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August 2013 Archives

Discharging Debt in New Jersey

The primary goal in filing for bankruptcy protection is to discharge debt. To discharge debt essentially means to eliminate your liability to pay it. It is important to understand that while most debts are dischargeable, there are a few that are not. When you complete your bankruptcy case, you receive a discharge order. You have no obligation to repay any debts that are included in the discharge order.  Also, once a debt has been discharged in bankruptcy, the creditor is prohibited from taking any further action to collect the money owed.  This means that the creditor cannot even contact you regarding the discharged debt. Generally, dischargeable debt is unsecured debt.  This means the debt is not secured by any collateral.  Under the Bankruptcy Code, certain types of debts are specifically excluded from discharge, depending on which chapter of bankruptcy the debtor filed under.  Examples of the more common debts that cannot be discharged include: •Child support and alimony •Most student loans •Some tax debts •Government fines •Debts resulting from certain crimes If you are considering bankruptcy and would like to know whether your debts can be discharged, you should consult an experienced bankruptcy lawyer to assist you. If you are interested in learning more about bankruptcy, contact Levitt & Slafkes, P.C. We are experienced in handling a variety of bankruptcy issues. Our offices are conveniently located in South Orange, New Jersey. Please call us at 973-323-2953 or online to schedule your free initial consultation today.  

Bankruptcy in New Jersey: Unsecured vs. Secured Debt

Deciding whether or not to file for bankruptcy protection is a big decision. If you are feeling the burden of overwhelming debt, the option of discharging or eliminating the majority of your debt should be appealing. An experienced bankruptcy attorney can review your individual finances and help you understand how a Chapter 7 or Chapter 13 could benefit you. When you file a bankruptcy case, your debt is classified as priority, secured or unsecured.  Priority debt is debt such as taxes that is given a special status or priority under the law.  The remainder of your debt is either secured or unsecured debt. If you have borrowed money and pledged an asset as collateral to the lender, it is a secured loan. The most common examples of secured loans are a mortgage on your home or a security interest in your vehicle.  Under these types of loan transactions, the lender has the right to foreclose or seize the asset if you default on the loan payments.  The creditor also has the right to auction or resell the asset to payoff (all or part) of your defaulted loan. If you file a Chapter7, you must remain current on your secured loan payments, surrender the property to the creditor or reaffirm the debt under a contract called a "reaffirmation agreement." In a Chapter 13 bankruptcy case, the debtor may be allowed to keep the asset if he provides for payment to the lender through his plan of reorganization. Be sure to read our  blog which discusses the Chapter 13 plan. Most debtors' debt consists of unsecured bills, such as credit card and medical debt.  In a Chapter 7 case, most (if not all) of your unsecured debt is eliminated (discharged).  This means that when you successfully complete your case, you're no longer obligated to pay the discharged debt.  In a Chapter 13 case, you pay the unsecured creditors a percentage of what they are owed.  Typically, unsecured creditors receive little, if anything, under the Chapter 13 plan.

Converting Your Bankruptcy Case

If you file a Chapter 13 case and your circumstances change resulting in Chapter 13 no longer working for you, bankruptcy procedure allows you to convert your case to a Chapter 7. The conversion process is relatively simple and begins with the debtor's attorney filing a notice of conversion and paying the court fee. Within a few days of filing the notice, your case is converted to a Chapter 7. What does conversion mean? Converting a case means that the Chapter 13 case ends and the case is treated as a Chapter 7.  Any funds being held by the Chapter 13 trustee are returned to you, less any administrative fees. The case proceeds as a Chapter 7 including:

The Feasibility of a Chapter 13 Plan

When you file a Chapter 13 case, your bankruptcy attorney will help you submit a plan of reorganization. The plan sets forth what your creditors will be paid over the course of your bankruptcy case.  Your plan must be "feasible" and the court must confirm or approve it. Feasibility is a term the court uses in determining whether or not your plan is likely to succeed. Your creditors file a proof of claim with the court. Each claim sets forth how much the creditor is owed. It also lists any assets pledged as collateral to the lender. The trustee reviews the claims to determine how much money the debtor must pay in order to fund the plan. The Chapter 13 plan must pay priority and secured claims, legal fees, trustee's fees, and anywhere from 0-100% of the unsecured claims. The "base" for the plan is the total amount to be paid under the debtor for three to five years.  A simplified example is if the debtor pays $100 per month to the trustee for a period of 3 years, the plan base is $3600. The Chapter 13 trustee verifies that the base amount is sufficient to pay the amount required to be made to creditors.    If it is, the plan is feasible.  The plan is infeasible if the amount required to be paid to creditors exceeds the the base amount. What happens if the plan is infeasible? Your attorney can help you amend the plan to make it feasible. Common ways to make a plan feasible include extending the length of the plan or increasing the amount of the monthly payment. If you are interested in learning more about Chapter 13 bankruptcy, contact Levitt & Slafkes to schedule your initial consultation. If you are interested in learning how filing a bankruptcy case can benefit you, contact Levitt & Slafkes, PC, at 973-323-2953. You can also reach us by filling out our online form. We represent debtors in Chapter 7, Chapter 13 and Chapter 11 filings. Let us help you get the fresh financial start you need today.

Will Trials Soon Be Held Without People?

The ABA Journal recently posted an article discussing how courts are moving toward a paperless existence. The article poses the question of whether the need for mobility of judges, attorneys and citizens will soon lead to not only a paper-less court, but also a people-less court. Today's technological advances allow for online banking and bill paying, so why should be physically present in a courtroom be necessary? Motions, briefs and notices are already being filed online, even in the bankruptcy courts, so why should meetings and hearings not be held via video? The article points out that the current ethical rules require attorneys to be technologically competent. Of course, it also points out that what constitutes "technologically competent" is a moving target, so this could cause problems. Additionally, if court documents in digital format include hyperlinks to cases or other sources and "link rot" occurs, the citations can be lost. Link rot refers to the citation being moved or removed entirely. Many experts believe that virtual meetings and hearings will increase, but others have their doubts. Will our constitutional right to a jury of our peers be handled over Skype? Only time will tell, but it will be interesting to see what happens.

What Happens to Your Retirement Accounts in Bankruptcy?

When you file a Chapter 7 or Chapter 13 case, you are likely seeking to obtain a fresh financial start. One of the biggest concerns debtors have before filing their case is what will happen to their assets. It is important to understand that bankruptcy law was created to help debtors, so certain assets are protected by property exemptions. The law recognizes it is impossible for a debtor to thrive after emerging from bankruptcy without having certain assets still in place. A retirement account is often one of your most valuable assets.  The federal exemption and the majority of state exemptions exclude 401k accounts, Individual Retirement Accounts (IRAS), pensions, and stock bonus plans from being included in the bankruptcy estate. In other words, these funds are not available to the trustee to pay creditors. If you are going to file for bankruptcy protection and you have a 401(k) account that you are regularly contributing to, it is essential that you discuss with your attorney what effect (if any) the filing will have on your pension.  Also, before you borrow any money from your 401(k) fund to pay outstanding debts, you should consult with a bankruptcy attorney to determine if that is the right option for you. Before you file a bankruptcy case, it is important to contact the legal team at Levitt & Slafkes to learn how the exemptions will benefit you. If you are interested in learning how filing a bankruptcy case can benefit you, contact Levitt & Slafkes, PC, at 973-323-2953. You can also reach us by filling out our online form. We represent debtors in Chapter 7, Chapter 13 and Chapter 11 filings. Let us help you get the fresh financial start you need today.

'Real Housewife' Settles Fraudulent Transfer Claim

According to the Wall Street Journal, Danielle Staub, a Real Housewife of New Jersey star, has agreed to pay $35,000 to settle a fraudulent-transfer claim. Ms. Staub filed for Chapter 7 bankruptcy claiming $500,000 to $1 million in debts and the same amount in assets. The trustee's investigation uncovered a potential fraudulent transfer by Staub. She made pre-petition transfers of assets to family members and friends. The assets included jewelry and home furnishings.

Garnishments & Bankruptcy

Many creditors use garnishment as a tool for collecting on a monetary judgment. A garnishment orders a third-party to pay money, otherwise owed to you, directly to the creditor. A wage garnishment and account garnishment are the two most common types. Wage Garnishment A wage garnishment occurs when the creditor serves your employer with garnishment papers.  The employer is ordered to pay a certain amount out of each of your paychecks directly to the creditor (or sometimes to the court).  Your employer must comply with the garnishment documents.  Failure to do so could result in the employer being held liable for the amount due to the creditor. New Jersey law provides significant protection for consumers facing wage garnishment because no more than 10% of a consumer's gross salary may be garnished. Additionally, certain paycheck deductions are exempt from wage garnishment, including:

Chapter 13 Bankruptcy: What is a cramdown?

When you file a Chapter 13 bankruptcy, you can take advantage of the "cramdown" tool. The cramdown allows a debtor who owns a vehicle that is worth less than what is owed on it to reduce the balance and interest rate on the car loan. A vehicle begins to depreciate in value as soon as you drive it off of the car lot, especially if you bought a brand new car. As a result, it is common for individuals to end up with a car loan balance that is greater than what the car is worth.  A Chapter 13 case may allow you to reduce your car loan balance down to the value of your vehicle. When your Chapter 13 attorney creates your Chapter 13 repayment plan, you can propose that the lender on the vehicle receive only the value of the car instead of the entire amount due under the loan.  For example, if you owe $30,000 on your car and it is only worth $20,000 now, you can allege that the lender only has $20,000 that is secured. The reasoning is that if the lender were to repossess your vehicle and sell it, the lender would only receive $20,000. Thus, the remaining balance of the loan (the $10,000 in the example) should be treated as an unsecured claim. Most unsecured claimants only receive pennies on the dollars due, which saves you thousands of dollars! A cramdown is only available in a Chapter 13 filing, it is not available in a Chapter 7 case.  It is important for debtors to understand that in order to take advantage of a car loan cramdown, you must have purchased the car at least 910 days (about 2 ½ years) before you file your bankruptcy. When you cram down a car loan in Chapter 13 bankruptcy, the law also allows you to lower your interest rate on the loan.  The interest rate will be determined by your specific bankruptcy court, but in most cases it will be lower than your original car loan rate. If are interested in a cramdown, contact Levitt & Slafkes to learn more. If you are interested in learning more about Chapter 13 bankruptcy cases or the cramdown method, contact Levitt & Slafkes, P.C. We are experienced in handling a variety of bankruptcy issues. Our offices are conveniently located in South Orange, New Jersey. Please call us at 973-323-2953 or online to schedule your free initial consultation today.  

Mistakes Made in Bankruptcy

Unfortunately, mistakes happen. What happens if an error is made in your Chapter 7 or Chapter 13 case? In many instances, it is possible to reopen your case and cure the mistake. Typically, cases are reopened to fix a procedural error. Common examples include:

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