Is Atlantic City The Next Big Municipal Bankruptcy?

Is Atlantic City The Next Big Municipal Bankruptcy?Two prominent Wall Street rating firms recently downgraded Atlantic City to near-junk status, after Gov. Chris Christie appointed an emergency management team to handle the finances of America’s Favorite Playground.

Last month, both Moody’s and Standard & Poor’s rating services dropped Atlantic City’s credit rating several notches, from BB to BBB+. The downgrade makes it more difficult for Atlantic City to borrow money, as it tries to stave off bankruptcy. An S&P analyst called the management team a “draconian” action that “has a greater likelihood of being detrimental to bondholders.” Moody’s said that Gov. Christie’s action may have ramifications for other financially-challenged New Jersey cities, including Newark and Patterson.

Four of Atlantic City’s 12 major casinos have closed in the last year, leaving the city with a greatly reduced tax base and nearly $400 million of debt.

Handling Bankruptcy

Atlantic City may hold a common misconception about bankruptcy, which goes back to the days of seemingly endless “Monopoly” games played out on the kitchen table, the living room floor, or a folding card table in the den. As you moved your racecar, iron, thimble, or battleship around the board, the worst thing you could do was file bankruptcy. That was the end of the game, and there was no hope of recovery.

Fortunately, the real thing works a bit differently. For one thing, a house on James Place may cost a little more than $50. More to the point, Chapter 7 Bankruptcy gives you a fresh start. Imagine that you have to take the red plastic hotel off of Pacific Avenue, but you keep the card face up and are soon able to start building it back up again. That, in a nutshell, is bankruptcy.

If you have more debt than you can pay, you can take the Atlantic City approach, and try to keep your head above water for a few more months and hope that things get better somehow. Or, you can take control of the situation and reach out to a Chapter 7 Bankruptcy attorney in Barrington. The experience may be somewhat uncomfortable in the short term, but you’ll be back at the financial starting line is as little as a few months, with little or no unsecured debt, more manageable secured debts, and a much brighter financial outlook.

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.