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 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.

The Two Most Common Personal Bankruptcy Options

Your Personal Bankruptcy Options

If you are considering filing for personal bankruptcy protection, you can easily be confused about the different options available to you. Here are the basic options for obtaining personal bankruptcy protection.

Chapter 7 Case

In a Chapter 7 bankruptcy proceeding, you are allowed to replace with most debts certain debts in exchange for the sale of some of your assets. There are some limitations on the debts you may discharge. Customarily, you cannot discharge the debt on secured assets—homes or cars—and still keep the property. Additionally, child support and alimony arrearages cannot be wiped out in bankruptcy, and student loan and tax debts are very difficult to discharge.

With respect to things you are financing like your car or home if you want to keep it you have to continue to make the payments. If the thing you are financing is work less than what you owe, you have the option to give it back to the lender and owe them nothing or keep it but continue with the payments.

Under the revisions to the federal bankruptcy laws in 2005, you must now qualify for Chapter 7 by submitting to a means test, where the bankruptcy court determines if you make too much money to be in Chapter 7, in which case your options are to file Chapter 13 or no bankruptcy.

Chapter 13 Reorganization

In a Chapter 13 petition, you work out new payment arrangements with your creditors, agreeing to settle your debts over a three-to-five year period. Often, you will be able to get late fees and penalties waived. As long as you honor your new commitments, your creditors cannot make any additional efforts to collect on a debt.

The Automatic Stay

Whether you file for protection under Chapter 7 or Chapter 13, you are immediately entitled to the protection of the automatic stay, which prevents your creditors from calling, writing or taking any legal action outside of the bankruptcy proceeding to collect a debt from you.

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 Floating Check Controversy

At the moment you file a Chapter 7 Bankruptcy, all your nonexempt cash and non-cash property technically becomes part of the bankruptcy estate. An interesting question arises concerning the funds in checking and other Demand Deposit Accounts (DDAs).

Assume that you paid your $2,000 monthly mortgage payment on Monday with a check and filed bankruptcy the next day. The money would probably still be in your account, because your check hasn’t cleared yet. Or assume that the mortgage company automatically drafts your installment payment on the 5th, and you filed your petition on the 4th. Once again, the $2,000 is in your account but is not “your money” in any practical sense.

If the trustee files a motion for turnover demanding that you reimburse the estate $2,000, what happens then? This is known in some circles as the “floating check” controversy. With proper bankruptcy counsel and guidance, you can avoid being stuck in this unfortunate situation. If not, you can find yourself facing a motion for turnover from a bankruptcy trustee.

Response to a Motion for Turnover

The wording of Section 542(a) of the Bankruptcy Code is quite clear: any entity with possession of property belonging to the bankruptcy estate “shall deliver to the trustee, and account for, such property or the value of such property.” Yet the purpose of bankruptcy, according to Supreme Court Justice John Paul Stevens, is to give the “honest but unfortunate debtor” a fresh start in life. Debtors cannot get a fresh start if they are delinquent on their financial obligations.

Some bankruptcy attorneys argue mootness in these situations. Simply put, there must be a live controversy for the courts to decide. For the most part, judges do not issue advisory opinions or make decisions about hypothetical matters. There may have been $2,000 in the account that may have belonged to the bankruptcy estate, but the money is gone now so there is no basis for a motion for turnover. A finding for the debtor does not necessarily prevent the trustees from collecting. They may be able to file avoidance actions against the payees to recover the funds.

At the very least, these arguments give you leverage when negotiating with the trustee, who may be willing to accept a lesser amount, let you pay the money in installments, or both.

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.

How Long Will a Bankruptcy Affect My Credit?

How Long Will a Bankruptcy Filing Impact Your Credit?

If you have opted for bankruptcy as a way to get your finances under control, you may be wondering how long the bankruptcy filing will remain on your credit report, and how long it will have an impact on your ability to obtain credit.

How long the bankruptcy will actually appear on your credit report depends on the type of bankruptcy you filed. With Chapter 7 liquidation, where you permanently discharge debts, your credit report will reflect the bankruptcy filing for 10 years. With Chapter 13, though, where you agree to repay your creditors under new terms, the bankruptcy filing only shows up for seven years. There are some situations where the bankruptcy may stay on your credit record for a longer period. For example, if you apply for a loan in excess of $150,000, the potential lender may see the bankruptcy filing, even though it has been more than 10 years.

How to Minimize the Impact of a Bankruptcy on Your Ability to Obtain Credit

When a potential lender considers your creditworthiness, they will likely look at your credit report. In many instances, though, that will be only one of many factors. Many lenders are far more interested in what you have done lately, as opposed to what you did a number of years ago. If your credit report shows that you have made all payments in a timely manner since your bankruptcy, a lender may be inclined to extend credit, perceiving that you have developed new habits, or that the bankruptcy was the result of an illness, injury or other unforeseen incident, and not the result of poor money management.

The other important thing to do, if you want to improve your chances of getting credit, is to minimize the use of available credit. If you have a credit card, don’t use it unless absolutely necessary, and pay it off every month or as soon as possible.

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.

How Come I Can Be Thrown in Jail for Not Paying Child Support If I’m in Bankruptcy

Bankruptcy and Delinquent Child Support Payments

You are behind on all your bills, including your child support. Maybe you lost your job, maybe you’ve had a difficult time getting back on your feet after a divorce or maybe you’ve been sick or hurt. So you decide to file for bankruptcy, having heard that a bankruptcy filing will keep creditors from harassing you. But then you get a notice from the court that, unless you pay past-due child support, you could face incarceration. How can that happen? Shouldn’t the bankruptcy laws protect you?

The simple answer is no. The bankruptcy laws do not allow for the discharge of child support (or spousal support) obligations in bankruptcy. So the laws that apply to most other debts simply do not apply to child support obligations. The state agency that has responsibility for collecting and disbursing child support payments can still take any action to try to collect those payments, from calls and letters to garnishment of wages to seizure of assets to jail time. Furthermore, child support arrearages must typically be paid off in full in a Chapter 13 proceeding.

One of the important things to remember is that a jail sentence is based on a finding of “contempt of court.” If you are truly without income — not just simply avoiding paying child support — a judge may be less inclined to order jail time. If you have some income, but not enough to pay child support and other creditors, you may want to consider a Chapter 7 bankruptcy, which will potentially eliminate all or most other debt so that you can afford child support payments.

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.

Questions to Ask Your Lawyer About Bankruptcy

Considering Filing for Bankruptcy? Here Are the Questions to Ask Your Bankruptcy Lawyer

You’ve been working hard to get your financial life back in order, but still can’t see any light at the end of the tunnel. You’re thinking maybe it’s time to consider filing for bankruptcy, but you are uncertain what that means, now and in the future. Here are the key questions to ask a bankruptcy attorney.

  • What are your qualifications? Before you hire a bankruptcy lawyer, find out how much experience they have, what types of bankruptcy proceedings they have handled and how well they have worked with others.
  • What are my options in bankruptcy? There are different approaches to bankruptcy. Chapter 7 allows you to permanently discharge most debts. In a Chapter 13 proceeding you have to make monthly payments to a Chapter 13 trustee who will distribute that money to your creditors over a three to five year period. A Chapter 13 bankruptcy case can also be used to catch up on missed mortgage payments, stop a foreclosure, or get back a car that has been recently repossessed.
  • Do I qualify for Chapter 7 protection? Under the 2005 revisions to the bankruptcy laws, to qualify for Chapter 7, you must demonstrate to the bankruptcy court that you lack the means to pay off your debts over a three-to-five year period. Your attorney should be able to walk you through the means test, provided you supply accurate financial information. Most people who are considering filing a Chapter 7 bankruptcy are eligible for Chapter 7.
  • If I file Chapter 7, can I keep any assets? The federal bankruptcy laws allow certain exemptions when you file for protection under Chapter 7. Each state has its own set of exemptions. You can choose one or the other. As a practical matter, nearly 98% of all people who file a Chapter 7 bankruptcy are able to keep everything that they own, including their houses and their cars.
  • What debts can I discharge? Most debts can be discharged in bankruptcy. However, not all debts may be discharged in a Chapter 7; certain tax obligations, child support arrearages and student loans are typically not dischargeable.
  • What information do I need to provide? You will be required to make an accurate and complete disclosure of your assets and liabilities as well as your monthly income and expenses. Your lawyer can work with you to collect all the documents necessary for a bankruptcy filing.
  • What is the cost? The cost for filing a bankruptcy case varies based on the complexity of the case. Between court costs and attorney’s fees, a standard Chapter 7 case can cost between $1,500 and $2,000. This amount is usually only equal to a small fraction of the debt owed.

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 Is the Difference Between Chapter 7 and Chapter 13 Bankruptcy?

Deciding Between a Chapter 7 and a Chapter 13 Bankruptcy Filing

If you’ve concluded that the best (or only) way out of your current financial predicament is to seek protection in bankruptcy, your next step is to determine which direction you want to go. You’ve heard references to “Chapter 7” and “Chapter 13,” but you may not know what these terms mean and what the basic differences between them are.

What Happens to Your Debt?

In both a Chapter 7 and a Chapter 13 you will receive a discharge of your debts. The primary difference is what source creditors can look to for possible repayment.

In a Chapter 7, creditors can only be paid from your current assets – they do not have a right to be paid from your future income. However, in Chapter 7 the person filing for Chapter 7 protection can protect (“exempt” in bankruptcy lingo) their assets up to certain limits. In New Jersey and Pennsylvania these limits are generous and as a result, most people who file a Chapter 7 keep all of their assets, discharge their debts, and do not have to make payments to their creditors. A Chapter 7 discharge of debt typically takes place 100 to 120 days after the Chapter 7 case is filed.

In a Chapter 13, creditors are typically repaid only from the future income of the person who files (i.e. monthly payments). The money paid each month is paid to the Chapter 13 trustee and not to each individual creditor. A Chapter 13 case can last between 36 and 60 months.

There are two primary types of Chapter 13 cases, as determined by what the goal of the Chapter 13 case is. The first type of Chapter 13 case is a “cure and reinstate” plan, where the person filing for bankruptcy has fallen behind on mortgage payments, car payments, or IRS tax payments and needs to impose a repayment plan on their creditors. In these types of plans, the person filing for Chapter 13 makes a monthly payment to a Chapter 13 Trustee who channels this money to the appropriate creditor. Some of the money paid will also go to their other creditors such as credit card and medical creditors. At the end of the Chapter 13 case (which can be as short as 36 months or as long as 60 months), the unpaid amounts on remaining debts will be wiped out.

The second type of Chapter 13 case is a case where the person looking to file for bankruptcy is ineligible to file a Chapter 7 case. Roughly speaking, this is because they “make too much money” to wipe out their debts without at least paying a portion of those debts back to their creditors. In these cases the person filing for bankruptcy must pay their monthly disposable income to their creditors for 60 months. At the end of the Chapter 13 case the unpaid balances are discharged. Even in this kind of case creditors are only paid a fraction of what they are owed.

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.

Feeling Good about Starting Over Debt Free

You Have the Right to Feel Good After Filing for Bankruptcy Protection

Bankruptcy has gotten a bad rap. The media likes to portray celebrities who file for bankruptcy as failures, people who had it all and messed it up. Of course, the implication is also that anyone who files for bankruptcy should feel shame, regret or a sense of defeat. Nonsense!

Bankruptcy laws have been in place for centuries, providing a means for people to get a fresh start. Statistics show that most bankruptcy filings stem from unforeseen circumstances — the loss of a job, a serious illness or injury, a divorce — and not from poor money management or spending habits. Studies show that fewer than one percent of people who file for bankruptcy are abusing the system. According to research done at Harvard University, the prevailing reason for a bankruptcy filing is some form of health issue.

The reality is simple — the U.S. bankruptcy laws were enacted to be used, to provide an avenue for people to step off the downward spiral of having too few resources to meet too many obligations. The laws were enacted to help people resolve financial challenges with dignity, rather than facing the seemingly endless calls, letters and legal maneuvers creditors and collection agencies engage in.

The reality is that many people we consider to be models of success — Abraham Lincoln, Donald Trump, Henry Ford — all sought protection in bankruptcy at some point in their lives. They understood that the bankruptcy laws are really a safety net, an assurance that when you work really hard to turn your financial life around and you just can’t make it happen, you won’t be out on the street. You can get some relief from creditor harassment while you put a plan in place to get your financial house in order.

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.