General Info

Immediately upon a NJ. bankruptcy filing of any chapter, the Automatic Stay Provision of the bankruptcy code applies, thereby protecting the debtor (person filing) from the creditors’ collection efforts. This means that no matter what type of bankruptcy case is filed, no creditor may proceed or commence a lawsuit against the debtor for money or property.

The Automatic Stay Provision stops the following actions: creditors’ correspondence, such as telephone calls and collection letters; bank and property levies; wage garnishments; lawsuits; utility shutoff; auto repossessions; foreclosure actions; prevent drivers’ license suspension and/or reinstate drivers’ license, under certain circumstances; prevents sale of property; filing of liens; possible limited protection from support arrears; and, delay collection from student loan creditors.

The Automatic Stay works as follows. If the bankruptcy petition is filed prior to the creditor commencing a lawsuit against the debtor, the creditor may not file the lawsuit. Immediately upon the bankruptcy filing, the lawsuit process stops. If the debtor files a bankruptcy case, after the lawsuit is filed and before the answer is due, the debtor need not file an answer. If the debtor files the bankruptcy petition after the creditor obtains a judgment from the lawsuit, the creditor may not attempt to collect money on the judgment.

A finance company may not repossess an auto if a bankruptcy case is filed, after the debtor is behind with payments, but before the auto is repossessed. If the auto is repossessed and not yet sold, the bankruptcy filing, may allow the debtor to obtain possession of the vehicle, under certain circumstances.

CHAPTER 7

The chapter 7 process is about four months long. After four months from the filing, the debtor is completely out of the bankruptcy case, with an order of discharge. Discharge means that the debt is eliminated. The discharge order completely eliminates certain debt, including all unsecured debt. Unsecured debt is debt that is not connected to collateral or property, such as credit card debt and personal loans. A chapter 7 does not require any court or trustee payments.

The bankruptcy code has a list of specific types of debt that are not discharged, including, but not limited to, child support, alimony, some types of tax debt and student loan debt.

A debtor may eliminate a mortgage if he does not wish to keep his house. Additionally, auto debt may be eliminated, if you are surrendering your auto. A chapter 7 will not permit someone to save an auto or house if he is behind with payments.

A debtor may possibly eliminate liens, as well.

CHAPTER 13

A chapter 13 requires monthly payments to a trustee for 36 to 60 months. The number of trustee payments vary based on numerous factors.

A person that does not meet the chapter 7 criteria, due to excessive income, may file a chapter 13 to pay back and/or eliminate a portion of their unsecured debt.

Also, a chapter 13 may permit someone to save a house from foreclosure and a car from repossession. Chapter 13 offers various options to save a house from foreclosure. However, the most likely options are to cure the mortgage arrears through the bankruptcy plan or obtain a loan modification. An automobile may be saved from repossession by way of various options. The most used options are to pay the finance arrears through the bankruptcy plan or pay off the total financing balance through the bankruptcy plan.

Under certain circumstances, a debtor may be permitted to eliminate a second or third mortgage. A debtor may be able to eliminate a lien too.

Bankruptcy lawyer, Robert Manchel, Esq., is available for a free consultation.

Attorney explains the NJ. Bankruptcy law benefits of a mobile home loan.

Believe it or not the bankruptcy code allows additional benefits for a mobile home loan, in New Jersey, that is not permitted for a house residence mortgage. A mortgage on a mobile home may be “crammed down” in a chapter 13, even though a home mortgage cannot. As I explained, in other blogs, a cram down is changing the secured status of a loan to a partially secured portion and a partially unsecured portion. The secured portion is reduced to the fair market value of the mobile home, with the balance due on the loan to be changed to general unsecured. For example, if the value of a mobile home is $25,000 and the total balance due on the loan is $70,000.00, the secured portion may be reduced to $25,000.0. with the balance of $45,000.00, to be classified as general unsecured. The bankruptcy code does not permit such a change in a mortgage on a house, that is the debtor’s residence.
How does this benefit the owner of the mobile home? In general, a New Jersey chapter 13 bankruptcy debtor is only required to pay the secured portion of the mortgage, plus a reasonable interest rate, through the bankruptcy plan, over five years. In most situations, the debtor may either eliminate all of the unsecured portion or most of the unsecured portion. This means that the debtor in the above reference example will only be required to pay the $25,000.00 (secured portion), plus a fair interest rate. However, the $25,000.00, plus the fair interest rate must be paid within the five year bankruptcy plan. The amount that must be paid towards the $45,000.00 (unsecured portion) balance and any other unsecured debt is based on the debtor’s income, expenses, type of debt owed and asset values.
The determination as to the property that the debtor is permitted to keep in a chapter 7 is based on exemptions. The amount of money that must be paid to unsecured debt in a chapter 13 is based on the value of assets, exemptions and disposable income. This blog is limited to exemptions on a residence. A residence under the bankruptcy code includes real property, which is a house, or personal property that is used as a residence, such as a mobile home.
Please note that the bankruptcy code considers all of the debtor’s finances and assets. Therefore, even though a debtor has filed for bankruptcy protection to deal with his mobile home debt, he may be  required to pay other debts and creditors.
Robert Manchel will answer your bankruptcy questions at 866 503 5644.

New Jersey Lawyer Explains When Unemployment Benefits are Dischargeable

Typically, an over payment of New Jersey unemployment benefits is dischargeable in bankruptcy, unless the debt was incurred by fraud. Unemployment debt is not included in any of the bankruptcy code exceptions to discharge. Therefore, in a chapter 13 and chapter 7 unemployment debt is generally dischargeable and classified as general unsecured debt.
However, the New Jersey Department of Labor and Workforce Development, Division of Unemployment and Disability Insurance (dept. of labor), may bring a bankruptcy action to deny the discharge of unemployment debt, under the fraud provision of the code, which states as follows:
“(a) A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt—
(2) for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by—
(A) false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor’s or an insider’s financial condition;
(B) use of a statement in writing—
(i) that is materially false;
(ii) respecting the debtor’s or an insider’s financial condition;
(iii) on which the creditor to whom the debtor is liable for such money, property, services, or credit reasonably relied; and
(iv) that the debtor caused to be made or published with intent to deceive; …”
The New Jersey bankruptcy court requires the Department of Labor to prove that the debtor obtained the unemployment debt by actual fraud, which includes the following elements:
“(1) [the debtor] obtained money, property or services through a material misrepresentation; (2) the Debtor, at the time of the transaction, had knowledge of the falsity of the misrepresentation or reckless disregard or gross recklessness as to its truth; (3) the Debtor made the misrepresentation with intent to deceive; (4) the Dept. of Labor reasonably relied on the misrepresentation; and (5) the Plaintiffs suffered loss, which was proximately caused by the Debtor’s conduct.”
The above means that the debtor may discharge the unemployment debt unless the Dept. of  Labor can prove, by a preponderance of the evidence, that the debtor is guilty of all five of the above listed elements. A preponderance of evidence means proof of more than 50% that the debtor committed each of the five elements. In other words if the debtor received an over payment without obtaining the funds through fraud, as explained by way of the five elements above, the debt is discharged in a chapter 13 and chapter 7.
Contact the NJ.bankruptcy lawyer, Robert Manchel at 866 503 5644 to discuss your questions.

New Jersey Lawyer Explains Bankruptcy Trustee’s Fraudulent Avoidance Power

A New Jersey bankruptcy trustee has seven powers that are called avoidance powers. Avoidance means to cancel or undue some type of transaction or obligation. In certain situations, a trustee may cancel a transaction for the benefit of creditors that were not involved with the transfer. In general, the avoidance laws were established to cancel a transaction based on wrongful intentions or to prevent the negative effect the transaction has on other creditors. The same transfer or obligation may be avoided by more than one specific bankruptcy avoidance law.
The first type of avoidance power relates to a fraudulent transfer. The trustee may avoid (cancel) the debtor’s transfer or obligation if the following criteria are met:
1. The transfer or obligation occurred within the 2 years, immediately preceding the bankruptcy filing; and
2. The transfer or obligation was made with an intent to hinder, delay, or defraud any past or future creditor; or
3. The debtor received less than fair market value for the sale of property; and
4. The debtor was insolvent or became insolvent at the time of the transfer; or
5. The debtor was engaged in business or about to engage in a business, or a transaction, with unreasonably small capital; or
6. The debtor intended to incur or believed he would incur debts beyond his ability to pay; or
7. The debtor made a transfer to an insider, which is typically a relative.
The best manner in which is to explain the above elements of the trustee’s bankruptcy avoidance powers, is as follows. In every situation, the transfer or obligation must have occurred within 2 years of the bankruptcy filing. The preference action is established, if the criteria of paragraphs numbers one and two, above, have been met. The preference action is established, if the criteria of paragraphs numbers one, three, in addition to any of paragraphs numbers four, five, six or seven.
In general, this power permits the New Jersey bankruptcy trustee to cancel transfers that are made to defraud creditors. An example of a transfer may be the debtor’s sale of real estate for an amount that is substantially less than the fair market value. A transfer may also include the debtor obtaining a substantial mortgage loan on a house, which was previously unencumbered. The trustee may enforce this power by filing an adversary complaint (lawsuit), within the bankruptcy case, against the entity that was involved in the debtor’s transaction. However, for the trustee to prevail, he must meet the necessary criteria listed above.
An example of a fraudulent transfer in a bankruptcy case is a debtor gifting property or money to his father, within 2 years prior to the bankruptcy filing. In this scenario, the trustee may wish to file an adversary complaint against the father to retrieve the funds. The trustee would be required to prove the elements as explained above.
Another example of a fraudulent transfer, is the sale of a house to a person, who is not a relative, within the 2 years prior to the bankruptcy filing, for an amount that is substantially less than the fair market value. In this scenario, the trustee would be required to prove the following criteria, in connection with a lawsuit against the purchaser of the house:
1 The intent of the sale was to hinder, delay or defraud creditors; or
2 The debtor received less than the fair market value of the house; and/or
3 The debtor was insolvent or became insolvent at the time of the transfer; and/or
4 The debtor intended to incur or believed he would incur debts beyond his ability to pay, and/or
5 The transfer involved the debtor’s business or a transaction, at the time when the debtor had unreasonably small capital.
Please note that the trustee may also use the New Jersey state fraudulent transfer laws which permit the trustee to avoid a transfer that occurred more than two years prior to the bankruptcy filing. Furthermore, the person who is sued by the trustee may possibly successfully defend an avoidance action lawsuit, even though all criteria was met, under certain situations, such as a person who purchased the property in good faith, without certain knowledge of the debtor’s circumstances.
Robert Manchel, New Jersey lawyer, may be contacted at (866) 503-5655 to discuss your options for receiving bankruptcy protection.

As the U.S. economy continues to struggle, consumers are being forced to choose whether to pay their mortgages or their credit card bills. According to a new study by TransUnion, a credit management company, consumers are increasingly choosing to pay their credit cards before they pay their mortgages.
In the last quarter of 2010, 7.24 percent of homeowners were delinquent on their mortgages, but current on their credit cards. Only three percent of Americans chose to fall behind on their credit cards but stayed current on their mortgage payments. The study found that shortly after the 2007 recession, Americans began to switch their priorities to paying their credit cards rather than their mortgages.
A major reason why many homeowners opted to fall behind on their mortgages in favor of credit cards was the collapse of the housing market, which left many homeowners owing more on their homes than they are worth. At the end of 2010, almost a quarter of all homeowners in the U.S. owed more on their homes than they were worth. At the same time, credit is tightening, and consumers are realizing that keeping a line of credit can be a necessity in tough times.
Are you struggling to stay current with your credit cards, as well as your mortgage? Do you feel like you are getting further and further behind each month? If so, you may wish to consider bankruptcy. Contact New Jersey bankruptcy and credit debt lawyer Robert Manchel at 866-503-5655 to learn more about your debt relief options.