New Jersey Bankruptcy Blog

What happens to pension loans when filing for bankruptcy?
Pursuant to the 2005 bankruptcy amendments, a pension loan and other ERISA qualified and pension like loans, such as a 403(b) and 401(k) loans are nondischargeable (cannot eliminate) in bankruptcy. Other ERISA qualified loans that are nondischargeable are profit sharing, stock bonus, and other similar plan loans. After the bankruptcy case is completed, the debtor continues to owe the balance that is due on such loans.
Typically, such loans are paid back by way of a wage garnishment from the debtor’s employer.
Typically, upon the filing of a bankruptcy case, the Automatic Stay is immediately effective against all creditors. This means that upon a bankruptcy filing, a creditor is prohibited from any attempt to collect a debt or pursue a lawsuit against the debtor. However, the creditor’s right to continue to collect the “pension like debts”, as described above, is an exception to the automatic stay provision. After the bankruptcy filing, the employer may continue to deduct the pension loan payments through the garnishment.
Robert Manchel is available to discuss your bankruptcy questions at (866) 503-5655.

Certain income tax debt is not dischargeable (not eliminated by bankruptcy). Also, in general, unsecured debt such as credit card debt and personal loans, is dischargeable in bankruptcy. However, the 2005 bankruptcy code amendment no longer permits a discharge of an unsecured debt that was used to pay taxes that would not have been discharged at the time of the bankruptcy filing.
A credit card or a personal loan that is used to pay for tax debt, that would not have been discharged, is also not discharged. In this situation, a person cannot eliminate the credit card debt that was used to pay for taxes, that is not dischargeable. This means that the credit card debt is not eliminated in the bankruptcy case and the debtor continues to be liable for such debt.
The creditor may have difficulty determining which funds were used to pay for taxes, if the payment was not made directly to the taxing authority. Also, based on the drafting of this matter of the bankruptcy code, it can be argued that this limitation does not apply to a chapter 13. In other words, it can be argued that this limitation only applies to a chapter 7 debtor and not a chapter 13 debtor, who would be able to eliminate such a debt.
NJ bankruptcy attorney Robert Manchel can be contacted at (866) 503-5655.

Many clients have questions regarding their debt and which items can be discharged in bankruptcy.
A debt that was incurred as a result of personal injury or death caused by operating a vehicle while intoxicated is not dischargeable in a chapter 7 or 13.
The debtor must have been intoxicated at the time. Intoxication may be due to alcohol or any other substance. Also, the standard of intoxication is based on the laws of the state.
The debt must be due to the death or personal injury of a person. Nondischargeability does not include debt incurred due to property damage, as a result of operating a vehicle while intoxicated. In other words, debt due to property damage caused by operating a vehicle while intoxicated is dischargeable.
The debt is nondischargeable if the debtor is operating a motor vehicle, vessel, or aircraft. If the vehicle is not deemed one of the aforementioned vehicles, the debt is dischargeable.
If the debt is nondischargeable based on the above facts, a chapter 13 debtor must pay such debt as a priority through the bankruptcy plan.
Robert Manchel, NJ bankruptcy lawyer, may be contacted at 1(866) 503-5655 to talk about your situation and how bankruptcy protection may apply.

In general, any debt that is incurred after the filing of a chapter 7 or 13 is not included in the bankruptcy case. In other words, if a person obtains a personal loan after the filing of a chapter 7, the lender may pursue the debtor for the debt and the debt is not discharged through the case. Also, if a chapter 13 debtor incurs a personal loan after the filing and during the case, the debt to the lender is not eliminated by the bankruptcy filing. Whether or not the lender may collect on the debt, during the chapter 13, is outside the scope of this blog.
However, if a chapter 13 debtor converts the case to a chapter 7, the debt that was incurred after the chapter 13 filing and prior to the conversion is included in the chapter 7 case. Under such a scenario, the debtor may be able to discharge such debt, assuming the debt is dischargeable.
Another example are medical bills incurred during a chapter 13 case and before the conversion.
Please note that there are certain criteria that must be met and a number of issues that a debtor must consider when converting the case. A chapter 7 case may not provide the necessary benefits that is provided by a chapter 13.
Attorney Robert Manchel will answer your questions at (866) 503-5655.

On April 20, 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA)was signed into law. The law was effective on October 17, 2005. This law modified a number of the bankruptcy code provisions.
Chapter 7
Prior to the amendment, a person was permitted to file a subsequent chapter 7 bankruptcy case within 6 years of the filing of a prior case. The law modified the number of years from 6 to 8. Also, the law modified the ability to refile a bankruptcy case. Prior to the October effective date, the news and public information about the law concerned people that were contemplating bankruptcy. The result of this concern caused the bankruptcy filings to sky rocket, during the months prior to the effective date.
The 8 year anniversary of the effective date of the law is October 17, 2013. This means that the people that filed, immediately prior to October 17, 2005, may file a second chapter 7 bankruptcy case, after October 17, 2013.
Chapter 13
Within the last several years numerous people have entered into loan modifications, which result in extinguishing a foreclosure action and removing their loan from default. However, due to the continued stagnant economy and high unemployment rate, a number of people have defaulted on their loan modification mortgage payments.
If a person wishes to save their house from foreclosure by filing a chapter 13 and paying their mortgage arrears through a five year chapter 13 bankruptcy plan, he must have the necessary monthly disposable funds to make the monthly trustee and mortgage payments. The higher the amount of the mortgage arrears, that must be paid through the bankruptcy plan,the larger the trustee payment. Over the prior three years, people were so far behind with their mortgage payments that they were unable to pay the substantial mortgage arrears, over the five year bankruptcy plan.
Prior to entering into the loan modification, an individual was less likely able to cure their mortgage arrears through a chapter 13 bankruptcy plan, due to the substantial arrears’ amount. In other words, the person had insufficient funds to pay all of their substantial mortgage arrears over the 5 year bankruptcy plan.
Typically, a loan modification cures the default and brings the mortgage payments current, as if the person is no longer behind with the payments. If a person defaults on the loan modification, the total amount of the mortgage arrears, includes the total amount due from the time of the loan modification through the present. The arrears does not include the amount that a person was behind prior to the loan modification. Therefore, the total amount of the arrears of a default of a loan modification is reduced to the amount due after the loan modification, only. Since the arrears’ amount is smaller after the loan modification, it is more likely that a chapter 13 debtor could pay such arrears through a chapter 13 bankruptcy.
Attorney Robert Manchel, a NJ bankruptcy lawyer, can be contacted at(866) 503-5655 to discuss your options for filing for bankruptcy protection.