about keeping your vehicle after a Chapter 7 bankruptcy, speak to attorney Robert Manchel to discuss your situation. As an experienced New Jersey bankruptcy attorney, I can explain the options of surrender, reaffirmation, and redemption in greater detail. I will be able to help you plan on how to keep your vehicle well before your Chapter 7 case is filed.

How A Debtor Can Change Their Intentions For Debt Owed In Bankruptcy

December 21, 2011 by Robert Manchel

For A Chapter 7
In a chapter 7 bankruptcy case, the entire process lasts about 5 months from the filing until discharge. Typically, it is unusual for a trustee to sell a debtor’s property. Therefore, generally, the debtor may keep their real estate and personal property through the bankruptcy procedure. The only issue is whether or not the secured creditor will take the property, such as a mortgage company or auto finance company.
A chapter 7 discharge, eliminates the creditor’s right to pursue the debtor for money damages. However, if a debtor is in default with their mortgage, the mortgage company may file a foreclosure action to take the house. If the debtor is in arrears with their auto payment, the finance company may repossess the auto.
A chapter 7 debtor may change their initial intention of surrendering their real estate to keeping their real estate and vise verse. However, the debtor must resolve the default issues directly with the mortgage company. In other words, if the debtor is in default, he may resolve the mortgage issues by curing the arrears or by working out a loan modification. The matters may be resolved after the debtor receives his bankruptcy discharge. However, when the house is sold at sheriff’s sale, the debtor’s right to resolve the mortgage issues are terminated, as the mortgage company takes ownership of the property.
Typically, a debtor may change his intention regarding his decision as to whether to surrender or keep the vehicle. In most situations, if the debtor is current with the finance payments, he may keep the auto. If the debtor is not current, the finance company will repossess the auto. This information does not consider reaffirmation agreements.
Chapter 13 debtor
A chapter 13 debtor is required to make monthly payments to a trustee for a period of 36 to 60 months. The plan period must be for no less than 36 months, unless the debtor is paying all creditors 100% in less time. If the household income of the debtor is in excess of the average income of a household of that size in New Jersey, some judges will require that you make monthly payments for a period of 60 months. The monthly payments must be no less than all of the debtor’s disposable income.
Some debt, such as certain taxes and child support arrears, must be paid through the monthly trustee payments, under any and all circumstances. However, there are other creditors who are paid voluntarily, through the plan, such as mortgage and auto arrears. A debtor may save their house or auto by paying the arrears through the monthly payments. A debtor may change their mind at any time during the chapter 13 plan and surrender their house or auto, due to loss of income, or other circumstances.
If the debtor changes his mind, he may file a modified plan, which will likely result in modified monthly payments. However, as said, the monthly payments, must continue to be no less than the debtors’ monthly disposable income. If the debtor no longer has monthly disposable income, the debtor may possibly qualify and convert to a chapter 7 bankruptcy.
Please call Robert Manchel, a NJ bankruptcy expert, at 1 (866) 503-5655, to discuss your bankruptcy protection options.

Manchel
New Jersey
Bankruptcy Law

General Information About Bankruptcy

Can I Keep My New Jersey Tax Refund If I Am In Bankruptcy?

Protecting Your Auto Through Bankruptcy Is An Option Explained By a NJ Lawyer

Eliminating Judicial Liens Against Real Estate – Explained By a NJ Bankruptcy Lawyer

NJ Bankruptcy Attorney Details What Happens With A Car In Chapter 7

How A Debtor Can Change Their Intentions For Debt Owed In Bankruptcy

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Manchel
New Jersey
Bankruptcy Law