New Jersey Bankruptcy Blog

Immediately upon the filing of a bankruptcy petition, the Automatic Stay provision of the bankruptcy code is effective immediately. This means that no creditor may commence or pursue any action against the debtor (person filing) for any action, regarding a monetary debt.
All lawsuits must stop immediately, no matter where the case is pending in the litigation process. If a bankruptcy petition is filed before the creditor commences a wage garnishment, the creditor may not start garnishing the wages. If the petition is filed after the wage garnishment has commenced, the garnishment must cease, immediately. Any funds deducted from the wages after the bankruptcy filing must be refunded to the debtor.
The following creditors’ actions must cease, immediately, upon the bankruptcy filing:
termination of utility service;
application of a lien;
application of a bank levy;
mortgage foreclosure action;
tax foreclosure action;
repossession of auto or other property;
telephone calls and any communication of any kind;
eviction action, unless a warrant of removal is entered.
Upon the filing of a bankruptcy petition, the creditor may not communicate or correspond with the debtor by any means, including, but not limited to, the following: letters, telephone calls to debtor, or any other parties. In certain situations, the creditor must return a repossessed auto and restore utility service.
Robert Manchel, bankruptcy lawyer in NJ, may be contacted at 1(866) 503-5655 to discuss your options for seeking bankruptcy protection.

If a homeowner or mortgage company does not pay the real estate taxes to the municipality, the municipality may obtain the payment for the balance due by selling a tax certificate. The municipality sells a tax certificate to an entity that pays the homeowners’ taxes. In return, the entity receives a certificate, reflecting the amount paid, plus the interest that is due on the funds paid. If the homeowner or mortgage company does not payoff the certificate, including interest, within two years from the date of the purchase, the certificate owner may commence a foreclosure action against the homeowners’ property.
The state and municipalities establish the amount of the interest rate on the funds paid for the certificate, which may be as high as 18%, depending on the specific certificate.
A homeowner may file a chapter 13 to avoid the tax foreclosure and loss of their property. The bankruptcy code requires that the homeowner payoff the amount due on the certificate, including the interest, through a bankruptcy plan, over a period of 36 to 60 months.
Before 2010, a bankruptcy debtor was required to pay back, the certificate, plus the interest rate, established by the state and municipality for each certificate. However, in 2010, a New Jersey bankruptcy judge wrote an opinion indicating that the interest rate, for the certificate, may be modified to the prime interest rate, plus an additional 1% to 3%, which substantially reduced the interest.
Thereafter, a second bankruptcy court judge wrote an opinion agreeing with this opinion. However, subsequently, two other New Jersey bankruptcy judge’s wrote opinions disagreeing with their decisions and determined that the interest rate should be the amount that is required by the state / municipality.
The various judge’s decisions result in a substantial difference of the interest rate, as the municipality’s rate may be as high as 18% and the rate based on the bankruptcy code is presently about 4.25%, based on the present prime rate and risk.
At the time this blog is drafted, the issue regarding the appropriate interest to be paid through the bankruptcy plan is scheduled to be decided by the New Jersey Supreme Court. However, at present, the amount of interest that must be paid on a tax sale certificate, in bankruptcy, depends on the debtor’s bankruptcy judge’s interpretation of the law.
Robert Manchel, a New Jersey bankruptcy lawyer, may be contacted at (866) 503-5655 to discuss your options for seeking bankruptcy protection.

If a person was denied a discharge of certain debt in a prior bankruptcy case, the same debt cannot be discharged in a subsequent bankruptcy filing. This code section if very limited and is rarely applied.
I am referring to the following type of debt that was not discharged in the prior case:
1. denied a discharge due to an intent to hinder, delay, or defraud a creditor by removing, destroying, mutilating, or concealing his property or property of the bankruptcy estate;
2. denied a discharge due to concealing, destroying, mutilating or falsifying business or other relevant records;
3. denied a discharge due to intentionally making a false oath, account, claim, or withholding certain documents;
4. denied a discharge due to failing to adequately explain a loss or deficiency of assets;
5. denied a discharge due to a debtor refusing to obey a court order or to testify about certain matters.
Any debt that was incurred after the bankruptcy filing of the prior case may be discharged in the subsequent case. In other words, if a person was denied a discharge of a case filed on 5/7/2012, a subsequent bankruptcy filing would still discharge a credit card taken out on 11/7/2012, which is after the filing of the prior case.
Robert Manchel is a New Jersey bankruptcy attorney and will provide bankruptcy advice at (866) 503-5655.