As I have outlined in prior blogs, one must attend a 341A Hearing (also referred to as a 341A Meeting of Creditors) following the filing of one’s bankruptcy petition. The hearing is generally conducted within thirty (30) days of the date of filing. The hearing is conducted by a panel trustee who will be asking questions throughout the hearing.
The following is a listing of frequently asked questions at such a Chapter 7 hearing (in no particular order):
- Do you recognize the signature on the sixth (6) page of your petition? Whose signature is it?
- Did you review the entire petition prior to signing?
- Is the petition complete and accurate? Any changes needed?
- Have you ever filed for Bankruptcy before? If so, when and under what chapter?
- Do you own a house? If so, when purchased and for how much?
- What is the house worth today and what did you base this value on?
- How much is owed on the house and with what lender(s)?
- How much would I get if I sold all of your jewelry?
- Do you own any stocks or bonds?
- Can you sue anyone as a result of an injury, breach of contract or wrongful termination?
- Do you have any IRA’s, 401k’s, pensions and/ or Profit Sharing plans?
- If I sold all of your furniture and furnishings, how much money would I receive?
- Do you have any Educational IRA’s?
- Are you running or operating your own business?
- Have you run or operated your own business in the past 4 years?
- Do you have a safe deposit box?
- Do you have a storage unit?
- Have you paid back any friends or family members more than $1,000.00 in the past 2 years?
- Have you sold or transferred anything of value in the past 2 years?
- How long did it take for you to accumulate this debt? And
- What caused you to file bankruptcy here today?
This is a sampling of the questions most of my clients have or will receive at their 341A hearing. Depending on the answers to the questions above, there may be a number of follow up questions posed by the trustee. Most hearings will take no more than five (5) to ten (10) minutes to complete. That being said, this is an important hearing and you should go into it prepared and having fully reviewed your previously filed petition. It is always important to remember to answer the questions as posed. Never volunteer information. Your attorney should be seated next to you so you will not have to “go it alone.” The key is to be prepared and to honestly and accurately answer the questions presented to you.
At Reinheimer & Reinheimer your attorney, not an outside party, will always attend your hearing with you. In fact, we prefer to bring you to the hearing well before its scheduled time to ensure a smooth and stress free experience.
The purpose of the Bankruptcy code is to give the honest individual the chance for a fresh start. This can mean discharging one’s obligation to pay any of their unsecured debts such as credit cards. However, the person filing must be sure that they conducted their affairs and accounts honestly, openly and properly.
It is not appropriate for one to “run up” their credit card balances prior to their time of filing. It is always best to have as little activity as possible within one’s credit card accounts in the months leading up to a bankruptcy filing. If, however, there has been credit card activity in the recent time prior to filing, it is important to determine what types of charges occurred. Charges can be for “luxury” goods/items such as dinners or trips and the like or for necessities such as home repairs and groceries. The types of charges made will be important.
When one files for bankruptcy, they are looking to receive a Discharge Order. This means the individual is no longer legally responsible to pay back certain bills, such as credit card balances. However, if a creditor has an issue with the types and/or amounts that have been charged by one prior to filing for bankruptcy, they can sue the individual within the bankruptcy court and seek an order determining that all or a portion of their debt shall not be deemed discharged or thus shall survive the Bankruptcy and remain the legal responsibility of the filing party.
There is something referred to as the “presumptive window of abuse.” This means that certain transaction/charge amounts that take place within a certain period of time prior to a bankruptcy filing have a presumption of being non-dischargeable. Pursuant to section 523(a)(2)(c), charges of more than $675.00 incurred within ninety (90) days of a bankruptcy filing for luxury goods or services or cash advances of more than $950.00 on any one line of credit in the seventy (70) days prior to a bankruptcy filing will be difficult, if not impossible, to discharge. The bankruptcy code clearly notes that “luxury goods or services” does not include goods or services that are reasonably necessary for the support or maintenance of the filing party or its dependents.
If you want your bankruptcy to go through smoothly and without fanfare, the less activity and charges that are contained within your credit cards, the better one’s outcome will be. In this case, less is clearly more. At Reinheimer & Reinheimer we will go through your accounts thoroughly to be sure the client does not run afoul of the bankruptcy code and its limitations on account activity.
The term “creditors” is often used in bankruptcy to describe those entities/persons who are owed money by those who are filing for bankruptcy relief. There are secured creditors such as a mortgage or car company (loan) and there are unsecured creditors such as credit cards or medical bills. There are, of course, other types of creditors like unsecured priority creditors, such as outstanding tax obligations, as well as others but I think you get the idea.
When one ultimately files for bankruptcy, all creditors must be duly and properly listed within one’s filed bankruptcy petition. Whether the creditor is deemed to be “good” or “bad”, it must be listed within the petition as long as there is any balance amount owed to the creditor in question. In other words, if you have an open credit card that has a zero balance at the time you are going to file either a chapter 7 or a chapter 13 bankruptcy, it would not have to be listed within the bankruptcy petition and there is an excellent chance that the credit card will not be closed by the company after the time of filing. On the other hand, if the credit card had even a one dollar ($1) balance at the time of filing, it should and must be listed.
It is not the decision of the party filing for bankruptcy to determine which creditors are noted in the filed petition and who is to be left out. Any individual or entity that is owed anything on any type of debt must be noted in the petition. The bankruptcy code mandates full, complete and accurate disclosure of all assets and liabilities. Failure to do so can put your bankruptcy matter in peril. During your meeting with your bankruptcy counsel, be sure to advise him/her of all debts and liabilities that are due and owing. To help you ensure such accuracy, I would recommend you running a credit report from www.annualcreditreport.com. It may also be a good idea to have a judgment search run on yourself for good measure.
Most unsecured debts, such as credit cards, subscribe to a listing entity/company. Such a company will compile a list of recently filed individuals along with their social security (partial) and address specifics. This list will be compiled and forwarded to the subscribing creditors. If the creditor finds a match between one of their customers/clients and the aforementioned list, the account in question will be closed. In other words, you may be able to hide the creditor from your legal counsel but you won’t be able to hide your bankruptcy filing from your creditor(s). Be smart and be sure to list all of your creditors in your bankruptcy petition.
A bankruptcy petition is the legal document which is filed with the bankruptcy court when one begins the bankruptcy process. The petition consists of no less than 30 pages in total and is divided into different types or categories of property (real and personal) and liabilities (secured/unsecured/priority).
All property and liabilities of any individual or any entity who files a petition in bankruptcy must include all of their assets and liabilities within the filed petition. Failure to do so can expose one to criminal prosecution for bankruptcy fraud, case dismissal and the like. When in doubt, list the asset or liability. A good faith omission of an asset or liability can be corrected at any time while the case remains open by way of an amendment or amended schedule being filed with the court clerk’s office.
If one has a line of credit that has no balance at the time of filing, it does not need to be listed within the petition. However, one must be sure to list all assets and liabilities whether they are considered good assets/debts or bad. For example, an automobile loan for a vehicle which is to be kept must be noted in the petition along with the value of the automobile. Likewise, a student loan which is current and otherwise non-dischargeable in a bankruptcy proceeding must also be listed within the petition.
Many clients ask if they can keep out of their bankruptcy petition a credit card that has a small remaining balance. My response is that if the credit card has a balance, it must be listed. Moreover, one must remain mindful that if a credit card or other similar debt has been paid more than $600.00 in the sixty (60) days prior to filing, it must be divulged within the petition. Accordingly, I would only approve of any such payment on such a card if it had a very small balance and was the type of card that is widely accepted. Of course, even cards with no balances that have not been listed within one’s petition have been canceled at times by the card issuer.
There is a lot in the way of information specifics such as the value of assets and balance amounts on different debts/liabilities that are contained in the bankruptcy petition. This legal document is signed by the petitioner (the one filing) under the penalty of perjury as being both complete and accurate. Therefore, it is very important that each and every page of the petition be gone over closely and preferably with the aid of legal counsel. At Reinheimer & Reinheimer, you will sit down one-on-one with an attorney who will go through each page of the petition with you to be sure it has been properly completed. Legal counsel will also explain the reasons behind what is being listed and where it is being listed within the petition. After all, we’re all in this together.
Whether you are filing a Chapter 7 or a Chapter 13 bankruptcy, the thing you are ultimately looking for is your discharge or what is officially termed as an Order of Discharge. This document means that that your case is over and the bankruptcy proceeding is closed. This is an important document and should be kept along with other similarly important papers. I would suggest you retain a copy of this document for ten (10) years along with a copy of your bankruptcy petition which should have been provided to you by your attorney shortly following the time of your filing.
If you have filed a chapter 7 bankruptcy, you should expect to receive your Order of Discharge somewhere between 65-75 days following your 341A hearing (also referred to as a 341A Meeting of Creditors). You will receive a copy of the order via regular mail. If for any reason you require a copy of the Order of Discharge earlier, you can contact your attorney’s office who will have received the order several days earlier by way of email from the Bankruptcy Court Clerk.
If you have filed a chapter 13 bankruptcy, you may not receive your Order of Discharge for up to several months following your last chapter 13 plan payment. The reason for this delay, versus what happens within a chapter 7 bankruptcy noted above, is the chapter 13 bankruptcy trustee has to perform a final accounting and wait for all disbursed checks issued to creditors to clear. In most instances, the Order of Discharge can be expected within approximately four (4) months following the date of the final trustee payment being made.
A copy of the Order of Discharge will also be mailed to all of the creditors listed within the petition itself. As such, its purpose is to put all parties of interest on notice that the terms of the bankruptcy filing have been completed and the bankruptcy proceeding is now closed.
For those who file or are contemplating filing a Chapter 7 Bankruptcy and own a home, it is important to know about a document which is termed a “Proposed Order of Abandonment.” For some reason, many bankruptcy practitioners fail to explain it and in some cases, even address this most important document. It is especially important for those filing who own a home and wish to keep or protect their home from the reaches of the bankruptcy trustee.
At the 341A hearing (also referred to as a 341A Meeting of Creditors) the assigned trustee will ask the debtor (the person(s) named in the filed petition) about their assets and liabilities which will include one’s home or other real property. Following the hearing, the trustee will determine if there are any assets which cannot be fully protected and thus be sold by the trustee. The proceeds of any such sale would then be distributed to the filing party’s creditors. This can and does include the potential forced sale of one’s home. Most, people, however do not wish to lose their home.
While many trustees will advise the individual(s) of their intent to “abandon” their interest in the home at the hearing, most will not. If the trustee does, in fact, wish to abandon his interest in the home, the trustee must file with the court a “Proposed Order of Abandonment.” This document is usually filed within a few weeks of the hearing date, up to as long as two months after the hearing date. A copy of this document will be mailed to all parties of interest including the individual(s) named in the petition.
The document will note the value of the property, the amount of all liens/mortgages against the property along with the amount of the bankruptcy exemption taken. Anyone who disagrees with the position of the trustee must file a written objection with the Clerk of the United States Bankruptcy Court at least seven (7) days before the scheduled hearing date. All abandonment notices will contain a specific hearing date/time on it in the event any objection is filed. In my twenty-plus years of bankruptcy practice, I have had only one (1) objection ever filed and the creditor objection went nowhere.
Accordingly, when one received such a notice in the mail it should be met with joy and happiness. Put another way, the trustee is walking away from any interest in the house and the home will once again be yours. Many people who have not been advised of this by their counsel interpret this document as the trustee advising them to abandon or leave their home. This, of course, could not be further from the truth.
Once the objection bar date passes the court clerk will author a Certification of No Objection. Your home is officially no longer “in play” and you can continue to live in it without fear of loss……. as long as you continue pay for it. There are no free rides in bankruptcy or in life.
For some people, filing a bankruptcy is simply not an option, whether it is due to personal beliefs or something else. What then is someone to do to clear away their unwanted debt? The answer for some is to consider what I term a “workout”.
As the name may imply, a workout is where one attempts to settle their debt at a (hopefully) far lesser amount than what is otherwise owed to the creditor. This can be done on one’s own or with the aid of legal counsel. This is done outside of any type of court proceeding and in most instances can be completed in only a few months. There are, however, a few things one must be aware of prior to beginning this process.
First off, a creditor is not going to significantly reduce one’s balance amount to then agree on accepting monthly payments towards the reduced balance amount. Rather, any agreed upon reduced balance amount will need to be paid in full, normally within fifteen (15) days or so of the settlement date. This means that one must have a “pool” of money to draw from in order to successfully “workout” the debt in question. Put another way, you’ll need to be able to pay before you begin to play with the creditor. In most instances, a debt will be able to be settled for between 40-60% of the actual debt amount.
Secondly, assuming one is able to resolve their debt with the creditor in this manner, there is the possibility that the creditor will issue a 1099-C for the amount of forgiven portion of the debt. Any debt forgiveness in excess of $600.00 will afford the forgiver of the debt (the creditor) the ability to issue a 1099-C. The 1099-C will indicate the amount of the debt that is being forgiven. In the eyes of the federal government, the forgiven debt amount is the equivalent of income that someone has received but has failed to pay any taxes towards. As such, the greater the amount of the debt forgiven, the larger one’s tax exposure will be. For many, this may not be an issue, but for others this could cause a significant tax obligation in the near future. It is important one is aware of this potential tax exposure prior to commencing a workout.
Like most things in life, workouts are not for everyone. However, for those who can obtain a pool of money, a workout can be a cheaper and quicker alternative to filing bankruptcy. Moreover, resolving a debt through a workout does not impact one’s credit score to the degree that a bankruptcy filing will. It is important to explore all suitable options when you begin experience financial money problems.
The majority of my blogs concern bankruptcy and the nuances pertaining to its system, function or procedures. This blog, however, will discuss the possible ramifications of one losing their home to foreclosure without ever having filed for bankruptcy protection. Let’s face it, some people would do anything to avoid a bankruptcy filing for whatever the reason.
In this scenario, a homeowner in New Jersey has lost their home as a result of a Sheriff’s Sale and never filed for bankruptcy protection or relief. What can happen next?
The first that can happen is the lender files a lawsuit against you with what is referred to as a deficiency suit or deficiency action. Frankly, it is simply a breach of contract action. The defaulting homeowner failed to abide by the terms of the contract (IE: the note and mortgage) and the lender is now seeking to recover all of the damages/ money they were due under the note and mortgage. This would include legal fees, inspection fees, insurance costs and the balance due under the note and mortgage. This type of lawsuit can be filed years after the foreclosure has been completed so there may be quite a bit of time with you looking over your shoulder until you know you are in the clear.
Another thing a lender can do is to send you a 1099C form. This item is sent to both yourself and the IRS. A 1099C is debt forgiveness which in eyes of the federal government is the equivalent of money you have been given to which you paid no taxes on. A 1099C would be sent if the lender has chosen not to bring the deficiency suit against the defaulting homeowner. Any debt forgiveness in excess of $600.00 by any creditor towards another can give rise to the 1099C. Assuming the lender was owed $50,000.00 at the conclusion of the foreclosure and authored a 1099C in this amount to the former homeowner, one could be looking at tax exposure which can run into the thousands of dollars.
Of course, the lender could decide to do nothing following the completion of the foreclosure. Over the past few years I have seen fewer and fewer lenders doing nothing. They are in the business of making money, not losing money.
In the event, however, the homeowner simply filed for bankruptcy protection, the lender would have no ability to either file a deficiency suit or send the homeowner a 1099C. Additionally, the filing of bankruptcy would have afforded the homeowner more time in their home. Learn of your rights before it’s too late. Most attorneys offer free bankruptcy consultations. Get off of the sidelines and get the facts so you can make the best decision of yourself and your future.
The following is a true story. I have changed names and the like to protect the privacy of the parties. That being said, this story is true and reflects how the use of both a bankruptcy and loan modification can be used to save one’s home from a pending foreclosure sale.
Ms. X came into our office with a considerable amount of credit card debt and a looming Sheriff’s Sale. She has just been rejected by her lender for a loan modification which she had attempted on her own. Losing the home was not an option for Ms. X as she has no other place to live and her credit was bad. Her credit card balances exceeded $50,000.00 and hadn’t been paid in months.
I sat down with Ms. X and we went thru a bankruptcy petition. Based on her facts and circumstances, we determined it was best for her to begin with the filing of a Chapter 7 Bankruptcy for several reasons:
- First, this filing would halt the Sheriff’s Sale due to the Automatic Stay provision of the bankruptcy code.
- Secondly, the Chapter 7 bankruptcy would discharge her credit card debt and help balance out her debt-to-income ratio which would likely help with any future loan modification attempt.
- Thirdly, the bankruptcy would help protect the client from any deficiency suit or 1099C exposure in the event the home was ultimately lost to foreclosure.
- Lastly, there are times that a bankruptcy filing will bring the lender back to the loan modification “table” for a number of different reasons.
The Chapter 7 bankruptcy was filed for Ms. X. We decided that we would begin a new loan modification for her a few weeks after her 341A hearing. As I have noted in an earlier blog, most Chapter 7 341A hearings are scheduled approximately one (1) month after their petition is filed. At the 341A hearing, the trustee was advised of our intentions to pursue the loan modification and we asked the trustee to abandon his interest in the property as soon as reasonably possible.
The 341A hearing went according to plan and a few weeks later Ms. X appeared in my office to tackle the loan modification. As you can imagine, Ms. X was apprehensive about attempting another loan modification after receiving a denial a few months earlier from this very same lender. Despite her trepidation, we completed all of the necessary forms and submitted them along with all of her supporting documentation.
I am happy to report that after two (2) months of going back and forth with the lender, Ms. X was offered a trail loan modification. After making her three (3) month’s of trial payments, she was offered a permitted modification by the lender. Years later she is still living in and enjoying her home. This proves that good things happen to good people. I was glad to help.
Chapter 13 bankruptcy is a type of bankruptcy filed solely by individuals. It is a type of bankruptcy filing where the individual is paying some of his creditors back something. A Chapter 13 sets forth a “plan” which specifies who will be paid what per month and over what period of time. A Chapter 13 plan may last as little as three (3) years but many not exceed five (5) years in length.
A Chapter 13 can be used by an individual to pay back mortgage arrears, automobile arrears and even past due taxes. In fact, all of these and more can be taken care of within one’s Chapter 13 plan. While you are in a Chapter 13 bankruptcy no interest, fees or penalties will accrue. Assuming one were to pay their mortgage arrears in their plan, the individual would resume paying their customary mortgage payment on the first day of the month following their actual month of filing.
A Chapter 13 Standing Trustee is appointed to the case shortly following the time of the bankruptcy filing. It is the trustee’s jobs to both collect and disburse the monies paid into his office to the respective creditors pursuant to the terms of the plan. One would begin making their trustee payment on the first day of the month which follows their month of filing. Accordingly, if one filed on April 15th the first trustee payment would be due on May 1st. There are three (3) trustees in New Jersey and one (1) Chapter 13 Trustee is assigned to each of the 3 vicinages in New Jersey. The three (3) vicinages are Trenton, Camden and Newark. Trustee payments can be made either online or by mail. If you decide to pay by mail you must be aware the Chapter 13 Trustee will not accept personal checks or cash payments. Payments must be made in the form of either a money order, bank check or with certified funds.
Some people who meet with me wish to file a Chapter 13 to repay mortgage arrears and the like while others can be forced to file this more timely and costly bankruptcy. This would be someone who on paper shows surplus income when comparing their petition schedules “I” and ”J”. If one is found to have extra money left in their budget (budget calculation does not include payments to unsecured debts such as with credit cards, etc.) this surplus amount must be paid to creditors. Also, under the bankruptcy code revisions which took effect on October 17, 2005, the median income now can play a factor with a Chapter 13 case. The median income means the average that people in your state with your family size earn yearly. If you are above this income amount you will have to file a Chapter 13 plan for five (5) years unless you can pay all debts off in a shorter amount of time.
I have filed Chapter 13 plans which have paid thousands per month for five (5) years. I have also filed Chapter 13 plans which paid $100.00 per month for three (3) years. It is important you speak with a law firm that is willing to take the time to carefully and personally go through your income and expenses and formulate the best possible plan which will ultimately meet with success. At Reinheimer & Reinheimer we take the necessary time to form the best plan for you and your household.
On October 17, 2005 the United States Bankruptcy Code underwent massive revisions. One of the changes concerned the new requirement of having to take two (2) courses as part of any bankruptcy filing.
Section 109(h) of the United States Bankruptcy Code makes one ineligible to file for bankruptcy unless within the 180 days prior to filing for bankruptcy the individual(s) takes and receives a credit counseling class from a non-profit credit counseling agency that has been approved by the United States Trustee. The lists of such approved agencies vary from state to state. This first course, which we refer to as the “credit counseling course”, can be completed either by phone or online. Most agencies are open at least six (6) days per week.
The first class will generally take between forty-five (45) and sixty (60) minutes to complete. Usually within thirty (30) minutes of completing the first class, a certification will be created. Most agencies will mail and/or email the certification to both the individual taking the course and their attorney. The purpose of this first course is for the agency to try and help the individual reign in or adjust their monthly budget. The certification must be filed along with the individual’s bankruptcy petition. Failure to do so will lead to a dismissal of the bankruptcy petition by the court.
A second course must also be taken. I refer to this as the “Personal Financial Management Course.” This second course must be completed after the time of filing but before the bankruptcy case closes. Bankruptcy code sections 727(a) and 1328(g) are what mandates the completion of this second course. The purpose of the second course is to help the individual strengthen their future budgeting and planning skills. It is meant to help people avoid future financial problems due to issues with operating within a household budget. Failure to complete this course will mean that a discharge will not be granted. This would cause any of your debts that were not paid within the bankruptcy to remain your legal obligation to pay.
The Personal Financial Management course is taken after the time of filing but prior to the bankruptcy case closing. A Chapter 7 bankruptcy will usually remain open for no more than four (4) months. A Chapter 13 bankruptcy, however, can remain open for between three (3) and five (5) years. In both types of cases, I strongly urge the client to complete the second (2nd) course within the first month or two of filing. This way, there is no concern with the client receiving his/her discharge at the conclusion of the case. A discharge is a document which means one is no longer legally responsible to pay certain debts. The primary reason most people file for bankruptcy is to obtain relief for some or even all of their underlying debts.
Many law firms briefly address these two (2) classes and don’t explain the importance and nuances of each. At the firm of Reinheimer & Reinheimer we take the time to go over and explain the importance of each class requirement and what can be expected with each.
You have scheduled an appointment to meet with an attorney to discuss your financial situation along with a possible bankruptcy filing. What should you expect to bring in for the meeting? For some unexplainable reason, many law offices simply schedule an appointment for you with no documents being requested. I consider this to be a complete waste of time for all parties. Proper legal advice cannot be provided without the benefit of reviewing certain items of information. Below I have addressed some of the items that my office will request to be brought in at the time of the initial meeting. The more of these items that can be brought in for the meeting, the more comprehensive the legal advice will be.
If you own a house, whether you wish to keep or surrender the house, counsel should be provided with proof of the house value, copy of the filed deed along with a statement which notes how much is owed on the mortgage(s). If you have more than one (1) mortgage on the property, a statement should be provided for each mortgage. A house is generally the largest purchase in one’s life. The value of a house can greatly impact a bankruptcy filing and this asset must be closely explored by counsel. Without this house information, many times counsel is doing nothing more than making an educated guess.
Proof of income or paychecks of all working adults in the household are also very important to bring in for the initial meeting. My office will generally request between one (1) to two (2) months worth of paychecks from all working adults in the household. Even if one spouse is not filing, their income must be calculated and noted within the petition. Any other sources of monthly income such as social security and disability must also be provided and ultimately verified by legal counsel.
I normally ask a client to also bring in at least one bank account statement. Ultimately, my office will collect two (2) or three (3) months of bank account statements. Most trustees will formally request that recent bank statements be provided to them for review shortly after the bankruptcy petition is filed. At the initial meeting, bank statements can be used to verify income and monthly expenses. Sometimes these statements reveal other sources of income that were not otherwise divulged by the client at the meeting.
I also like to see at least one (1) state and federal tax return at the initial meeting. If you are only bringing in one (1) tax return, it should be the most recently filed tax return. By the time of any bankruptcy filing, my office will have no less than two (2) years of tax returns- assuming one is legally required to file a tax return. A close review of tax returns can give the attorney a good idea of the yearly household income. It can also reveal any business interests that may exist along with other financial information such as dividend income and the like.
Any statements concerning retirement accounts should also be brought into the meeting. While these types of assets, even if significant in amount, can easily be protected within the bankruptcy petition, they must still be divulged with specificity. Additionally, if you can have any term or whole life insurance, the actually policy should be reviewed by counsel. If you own a whole life policy, try to obtain a recent statement which notes the amount of cash surrender value presently contained within the policy.
A recent credit report is also helpful at the initial meeting. My office recommends Annualcreditreport.com. Through this site you may obtain a free credit from each of the credit reporting agencies. Please be sure to obtain a printable version of the credit report and not a summary. This site will not provide you with a credit score but your score will never be needed by the attorney. This is a secure and reliable source for anyone to obtain a complete and accurate credit report. Many times I identify otherwise unknown creditors for my clients by reviewing their credit report(s).
In many instances I will conduct initial meetings without a lot in the way of supporting documents. What I have found is the best advice and game plans are formulated when the potential clients comes with as much in the way of the items noted herein. Upon calling my office, information is obtained. It is based upon the information provided that we are able to advise you what items to bring in. As noted, previously, this list is not exhaustive by any means. Your time is valuable. To make the best use of your time, come prepared for your initial meeting. It’s always better to bring in too much versus to little.
Within a few days of your Chapter 13 bankruptcy petition being filed a 341A hearing will be scheduled. This hearing is also referred as a 341A Meeting of Creditors. The United States Bankruptcy Code 11 USC § 341 is what authorizes this hearing. As the name suggests, creditors may attend this hearing and ask questions of you during this proceeding. In a vast majority of cases, however, no creditors attend. In a Chapter 13 hearing, secured creditors such as mortgage companies and the IRS are the most likely parties to appear on the creditor side.
Much like with a Chapter 7 341A hearing, the Chapter 13 341A hearing is usually scheduled approximately (1) month from the date of filing. Each of the 3 Bankruptcy venues in New Jersey (Newark, Camden & Trenton) only have one Chapter 13 Trustee. They are referred to as a Chapter 13 Standing Trustee. Each of the three trustees will conduct their 341A hearings on one particular day each week. For example, the trustee for Trenton only conducts his 341A hearings on Thursday. Hearings can be scheduled for as early as 9:00 a.m. and most case lists will end with a start time no later than 2:00 p.m.
You will receive notice of this hearing date/time within approximately one week from the date of your filing. Your attorney should receive the hearing notice within two days of your petition filing. Despite receiving your notice directly from the court, your attorney should also be providing you with the date and time of your hearing.
Your hearing will not be conducted in a courtroom setting. Rather, Chapter 13 341A hearings are conducted in the private office of the trustee. You will need to have both a photo ID and proof of Social Security number at the time of your hearing.
Chapter 13 hearings tend to take longer than its counterpart, the Chapter 7 341A hearing. While most hearings will take far less, it is fair to estimate a hearing taking close to 15 minutes or so to complete. If one has filed a joint petition, both parties must attend the hearing and both will be expected to answer each question posed during the hearing. Your attorney will be seated directly to your side throughout the entire proceeding. Notwithstanding this, you will be the one expected to answer the questions. Be sure you have closely reviewed your entire petition and Chapter 13 plan prior to the actual hearing. This is not an open book test.
Outside of the hearing room(s) there will be an area to be seated. This is where you will be able to meet with your attorney and discuss any remaining issues. You may attend your hearing with your friends or family but they will not be permitted inside of the hearing room itself. The room will be designated for the trustee, yourself, your attorney and any creditors that might appear.
The questions that can be posed during the hearing can vary greatly. I generally will go over a likely “skeleton” of questions with my client in my office to see how they do. From there I will go over any of the issues contained within the client’s petition and formulate questions concerning any such issues.
Good eye contact throughout the hearing is needed. If you don’t understand the questions asked, you should request the trustee to clarify the question. Never guess! This is likely your only appearance in the case so prepare for it accordingly. You never get a second chance to make a first impression. A good law firm will closely go over all of this and more with you. Be prepared, stay relaxed and your hearing will be over before you know it.
Many people in New Jersey who are facing a foreclosure have turned to a loan modification in an attempt to save their home. The loan modification can be done on your own or with the aid of a third party, such as an attorney. You do not need to have anyone do this for you. However, if you do choose to have a third party attempt the loan modification on your behalf, be sure to use someone from your home state or within a reasonable driving distance from your home. I have personally witnessed my client’s horror stories of them paying a company on the other side of the country thousands of dollars only to have absolutely nothing done for them. By nothing, I mean not even submitting a loan modification package on their behalf.
Some lenders will initiate the process by sending a cover letter along with a loan modification package to the client before a request has been made. In most instances, however, you must start the process. You may do so by either calling the lender directly and asking them to mail the package to you or you may go online and download the modification package directly from the lender’s website.
It is very important that you fully complete the entire package. I have seen loan modifications returned by a lender due to a single box failing to be checked off. If you are unsure of something found within the loan modification package and you are completing it on your own, call the lender and ask them about it. While it may be difficult to get the lender on the phone, it will ultimately save you a great deal of time.
Be sure your loan modification package contains a Dodd-Frank Certification and a 4506-T form. If your package does not include them, it is very easy to locate both forms via an online search. For example if you typed either documents name while doing a “Google” search, you will immediately locate them.
Once the loan modification package is completed, you must submit it to the lender along with the number of other documents. Generally, any loan modification package that I submit on behalf of a client will also include the following in addition to the several page loan modification form itself. They are as follows:
- Two (2) months of bank account statements;
- 60 days proofs of income;
- Last two (2) years of tax returns (signed and dated);
- Recent Mortgage statement;
- Hardship letter (signed and dated);
- Two (2) utility bills and
- Credit card statements which have outstanding account balances.
After you have submitted all of the supporting documents along with the loan modification package, you will need to follow up with the lender no less than once per week. You need to be sure the lender has all of the needed items. You will also want to monitor the overall status of your submission. While each call into the lender can be both timely and frustrating, it needs to be done.
The initial goal is to have your loan modification sent to underwriting. Once in underwriting, the lender’s underwriter will closely scrutinize all submitted documents. Your papers may remain in underwriting for as long as thirty (30) days. Once your package leaves underwriting you could be given a denial, a trial loan modification or a request for additional items to be provided.
If a denial is given, you may either accept the denial or appeal the denial. The appeal would need to be based upon an error on the part of the lender. The time within which to appeal a denial is usually limited to thirty (30) days from the date of denial. Successful appeals are few and far between.
If you are approved, you will be offered a three (3) month trial. Once you have successfully completed the three (3) months of trial mortgage payments you will be offered your permanent loan modification. Upon signing and returning the final loan modification package to the lender, your foreclosure will be dismissed.
A loan modification can be sought before a foreclosure complaint is filed. Most lenders, however, will not consider a modification unless the mortgage account is at least two (2) months or more behind. A loan modification application can proceed to the three (3) month trial payment stage in a matter of weeks or it may take as long as several months to get to this stage. It all depends on the lender in question and how quickly you can get all of the necessary items over to the lender.
Patience and constant communication with the lender is needed in order to put yourself in a position to receive a loan modification. If you have been denied a modification in the past, you may seek a loan modification again. However, some lenders will not entertain a loan modification if you have previously received one on the same property. Other lenders have a policy which dictates how much time must pass between loan modifications. Don’t be afraid to ask you lender about their loan modification policies before you begin what can be an exhaustive and frustrating process.
You have now been served with a foreclosure complaint. Your head is spinning and your stomach is in a knot. What do you do? The first thing you do is to try not to panic. New Jersey is a judicially supervised foreclosure state. This means the court will preside over the case until the time of the Sheriff Sale.
While it can and will vary from county to county, most New Jersey foreclosures will take approximately one (1) year to complete. Accordingly, you will have ample time remaining in the property to determine what course of action, if any, is right for you.
You need to initially determine if you wish to “save” the house or simply try to stay in the home for as long as possible. The direction you choose will lead you to and through different avenues.
Assuming you wish to try to save the house, you may attempt a loan modification directly with the lender. An attorney who is well versed in dealing with loan modifications can help you with this process. You do not need to have any professional help you with seeking or obtaining a loan modification although you may find one to be helpful.
Contact the lender and ask them to mail or email you a loan modification package. Many times one can download or print out a loan modification package directly from the lender’s website. Once you have the package, you need to carefully complete all applicable portions of the package. The package and supporting documents such as paychecks will then need to be forwarded to the lender. As this blog does not concern how to obtain a loan modification I am not going to go into specifics on how the modification process can and will play out. Suffice to say, if you jump through all of the right hoops, the lender should offer you a trial modification. Upon making three (3) trial payments in a timely manner, you will be offered a permanent modification.
Once the permanent loan modification is signed and returned to the lender, the process will be completed. As a result, the foreclosure complaint will be withdrawn by the lender and the risk of you losing your home will be gone.
Another option that can be explored to save your home would be filing a chapter 13 bankruptcy. This type of bankruptcy will afford you up to 5 years to pay back all of your mortgage arrearages. While you are repaying the arrearages, you must resume making your customary monthly mortgage payment. The first mortgage payment will be due on the 1st of the month following whatever month you file bankruptcy within. At the end of your bankruptcy, you will be current with all arrearages. The mortgage lender must accept payments made by yourself and the chapter 13 trustee while your bankruptcy case is pending.
Upon the filing of a bankruptcy petition, the foreclosure process must stop. This is due to what is called the “automatic stay provision” found within the United States Bankruptcy Code. It means that all collection activity and lawsuits which pertain to your debts which arose prior to the time of your bankruptcy filing must stop. As long as your chapter 13 case remains open and you continue making both your trustee and post-filing mortgage payments, the foreclosure cannot and will not proceed and your home will be saved.
If you do not wish to try and save your home, you still may wish to file a bankruptcy. Assuming one qualifies, a chapter 7 bankruptcy might be considered. This type of bankruptcy does not afford you the opportunity to pay back any mortgage arrears. This wouldn’t be an issue as you don’t want to save the house anyway. However, by filing a chapter 7 bankruptcy you can be sure the lender will no longer be able to file a deficiency suit against you or send a 1099-C form to you at the conclusion of the foreclosure.
A 1099-C is the amount of debt forgiveness afforded to you by another. Any debt forgiven in excess of $600.00 can give rise to a 1099-C. In the eyes of the federal government, the amount of debt forgiven is viewed as income paid to you which you paid zero in the way of taxes towards. This could cause you quite a tax issue within your tax year in question. The chapter 7 bankruptcy filing removes this type of potential exposure.A deficiency suit is where the lender sues you for any money they have lost or have laid out of their pocket as a result of you not paying your mortgage and the resulting foreclosure.
A chapter 7 bankruptcy filing might also afford you a bit more in the way of time in your home. As with chapter 13 filing, upon the filing of the chapter 7 bankruptcy the automatic stay will stop or halt the Sherriff Sale. Counsel for the lender would then need to file an application with the court seeking to have the automatic stay lifted. This takes time and once filed, the motion will not be heard by the court until approximately one month from its date of filing.
When you are facing a foreclosure it is always best to sit down with an attorney who practices in the areas of foreclosure and bankruptcy. Learn your rights, don’t sleep on them. Ignoring the problem will not change the reality of your situation. While you have some time to act, time is not on your side in this regard. At Reinheimer & Reinheimer our bankruptcy consultations are absolutely free of charge. Give us a call and let’s explore your options together.
In the area of bankruptcy law there is no “one size fits all.” Some people will have a far greater tolerance in handling financial stress than others. I have filed bankruptcy for people who owed as little as a few thousand dollars and for some people who have had hundreds of thousands of dollars worth of debt. Some people arrive in my office without having ever been late with a payment while with other clients I learn they haven’t made a payment to a creditor in several months or even years.
While there is no single reason why someone must file bankruptcy, there are some warning signs which might form a basis for you to sit down with an attorney and discuss the possible filing of a bankruptcy petition as a solution to some or most of your financial problems. Below, I will touch upon many of the tell-tale signs that someone should consider a bankruptcy filing.
- Cash Advances – While taking out a cash advance doesn’t mean on its face that you should file bankruptcy, a thought must be given why such an “advance” was needed in the first place. How much money was taken? How often have you taken cash advances in the past year? Since you begin paying interest on the cash advances the moment the money hits your hand and at a higher interest rate than a normal credit card purchase, there needs to be an immediate and vital reason to do so. If the cash advance is being used to pay for groceries or even utilities, there is likely a cash flow problem and you need to sit down with an attorney to discuss your options. The amount one is taking and the frequency of the cash advances also go a long way in determining the problems a household is facing with paying their monthly bills.
- Automobile/ Mortgage Arrearages– If you are consistently falling behind or paying late on either your automobile and/or mortgage payment it is usually a sign of financial problems. With regards to a mortgage payment, its due date is the 1st of the month. Any payment received after the 15th of a given month is considered late. Too many people come to me and feel as though their mortgage payment is due by the 15th. Your payment should be in possession of the lender on or before the 1st of the month. While paying an automobile loan or mortgage payment late is a small sign of a problem, being one or more months behind with such an important payment is a sign of a larger problem. Don’t be afraid to talk with a professional such as a well-seasoned bankruptcy attorney to see what can be done to reverse this trend.
- Max Limit Met on One or More Credit Cards– If you have “maxed out” (or about to) one or more lines of credit it is a sure sign that while things are not right, they are about to get worse. Generally, a creditor will extend a line of credit to you in an amount one should be able to manage based on their earnings and other monthly payment obligations. By either closely approaching or even exceeding the assigned credit limit, you have shown you do not have enough disposable income available to meet your financial obligations. If this is the case with more than one credit card or other line of credit, clearly something is wrong and a consultation should be sought.
- Types of Charges being made– Every household from time to time will encounter a particularly bad month or two. This is a normal and should be expected. This is where a credit card can help bridge the gap. If, however, you are consistently charging things such as groceries or utilities it is a sign there’s a financial problem in the household.
- Credit Card/ Other Unsecured Debt– While most of us carry credit card balances from month-to-month you need to monitor how much debt you are, in fact, carrying over each month. As most bills come in at different times over the course of a given month, many people don’t realize how much they owe in total to all of their creditors. Many are surprised to learn exactly how much they owe when I review their debt total and discuss it with them. How much do you owe versus your yearly household income? Your yearly household income should be far greater than your credit card and other unsecured debt amount total (IE: credit cards, medical/dental bills, personally loans, etc.). Scraping by each month only to make the minimum monthly payment amount is not a good thing. Assuming one continues down this path and never used the line of credit again, it would take well over a decade to completely pay off the entire balance amount. Just because you have “never been late” on a payment does not mean you are doing well.
- Bouncing of Checks– At some point in everyone’s life they have likely bounced a check. The problem is that in many jurisdictions a bounced check can lead to a hefty fine and even a Disorderly Persons offense on your record. How often have you bounced a check? What were the amounts of the bounced checks? Obviously, the more frequently this happens the more likely one is struggling financially. Additionally, if you are bouncing checks made out for nominal amounts, it is likely a very bad sign.
- Wage Garnishment/ Bank Levies/ Civil Judgments– If any of these things are happening or have happened to you it should be taken as a clear sign that things are not going well and help should be sought. This downward spiral will begin with a lawsuit being filed against you. An answer to the complaint must be filed within thirty-five (35) days of being served with the complaint. If you answer the complaint and lose the case, the court will enter a judgment against you. If you ignore the complaint, the court will enter a default judgment against you. Once default has been entered against you, the attorney for the party suing you can and will apply to the court for a final judgment. Once entered, a civil judgment is obtained and the party will begin trying to collect on their judgment. The most popular ways to collect on a judgment is by freezing bank accounts and garnishing wages. Sometimes this happens very quickly while other times it may come many months or even years following the judgment being entered. No news is not good news in the world of judgments. After twenty (20) years, a creditor may choose to renew the judgment for another twenty (20) years. Thus, a judgment can literally follow you to the grave.
This list is not meant to be exhaustive. Rather, it is but a few of the many warning signs that it might be time to speak with an attorney about bankruptcy. Putting your head in the sand will not make the bad things go away. You owe it to yourself and your family to take back control of your life and your finances. At Reinheimer & Reinheimer all of our bankruptcy consultations are absolutely free. Most consultations will take between sixty (60) to ninety (90) minutes to complete. Learn your right and responsibilities. Give us a call and learn about what we can do for you.
Within a few days of your Chapter 7 Bankruptcy petition being filed with the court, a hearing will be scheduled. This hearing is referred to as a 341A Hearing or as a 341A Meeting of Creditors. They are one in the same no matter how they are referred to. It is the Bankruptcy code at 11 USC §341 which gives this hearing its life.
With a Chapter 7 filing, the hearing is usually scheduled to take place approximately one (1) month from the date of filing. The exact timing of the hearing date can vary based on the amount of filings in any given month within the respective bankruptcy viscinage. You will be given a date and time to appear at the hearing. In most instances you will be afforded at least three (3) weeks advance notice of the hearing.
Within approximately one (1) week of your bankruptcy petition filing you will receive your first notice in the mail. This notice will be generated by the Bankruptcy Court Clerk and will advise you of your hearing date and time. If your petition was filed with the aid of an attorney, your attorney will likely learn of the hearing specifics within two (2) days of filing the petition. Most attorneys will pass the hearing specifics along to the client despite the court notice that will be sent directly to the client.
At the 341A hearing you will need to present a photo identification along with proof of your social security number. The hearing will not take place in a courtroom and no judge will be present at the hearing. The hearing will be conducted by a Chapter 7 trustee panel member. Most of the three (3) New Jersey bankruptcy viscinages (Camden, Newark and Trenton) have several different panel trustees and the cases are distributed to each of them through the United States Trustee’s office. While formal attire is not required at the hearing, one should dress casual but appropriately for this court-like event.
Most Chapter 7 341A hearings will take less than ten (10) minutes to complete. You should expect to receive twenty (20) or so questions at the hearing. If represented by legal counsel, your attorney will be seated directly to your side. That being said, you should closely review your petition prior to the hearing and be both comfortable and familiar with its contents at the time of said hearing. You are the one under oath at the time of your hearing, not your attorney. Some panel trustees will not allow counsel to speak much, if at all, during the hearing for this very reason.
It may be helpful to meet your attorney outside of the hearing room prior to your testimony to go over any last minute questions or concerns. You may attend the hearing with anyone you wish. They can enter the hearing room and provide you with all the support your need. Any such guests, however, should not sit at the hearing table with you at the time of your hearing.
Many of the questions posed at the hearing can be answered with a simple “yes” or “no”. It is important to answer the question that is posed. For example if one were asked if they have a bank account and assuming they do have an open bank account, the answer would simply be “yes”. Don’t volunteer information at the hearing. The hearing itself is quick. You are not saving yourself any real time in talking about what accounts you have and how much are in the respective accounts. Let the questions come to you and answer the question that is posed to you.
A good attorney will go over all of this with you well before the hearing is even scheduled. At Reinheimer & Reinheimer, we actually do a “mock” hearing at your signing appointment to see how you do and what might need to be worked on. We also bring you to the hearing well before your scheduled time. This way, you have ample time to get comfortable in your new surroundings and have the ability to watch other hearings take place.
In New Jersey, foreclosures remain active and is a judicially involved process. Depending on the county where you reside, it can take upwards of twelve (12) months or more to complete a foreclosure from the time of service of the foreclosure complaint to the date of the sheriff sale. So while you have some time until you will be removed from the property by way of a foreclosure complaint being filed, it is important to speak with legal counsel early on and learn your rights.
If you no longer wish to own the property and do not want to try to save the home from foreclosure, you still need to be aware how the foreclosure can impact you following the sheriff sale. A lender can choose to sue you personally for any and all sums still owed to the lender following the sheriff sale. This is often referred to as a deficiency suit. This type of lawsuit would be filed in New Jersey Superior Court in the county where the home is located. You would be provided a specific period of time to file an answer to the complaint. If you fail to do so, default and default judgment would be entered against you. Once entered against a party, the judgment is valid for twenty (20) years.
A lender could also forego a deficiency suit and provide you with a 1099C. A 1099C can be issued by a creditor who has forgiven more than $600 worth of debt on behalf of another. A 1099C is viewed by the federal government as income to which you have paid no taxes towards. This can lead to future tax issues and perhaps money owed to the IRS as a result of receiving the 1099C. You must then claim the amount forgiven as income or run the risk of an audit for failing to disclose all of your income. While this scenario looks bleak, there are two (2) different types of bankruptcy filings that could help.
A chapter 7 bankruptcy can help in a few different ways. First, the chapter 7 filing will stop the foreclosure process and provide the average person with more time in the property. Additionally, once the chapter 7 bankruptcy is completed, the lender will no longer be able to send a 1099C to you. By filing the chapter 7 bankruptcy, you will have effectively “insulated” yourself from any and all (future) negative exposure to the house. It is also my experience that most people who are being foreclosed upon also have additional debt in the form of credit cards, medical bills, personal loans and the like. The chapter 7 bankruptcy filing will take care of these debts as well.
Following the completion of the chapter 7 bankruptcy, you may wish to attempt to save the house by attempting a loan modification with the lender. Many of our clients have sought and obtained loan modifications following their bankruptcy filing. Some clients have received loan modifications following their bankruptcy filing even though they were denied a loan modification by the very same lender prior to their filing. This may be due to the fact that one’s debt-to-income ratio is in better alignment following the bankruptcy filing and ultimate bankruptcy discharge. It may also be due to the lender realizing that the homeowner is no longer on the “hook” and the lender doesn’t wish to put any more time and money into the property. For whatever the reason, I have seen a great deal of success in saving a home by filing a chapter 7 bankruptcy followed by an application with the lender for a loan modification.
For someone who wishes to save their home but aren’t otherwise able to file a chapter 7 due to excess household income or some other reason, a chapter 13 bankruptcy can be utilized. Under a chapter 13 bankruptcy you will be given up to sixty (60) months to make up all of your mortgage arrears. On the first of the month (following your month of filing) you would have to resume making your mortgage payment as if you were never late with a payment. The lender would have to accept the monthly payment from you. Once your case has been confirmed (approved) by the court, the chapter 13 trustee would begin paying the mortgage company on a monthly basis out of the funds you have to pay monthly to your trustee. At the conclusion of your chapter 13 plan, all of your mortgage arrears would be current. As with the filing of a chapter 7 bankruptcy, the filing of a chapter 13 bankruptcy would immediately halt or “stay” any foreclosure proceeding upon the filing of the bankruptcy petition.
This is a streamlined blog on what is otherwise a vast area of the law. An experienced attorney will take the time to go through each scenario and legal avenue with you to help arrive with a plan that works best for you given your surrounding facts and circumstances.
At Reinheimer & Reinheimer you always meet with an attorney who will give you his utmost attention. We realize that your home is more than just a place where you sleep at night. Rather, it is a place where you raised your family or where many fond memories and milestones were formed. At our firm you become a part of our extended family. Make the call today and allow us the opportunity to help you make the best choice for yourself and your household.
Bankruptcy, like many other areas of the law, can be intimidating to some and unthinkable to others. In this digital age that we live and operate in there are a lot of places that one can find information and opinions. The purpose of this piece is to address some bankruptcy misconceptions that have arisen from speaking with clients over my many years of practice in this area of the law. My hope is to separate fact from fiction. The following discussion will address the top misconceptions of bankruptcy and filings in the State of New Jersey as bankruptcy laws can and will vary from state to state.
1. Your Credit is Gone for Good
One of the first bankruptcy misconceptions that clients hold is their concern that they will be unable to secure credit in the future or ever be able to purchase a home or a car following a bankruptcy filing. This is simply not true.
Offers for credit will resume and in many instances, within only a few months after one’s filing. While it is true that any such offers may come with a higher than usual interest rate, the credit offers will come.
I normally suggest to my clients that they wait one (1) year following their filing to attempt to purchase an automobile and two (2) years following their bankruptcy filing to attempt to purchase a home.
2. All Credit Must Be Exhausted Before Filing Bankruptcy
Another misconception regarding bankruptcy concerns one’s use of their lines of credit prior to filing. Put another way, some clients seem to think it is fine to “run up” their charge cards and other lines of credit prior to filing. This is not appropriate and can be deemed as fraudulent.
The general rule of thumb for debts in bankruptcy is that they can and will be discharged. This means the individual is no longer legally responsible to pay the debt(s). Creditor’s, however, can sue someone within the bankruptcy court system and argue that either all or a portion of their underlying debt is non-dischargeable.
Generally, in the ninety (90) days prior to filing one should not charge more than $500.00 on any one line of credit for luxury goods or services. Cash advances in excess of $750.00 in the seventy (70) days prior to filing can and likely will lead to creditor issues within one’s bankruptcy.
The less activity on the lines of credit prior to filing, the better the chances of the case proceeding without any issues. Remember, bankruptcy relief is afforded to the unfortunate and innocent person who has fallen on difficult times.
3. Not Every Debt and Asset Needs to Be Listed
Another bankruptcy misconception many people have is they can pick and choose what debts are included in their petition and which assets they want listed in their petition. All assets and all debts must be included in the filed petition.
If you have a credit card that has no balance at the time of filing, it does not have to be listed in your petition because without a balance it is not actually a debt. If that same credit card had a $10.00 balance at the time of filing, it would need to be added to one’s petition.
No individual has the right to pick and choose what creditors or assets will be listed within their bankruptcy petition.
Frankly, if one files for bankruptcy and fails to list a card with a nominal balance, the credit card company will ultimately learn of the filing and cancel the card. Less is more, both in life and prior to one’s filing.
Assets must also be listed, whether they are subject to a lien (loan or lease) or fully paid off. It is the job of your counsel to fully divulge all assets, assign fair and reasonable values to all such assets and to protect the assets for their client(s) through the use of bankruptcy exemptions.
In most instances, there is no problem in protecting all of one’s items of value within the body of their petition.
4. Bankruptcy Also Hurts Your Spouse
Another misconception concerns spouses and the need for one or both having to file. No one is required to file a bankruptcy petition because they are married or because their spouse is going to be filing for bankruptcy.
In some instances, a vast majority of the entire household debt is only in the name of one spouse. If that is the case, there would be no need for the other spouse to file. If, however, a majority of the debts are joint or both spouses have a significant amount of debt in their respective names, it would then be appropriate for both spouses to file for bankruptcy.
Even if only one (1) spouse files, however, the non-filing spouse will still need to provide proof of income, tax returns, and the like so the filing spouse’s bankruptcy petition schedules can be properly and fully completed by legal counsel.
5. You Will Lose All Your Property
A lot of people are fearful of a bankruptcy filing as they believe they will lose all of their property and belongings. The concern is they will be left with nothing and will have to start their life all over again. This is simply not the case. In New Jersey, different types or categories of both real and personal property have different amounts (monetarily) that can be protected.
In a vast majority of cases, my clients are able to exit bankruptcy with all of the property they entered their bankruptcy with. A knowledgeable attorney will carefully go through all of one’s assets and fully protect them with what are called “exemptions”.
A well-seasoned attorney will be able to advise almost immediately if the value of a particular asset or assets will be a problem protecting within one’s bankruptcy petition.
6. Your Bankruptcy Will Be Widely Published
Many people are of the misimpression that once they file for bankruptcy they will be published in some sort of paper and all of their friends and family members will learn of their filing. In New Jersey, the only publications noting bankruptcy filings have dealt with business’. Tens of thousands of individuals file for bankruptcy each year and none need to fear ending up in a newspaper or periodical.
While bankruptcy filers are part of a public record, the only parties that will actually receive formal notice of one’s filing are the creditors of the party filing and not the general public at large.
7. Bankruptcy Filing is a Difficult Process
Bankruptcy is not as hard to file as many people think. In my office, I currently meet with a client on three (3) different occasions with the initial appointment being the longest at approximately sixty (60) to ninety (90) minutes in duration. This is where the assets and liabilities are gone over and the client is provided with a list of any additional items that will be needed to complete our thorough evaluation.
The second appointment will customarily last between thirty (30) and forty-five (45) minutes.
The third appointment is the signing appointment at which point the bankruptcy petition draft is gone over and any necessary changes are made. This appointment usually lasts sixty (60) minutes. All of our appointments are conducted by the attorney.
8. All Debt Will Be Discharged
Another misconception in bankruptcy concerns the types or kinds of debts that can be wiped out or discharged. Domestic support obligations such as alimony and child support cannot be extinguished as a result of a bankruptcy filing.
Student loans, however, can be discharged but only after several factors have been met and generally only after a trial has taken place before the bankruptcy court. Generally speaking, one who enters bankruptcy with a student loan will exit their bankruptcy with that same student loan.
The general rule of thumb is that one’s debt will be discharged. However, depending on how the debt was incurred can impact the ability to discharge the obligation.
A debt incurred by and through fraud will remain the responsibility of the bankruptcy filer if the Bankruptcy Court finds the debt arose through fraudulent conduct or other form of fraudulent communication. Fraudulent conduct would be deemed an “exception” to discharge.
Other exceptions to the general rule of discharging debts are fully noted within section 523 of the United States Bankruptcy Code.
It is important to find an attorney who is willing to take the time to go over the past history of all debts to see if any of the “exceptions” to discharge come into play prior to any filing.
Credit cards, medical/dental bills and personal loans can all be discharged in a bankruptcy.
You may also walk away from your legal responsibility to pay for automobile loans/leases and mortgages in a bankruptcy. However, if you walk away from these types of secured debts you will not be able to keep the asset.
9. You Can Only File for Chapter 7 Bankruptcy Once
Just because someone has filed for bankruptcy in the past does not mean they can never file for bankruptcy relief again in the future. An individual who has received a discharge in a Chapter 7 within the past eight (8) years cannot receive another Chapter 7 discharge.
The individual must wait until eight (8) years from the date of their prior Chapter 7 filing until being able to receive another Chapter 7 discharge. This is governed by section 727(a)(8) of the Bankruptcy Code. Section 1328(f) of the Bankruptcy Code prevents a person who is filing a Chapter 13 from receiving a discharge if the individual receives either a Chapter 7, 11 or 13 discharge during the four (4) years proceeding the pending Chapter 13 petition date or received a Chapter 13 discharge within two (2) years before filing the pending Chapter 13 petition.
As you can see, a person can file for bankruptcy relief on more than one occasion. However, the time which has passed since the last filing date will determine when and what chapter one can ultimately file under.
While a bankruptcy can be filed without the aid of counsel, you can see from the information contained in this blog that this area of the law can be complicated and intricate. I have seen many individuals attempt to proceed on their own (referred to as pro se) and have witnessed their problems first hand. It is always best to proceed with the aid and direction of legal counsel.
At Reinheimer & Reinheimer we handle our cases with a personal touch. We understand while this is our file, it is your life. The misconceptions addressed within this blog are only but a few of the many that exist. Let us guide you through the process and separate the fact from fiction. Our bankruptcy consultations are completely free. Give us a call and take back control of your life.
A Chapter 7 bankruptcy is termed a “liquidation” type of bankruptcy. This type of filing is generally used by individuals or consumers although a business may also file a Chapter 7 if it no longer intends to continue operating as a business.
In a Chapter 7 bankruptcy the person filing is required to list all of their debts and all of their assets. Different types of real property (house, land, etc.) and personal property (furniture, jewelry, etc.) have different amounts of value that can be protected. These are referred to as “exemptions” under the United States Bankruptcy Code.
During your initial meeting with counsel, all categories of property will be closely examined and valuations will be assigned to the respective item(s) of property. In most instances, the individual filer(s) will exit bankruptcy with all of the assets they entered bankruptcy with.
Chapter 7 bankruptcy is for those who do not have the ability to pay creditors back. As such, in most instances the individual will have more in the way of monthly expenses then they have in monthly take home income. Many people are able to file for Chapter 7 relief even while owning a home or multiple properties.
Chapter 7 bankruptcy is a rather quick process taking approximately four (4) months to complete. Once your petition is filed, you will be scheduled for a 341(A) hearing (also referred to as a 341A Meeting of Creditors) which will take place approximately one (1) month later.
In New Jersey, hearings will take place in Trenton, Camden or Newark depending on where the party lives in New Jersey. Most hearings will last approximately five (5) to ten (10) minutes and will take place before a panel trustee.
Most hearings will consist of twenty (20) to thirty (30) questions. This hearing will not take place before a judge or in a courtroom.
Photo ID and proof of one’s Social Security number are required by the party filing and both must be presented at the time of the hearing. Your Attorney is seated directly to your side throughout the hearing. Be sure your attorney personally attends all such hearings and doesn’t hire someone from outside his/her office to cover them. I have seen a great deal of otherwise avoidable problems occur from this arrangement.
Discharge of Debtor Notice
Customarily, one will receive their “Discharge of Debtor” notice approximately sixty-five (65) to seventy-five (75) days following their hearing. This document means that the case has been completed and the person filing is no longer responsible to pay for the debts they were seeking to walk away from.
At the firm of Reinheimer & Reinheimer all of our bankruptcy intake consultations are completely free and are conducted by an attorney. Customarily, the initial intake will take approximately ninety (90) minutes to complete and can be done in person, over the phone or via Skype.
You’ve taken the “plunge” and filed for bankruptcy. In fact, you’ve completed your bankruptcy and have earned your discharge. You are now, relatively speaking, debt free but you are also credit poor.
Following a bankruptcy, most people take the position that they will pay for everything in cash as they move forward. Put another way, they swear off obtaining any lines of credit in the future. This is not a good idea and likely not a feasible plan.
Establish 3 or more lines of credit… and properly manage them
The important thing to remember is that following a bankruptcy filing, you need to “show the world” that you have learned from your past mistakes and can now properly manage your lines of credit. To do this, one needs to re-establish their credit. What I have learned over the years is the quicker one can establish three (3) or more lines of credit and properly manage them, the sooner their credit score will rise.
Avoid Applying and Getting Declined
Although a bankruptcy filing can remain on a credit report for no more than ten (10) years, the ill-effects of the filing will be greatly lessened due to the new lines of credit being opened and properly maintained.
In many instances, my Chapter 7 bankruptcy clients will receive multiple credit card offers within six (6) months of receiving their discharge order (meaning the bankruptcy case has been successfully completed and closed). What you don’t want to do is apply for new credit shortly after completing your bankruptcy and be denied. This will only hurt your credit score even more. Instead, you should wait until you receive a pre-approved line of credit or credit card and then apply for it.
Rebuild Credit Trust Slowly
Following a bankruptcy filing, you will not be afforded a high credit amount and that is fine. Remember, you are beginning the process of re-establishing your credit. Proceed with this rebuilding process slowly and cautiously. Following your bankruptcy you may still be left with auto loan/lease payments. This type of monthly payment obligation will also help you re-establish your credit. In some instances, I have clients who report their credit score has significantly increased one (1) year after filing when compared with their credit score just prior to the filing of a bankruptcy petition.
How We Can Help With Bankruptcy and Beyond
At the firm Reinheimer & Reinheimer, we counsel you not only about bankruptcy but also about things such as your life after a filing. Choose a law firm that cares and is willing to go the extra mile to get you back on track and to keep you moving in the right direction after your bankruptcy is completed. Call for your free consultation today and take control of your life and your future.