When Do I Start Receiving Bankruptcy Benefits?

When Do I Start Receiving Bankruptcy Benefits?In some ways, your financial fresh start occurs the moment you file for bankruptcy, as your creditors are immediately prevented from taking actions against you or your property to collect their debts. The debts are then officially wiped out when you receive a discharge order in a Chapter 7 or Chapter 13 Bankruptcy.

When Can I Get A Home Loan?

Many of our clients ask how long they must wait before they can apply for a residential mortgage after filing for bankruptcy. Specific requirements may vary between lenders, so it is best to shop around. But, there are some general industry standards:

  • Fannie Mae: Lenders are eligible for a loan as little as two years after a Chapter 7 or Chapter 13 discharge, although some borrowers may have to wait four years after a Chapter 7. Either way, that is considerably less time than the seven year wait after a foreclosure.
  • Freddie Mac: The same general waiting periods apply, but Freddie may be a bit more rigid.
  • FHA: These loans are generally the most forgiving when it comes to past credit problems. Borrowers with a Chapter 7 must wait a maximum of two years, while Chapter 13 debtors can be eligible in only one year.
  • VA: Borrowers are eligible for a loan under $417,000 within two years after a Chapter 7 or Chapter 13 Bankruptcy.
  • USDA: The waiting period after a Chapter 7 is three years, and a borrower who is still in Chapter 13 can qualify after a year of on-time trustee payments.

These values may be changing, as Congress and the White House may consider unwinding the government’s control of Fannie Mae and Freddie Mac in the coming year.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.

Stopping a Home Foreclosure with Bankruptcy

Bankruptcy and Foreclosure Proceedings

Stopping a Home Foreclosure with BankruptcyIf you are struggling to meet your financial obligations, and have fallen behind on your mortgage payments, you may be worried about a foreclosure proceeding and the loss of your home. You may be considering filing for bankruptcy to prevent or stop foreclosure proceedings. Here’s what you need to know.

The most important thing to understand is that bankruptcy won’t terminate a foreclosure proceeding—it will only suspend a foreclosure action. Once your bankruptcy is complete, your lender can move the process forward again.

That doesn’t mean, however, that a bankruptcy filing won’t help you keep your home. Upon the filing of a bankruptcy petition, an automatic stay will go into effect, preventing your creditors from calling, writing or taking any other legal action to collect debts from you. The automatic stay can get you some relief from the constant outflow of cash. In addition, by discharging other debts, you may be able to free up the funds to make your monthly mortgage payment affordable.

It is also important to understand that you cannot seek to discharge the debt on your home in a Chapter 7 proceeding and still keep the house. Both state and federal bankruptcy laws grant you a certain dollar amount exemption in your home in a Chapter 7 filing, but it’s an exemption in the equity in your home. Unfortunately, you can only recognize the equity in your home when you sell it.

The best way to save your house through bankruptcy is to file Chapter 13 reorganization and work out a new payment plan with your mortgage lender. You will still get the benefit of the automatic stay, and will have that benefit for a three-to-five-year period. In many instances, when you reorganize, you can get your lender to waive late fees and penalties, and fold any arrearages into the principal balance of your note.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.

The Means Test

The Means Test in Bankruptcy

The Means Test in BankruptcyBefore 2005, persons seeking to file bankruptcy could generally choose between a Chapter 7 liquidation proceeding and a Chapter 13 reorganization. However, as a part of the revisions to the federal Bankruptcy Code in 2005, Congress set limits on who may qualify to discharge debts under Chapter 7. To be eligible, you must now submit to what is known as the “means test.”

The purpose of the means test is to determine whether you reasonably have the capability to repay your creditors rather than having your debts discharged. The means test is designed to keep persons with high incomes from discharging debt and immediately having substantial discretionary income that could have gone to creditors. Under the means test, however, you don’t have to be without income to qualify for Chapter 7. Here’s an overview of the how the means test works.

Determining Your Eligibility for Chapter 7

The first question the bankruptcy court will ask: Is your income less than the median income in your state for a household of your size? If so, you don’t have to go any further—you qualify.

If, however, your income exceeds the median income, you must document your expenses to determine whether you have enough income left after paying “allowed expenses” to pay some portion to your creditors. If your income exceeds your total expenses by a specified amount (which varies from state to state), you fail the means test and must file a Chapter 13 petition if you choose to use bankruptcy to get a fresh financial start.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.

Special Asset Issues

Bankruptcy and Special Assets

Bankruptcy and Special AssetsIf you have decided to file for bankruptcy as a way to get a fresh financial start, you may have concerns about how the bankruptcy filing will affect certain articles of property. What about any money you have received or are eligible for through an inheritance? What about your retirement plan assets? Will you have to reclaim property given to friends or family, or that you’ve recently sold or given away?

Inheritance and Bankruptcy

Whether or not the proceeds of an inheritance will be accessible to the bankruptcy trustee in a Chapter 7 proceeding depend on two issues:

  • Whether your state allows you to claim an exemption on an inheritance—the law varies from state to state
  • When you received the inheritance—if you have already received the inheritance when you file, or if you receive the inheritance within 180 days of filing, it must be included in a Chapter 7 proceeding

Retirement Plan Assets and Bankruptcy

As a general rule, money put into a retirement plan is exempt from access to pay creditors in a bankruptcy proceeding. This includes profit-sharing plans, defined benefit plans, 401(k)s, IRAs and money purchase plans. The only retirement assets that may be taken by the bankruptcy court are Roth and traditional IRA plan assets in excess of $1,245,475.

Gifts to Friends or Family or Items Recently Sold

A significant gift to a friend or family member within two years (under federal rules) of a bankruptcy filing can qualify as a fraudulent transfer. Some states will look back as far as seven years. As a general rule, if the bankruptcy court finds a transfer to be fraudulent, it will require that the property or its value be returned to the bankruptcy estate. It may also prohibit you from completing the bankruptcy.

Items sold at fair market value typically don’t qualify as a fraudulent transfer, but a sale for less than market value may have the same consequences as a gift.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.

Dealing with an Aggressive Creditor

Protecting Yourself from Creditor Harassment

Protecting Yourself from Creditor HarassmentMost of us want to pay our bills in a timely manner, and we often try hard to work with creditors when we get behind. But some creditors are relentless, calling and writing incessantly in an attempt to collect a debt. Some will call at all hours of the day or night. Some will call your friends and neighbors. Some will badger and berate you over the phone. There are ways you can deal with overly aggressive creditors.

The Fair Debt Collection Practices Act

In recognition of the abuses of debt collectors, Congress enacted the Fair Debt Collection Practices Act, empowering the Federal Trade Commission to monitor and regulate for abusive, unfair or deceptive practices. The FDCPA prohibits a wide range of actions perceived as harassment or misrepresentation, including:

  • Calling outside of specific hours
  • Communicating information about a debt to a third party
  • Threatening actions that the creditor or collection agency cannot take
  • False statements about a debt owed

Taking Legal Action

If a creditor or collection agency violates the law, and refuses to stop doing so after a written request, you can take legal action in court. In many instances, if you can successfully show violation of the law, you can get attorney fees and court costs, in addition to statutory and other damages. However, the legal action will not necessarily make the debt go away. Even if you can demonstrate that a creditor or collector violated federal law, you will still owe the debt until you pay it or the creditor/collector discharges it.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.

‘No One Gets A Free House’

No One Gets A Free HouseCourts in New Jersey, Pennsylvania and elsewhere have repeated this phrase quite a bit since the mortgage crisis began in 2009. Distressed homeowners burdened by mortgages that had become unaffordable complained of unfair lending practices, both inside and outside of bankruptcy court. While not unsympathetic to their plight, most judges were very reluctant to grant legal relief, absent extraordinary circumstances. However, all the stars aligned for two Madison homeowners in Washington v. Specialized Loan Services and The Bank of New York – Mellon (In Re Washington). What happened in this case, and what does it mean for your family?

Facts

In 2007, the Washingtons purchased a three-family home on Walnut Street. They failed to make the installment payment due on July 1, 2007, and their 30-year adjustable rate mortgage loan has been in default ever since then. The bank accelerated the note in May and filed a foreclosure complaint in December 2007. These dates become very important later.

Decision

A provision in the Fair Foreclosure Act of 2009 places a six-year statute of limitations on a mortgage foreclosure proceeding. In other words, the bank has six years from the date of filing to either take the property or formally reinstate the loan.

Probably because the case slipped through the cracks, the court dismissed the foreclosure action because the bank did not pursue the action, and its six years expired in December 2013. The bank tried to argue that a thirty year statute of limitations applied, but the court was unconvinced.

After “gargl[ing] to remove the lingering bad taste,” Bankruptcy Judge Michael Kaplan ruled that the statute of limitations had expired and that the mortgage was void. The Washingtons are also immune from a deficiency judgment or any other action on the note. Hello, free house.

Application

The ruling only applies when the statute of limitations has expired prior to the commencement of a foreclosure case. Such instances are quite rare, but not unheard of. The same thing happened in Texas in 2001!

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.

Filing Bankruptcy for the Second Time

Can You File for Bankruptcy More than Once?

You may have filed personal bankruptcy with the best of intentions, hoping to put your financial challenges behind you. Circumstances can change that, though—you may experience injury or illness without adequate insurance, or you may lose your job at a difficult time. Fortunately, you can seek bankruptcy protection more than once. There are some restrictions, though.

Under the federal bankruptcy laws, you may not receive a discharge in a Chapter 7 bankruptcy proceeding for at least eight years after the date of a prior Chapter 7 discharge. You may, however, seek to reorganize your debt under Chapter 13 after only four years, if your prior discharge was in Chapter 7.

If you reorganized your debt under Chapter 13, you can file another reorganization petition after just two years. However, if you want to obtain a discharge in a Chapter 7 bankruptcy proceeding after reorganization in Chapter 13, you must wait at least six years.

These rules, however, apply to discharges rather than filings. The bankruptcy law does not prohibit your from filing a bankruptcy petition immediately after a discharge in bankruptcy—you just can’t obtain a second discharge in bankruptcy before the specified time period has elapsed. For example, many debtors file and complete a Chapter 7, permanently discharging some of their debts. However, once the bankruptcy proceeding is complete, they may start receiving harassing calls and letters from creditors who were not discharged. The debtor may then file a Chapter 13 petition to invoke the provisions of the automatic stay.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.

Life After Bankruptcy

An attorney can help you do so much more than just file paperwork. One of the many advantages of partnering with an experienced bankruptcy attorney is that a lawyer can help you develop an exit strategy and goals for your financial future. A successful bankruptcy puts you back on the starting line, and a good attorney can give you a gentle shove in the right direction.

Rebuilding Credit

The most common fear people report is that they will “never be able to get credit again”. This simply doesn’t happen! Once you have filed for bankruptcy you no longer owe pre-bankruptcy debts, and you cannot file for bankruptcy again for at least a few years. As a result, you are actually more creditworthy than when you filed!

One easy way to rebuild credit is to pay your bills on time, especially for secured debts like your house and car. Consider using an automatic bank draft every month to avoid late payments. Many creditors may even allow you to break up a monthly installment payment into biweekly amounts. If you prefer writing a manual check, make sure it’s in the mail at least five business days prior to the due date.

Many clients report receiving credit card solicitations within 6 months of when their bankruptcy cases are over. Find one with a low limit, definitely under $1,000 and maybe even below $500. Use it responsibly and pay it off every month!

If you are looking to purchase a home, government sponsored FHA and Fannie Mae programs allow a mortgage a mere two (2) years after a Chapter 7 bankruptcy filing.

A surprising number of lenders are willing to work with people who have poor credit scores. In any case, when you go to the furniture store or car dealership, be upfront about your credit problems and do not sugarcoat your financial past. If one business isn’t willing to lend you money, don’t take it personally, just move on down the street.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.

What Property Can I Keep In A Chapter 7?

New Jersey is one of 19 states which allow Chapter 7 debtors to choose between federal and state exemptions. If property is exempt, you get to keep it in a bankruptcy. What are some of the differences between state and federal bankruptcy exemptions on some commonly held property items?

Homestead

New Jersey does not have an exemption for your home.

However, the federal exemption is a bit more straightforward. Up to $22,975 of equity is exempt. After the real estate crash, fewer and fewer people have equity in their homes and as a result find that they can easily protect their homes in a bankruptcy filing.

Vehicle

New Jersey does not have a vehicle exemption, but does allow up to $1,000 of personal property to be exempt. This personal property exemption can be used on a vehicle.

If using the federal exemptions, you can claim up to $3,675 in equity for a motor vehicle.

Retirement Benefits

IRAs, 401(k)s, Social Security benefits, pension plans and other retirement benefit plans are exempt under both state and federal bankruptcy laws. So, bankruptcy will not disturb your nest egg. However, if you have borrowed money against your retirement savings, you will still be required to repay those loans.

The Wildcard

Federal exemptions provide for a “wildcard” of $1,225 plus up to $11,500 of unused homestead exemption to use on anything that you want. This wildcard exemption can be used to protect extra equity in a car, cash at home, money in the bank, or extra equity in a home, boat, investment property, timeshare… you name it!

On a practical basis, New Jersey state exemptions are very meager and infrequently chosen, especially since the federal exemptions under the Bankruptcy Code are so generous. As a result of the federal exemptions under the Bankruptcy Code, the vast majority of people who file a Chapter 7 bankruptcy are able to keep everything that they own, while shedding their debts.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.

The Automatic Stay in Bankruptcy

The Benefit of the Automatic Stay in Bankruptcy

The federal bankruptcy laws were enacted to give individuals and business owners a way to get a fresh financial start. But Congress also recognized the need to provide relief from aggressive collection efforts. That relief comes in the form of the automatic stay.

When you file a bankruptcy petition, whether in Chapter 7 or Chapter 13, the automatic stay automatically goes into effect. The automatic stay prohibits your creditors or their representatives from calling, writing or taking any action outside of the bankruptcy proceeding to try to collect a debt from you. The automatic stay applies to creditors and their legal counsel, collections agencies, and most governmental entities. Some specific provisions of the automatic stay include:

  • Foreclosure proceedings—An automatic stay will suspend (but not terminate) foreclosure proceedings
  • Evictions—The automatic stay can stall the eviction process for a few days, unless your landlord has already obtained a judgment of possession or can show that you are endangering the property
  • Utilities—Typically, an automatic stay will suspend the disconnection of services for up to 20 days
  • Wage garnishments—The automatic stay stops any garnishment proceeding

Exceptions to the Automatic Stay

You cannot use the automatic stay to stop or suspend:

  • Criminal proceedings
  • Child or spousal support actions
  • Some tax actions
  • The withdrawal of funds from your paycheck to repay a pension or retirement plan loan

The bankruptcy court has the authority to lift or remove the automatic stay, if a creditor can show that the stay serves no purpose. If you have real property with no equity, and have no way to make payments on the property, the bankruptcy court may lift the stay so that your lender can foreclose and protect its interests.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.