Robert Manchel

How Are Tax Returns Handled In A New Jersey Chapter 13 Case?

December 16, 2015 by Robert Manchel

New Jersey Attorney Details How Tax Returns Are Handled In A Chapter 13

All tax returns must be filed to proceed with a chapter 13 bankruptcy case. If any return is not filed, the trustee may possibly dismiss the case at the Confirmation Hearing. A case dismissal means that the case is thrown out. It may be possible to reinstate and continue with the same case.
In New Jersey, each creditor files a Proof of Claim (claim) with the court that indicates the details of the debt. All taxing entities, such as the Internal Revenue Service and the State of New Jersey, Division of Taxation, will file a Proof of Claim. The claim indicates whether all of the debtors returns are filed. Sometimes the tax claim will reflect that return for specific years were not filed even though the return was actually filed. In this situation, the taxing entity must file a modified proof of claim reflecting that all tax returns have been filed.
In addition to the non filing of a tax return, there may be many other more complicated tax issues related to the proofs of claim and tax debt. Typically, the State of New Jersey and the IRS are very easy to deal with and will amicably resolve various issues. For simple issues, the matter may possibly be resolved by forwarding the taxing authority the appropriate tax return. However, in a number of circumstances, it may be necessary to file a motion with the court objecting to the taxing entity’s claim. If the matter cannot be resolved, the issues may be argued before the judge, who will make a decision regarding the tax debt.
The NJ. bankruptcy practitioner, Robert Manchel, may be contacted at 866 503 5644.

Can I keep A Motorcycle In A New Jersey Chapter 13 Case?

December 11, 2015 by Robert Manchel

New Jersey Lawyer Explains How To Keep A Motorcycle In A Chapter 13

If a New Jersey bankruptcy debtor is not discharging or eliminating any of his debt and has sufficient disposable income to pay all creditors that must be paid, under the bankruptcy code, the debtor may keep any motorcycle. However, if a debtor is attempting to eliminate debt, such, as credit card debt, a debtor may or may not be permitted to keep his motorcycle. The balance of this blog pertains to a New Jersey chapter 13 debtor who owns a motorcycle and intends to eliminate certain debt.
There are two issues related to whether a debtor may keep a motorcycle in a chapter 13 case.
First issue:
A chapter 13 debtor must pay to the trustee, all of their household disposable income on a monthly basis. The allowable expenses that are used to obtain the disposable income, must be necessary and reasonable to live. The allowable disposable income, typically, does not include a payment on motorcycle financing, unless the motorcycle is necessary for work. In other words, a trustee or judge will likely not permit a debtor to use a $500 motorcycle finance payment as an expense and not use the $500.00 to pay back creditors. The debtor will not likely be permitted to keep a motorcycle, under this scenario. However, depending on the circumstances, the trustee may possibly work out a settlement or the issue may possibly be resolved by the debtor’s attorney.
Second issue:
A debtor must pay to their unsecured creditors (ie. credit card debt), pro rata, no less than the amount of their unexempt assets. The exemption analysis has been explained, numerous times, in other blogs within this website. The exemption analysis is the same in a chapter 7 and chapter 13.
The bankruptcy code has a list of exemptions that may be applied against the equity in assets. If the amount of the exemption that is applied to any asset is less than the asset’s equity, than the difference is the unexempt equity. Depending on the specific asset, the equity and the unexempt amount may be reduced by the estimated cost of sale of the asset.
The bankruptcy code provides a list of exemptions that may be applied toward specific assets. The bankruptcy code allows an exemption of $3,675.00 in any motor vehicle. This exemption is typically applied to a car, but may possibly be applied towards a motorcycle, in certain circumstances. Additionally, another code section permits a person to apply the amount of $11,500.00 in a motorcycle, that is not used or needed for their residence. Additionally, the debtor may apply $1,225.00 in any property. The following is an exemption analysis:
Motorcycle Value       $10,000.00
Financing Payoff         $2,000.00
Balance $8,000.00
Exemption                   $5,000.00 (Assume that $5,000.00 is the maximum exemption that may be applied. In other words, assume that the auto exemption is needed and applied to another automobile and cannot be applied towards the motorcycle. Also, assume that this debtor can only use $4,775.00 of the unused portion of the residential   exemption and the additional $1,225.00 amount.)
Balance                       $3,000.00
The above example results in a motorcycle with unexempt equity of $3,000.00. This means that the debtor must pay at least $3,000.00 towards their total unsecured debt. The amount of any other unexempt equity in any other property must be added to this $3,000.00. The debtor must pay at least the total amount of all unexempt equity toward their total unsecured debt, through their bankruptcy plan. If the debtor does not maintain sufficient disposable income to pay this amount through his bankruptcy plan, he will not be permitted to continue with his chapter 13 case. Therefore, if the debtor does not have sufficient income to pay the total amount of his unexempt motorcycle equity, to his unsucred creditors, he must sell the motorcycle, if he wishes to file a chapter 13 bankruptcy case.
Robert Manchel, the NJ. bankruptcy lawyer, may be contacted at 866 503 5644.

Can I Keep A Motorcycle In A New Jersey Chapter 7 Bankruptcy Case?

November 30, 2015 by Robert Manchel

New Jersey Lawyer Explains When A Person May Keep A Motorcycle In A Chapter 7

Over the many years of practicing bankruptcy law, I have noticed that peoples’ motorcycles are their most treasured property. When I counsel a person about their Harley Davidson, there is great concern on their faces. I understand that in some instances their motorcycle may hold more importance than their house or car.
In a New Jersey chapter 7 bankruptcy case, typically, a motorcycle is treated as a luxury item, unless the debtor needs the vehicle for work transportation. I have stated, on numerous occasions, the chapter 7 bankruptcy criteria, in other blogs. The criteria as to whether a motorcycle owner is entitled to a bankruptcy discharge is different than the criteria that is applied to whether the motorcycle owner can keep his motorcycle. In other words, a person may be entitled to a discharge and lose his motorcycle. Also, a person may not meet the criteria for a chapter 7 discharge and be permitted to keep his motorcycle, if they filed a chapter 13.
In New Jersey, a debtor can only keep assets that are fully exempt and that do not have a substantial value. The application of exemptions is explained, in detail, in numerous other blogs. I will briefly explain the exemption process, as follows. If a debtor can fully exempt the value of a motorcycle, the debtor may keep the motorcycle. The bankruptcy code exemptions are listed in 11 U.S.C., section 522(d). Section 522(d)(2) allows a $3,675.00 exemption in one motor vehicle. Typically, this exemption is used for the debtor’s car. However, theoretically, this exemption may be applied to a motorcycle.
A debtor may also apply, in any property, a portion of the exemption that is not used or needed for their house. Each debtor has a $22,975.00 exemption that may be applied towards the equity in their house. Bankruptcy code section 522(d)(5) permits the debtor to use up to $11,500 of the unused portion of this household exemption in any property, in any amount. Additionally, section 522(d) permits the debtor to apply 1,225.00 in any property. By way of example, said $11,500.00 and $1,225.00 exemptions may be applied to: $5,000.00 checking account funds; $4,000.00 of stock; and, a $3,725.00 antique vase.
The debtor may clearly keep a motorcycle, if there is no profit to be earned from selling the motorcycle. For example, a debtor may keep a motorcycle that has a $20,000.00 value, with a $21,000.00 financing payoff amount. The debtor is permitted to keep the vehicle because the bankruptcy code does not permit the elimination of the motorcycle’s financing lien. For example, if the motorcycle’s value is $20,000 and the motorcycle financing payoff balance is $21,000, the trustee will be unable to payoff the $21,000.00 lien with a $20,000.00 sales’ price.
However, a trustee will be permitted to sell the motorcycle, if there are funds available after deducting the motorcycle financing payoff and all of the applied exemptions. Look at the following example:
Auto value: $25,000.00
Financing Payoff: $2,000.00
522(d)(5) exemption: $11,500.00
522(d)(5) exemption: $1,225.00
Balance $10,275.00
Based on the above example, the trustee could sell the motorcycle and receive $10,275.00 from the sale. The debtor would receive $12,725.00, which is the amount of the debtor’s applied exemptions. Please note that the calculations generally include the costs to sell the motorcycle. Also, there may be many other issues that modify the figures that are used.
Contact Robert Manchel at 866 503 5644 to discuss your NJ. bankruptcy law questions.

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

November 12, 2015 by Robert Manchel

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?

October 30, 2015 by Robert Manchel

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?

October 23, 2015 by Robert Manchel

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.

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