The Check Is In The Mail

The Check Is In The MailAs of February 20, the IRS says it processed about 50 billion 2014 income tax returns. 83 percent of these filers received an average refund of $3,120.

The number may be somewhat skewed, since taxpayers who anticipate large refunds tend to file earlier in the season. Over the past several years, about eight in 10 taxpayers qualified for an average refund of $2,800. The news was not all good, as Service officials acknowledged that budget cuts had triggered extremely long wait times on the IRS telephone hotline.

To help guard against hackers, the IRS suggested that online taxpayers sign up for an additional PIN.

Bankruptcy and Tax Refunds

Many people look forward to a large tax refund every spring, and they may even over-withhold a few dollars a month to put more change in the piggy bank. Other people question the wisdom of this approach, as they view an income tax refund as an interest-free loan to the government.

Financial windfalls like a tax refund, lottery prize, escrow refund and inheritance are all part of the bankruptcy estate, and all assets in the estate are subject to distribution among the creditors, unless the asset is exempt. When you file bankruptcy, all anticipated windfalls, and their expected value, should be listed on Schedule B. If you file Chapter 7, the additional money should not affect the means test. If you receive an unexpected windfall, you can generally amend Schedule B without affecting the discharge date.

Most filers in New Jersey use federal exemptions, so the cash windfall can be exempted under the federal wildcard, in many cases. In most courts, a Chapter 13 trustee does not ask a filer to turn over a tax refund, so the issue may not even come up.

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.

Exceptions to the Automatic Stay

Exceptions to the Automatic Stay under the Bankruptcy Laws

When you file for protection under Chapter 7 or Chapter 13, the automatic stay under the Bankruptcy Code immediately goes into effect, prohibiting your creditors from calling, writing or taking other legal action to collect a debt from you. There are, however, specific types of legal actions that will not be affected by the stay.

Exceptions to the Automatic Stay under the Bankruptcy LawsTax Actions

The Internal Revenue Service, as well as state tax authorities, can still take certain actions, such as demanding payment of an assessment, requiring a tax return, conducting a tax audit or issuing a deficiency notice.

Family Law Obligations

Generally, child support and spousal support/alimony arrearages are not affected by a bankruptcy filing, and state enforcement agencies are not prohibited from collection efforts. Accordingly, if you have a child support or spousal maintenance deficiency, the collecting agency may engage in a wide range of actions in an effort to collect the amount past due, including:

  • Withhold money through your employer to pay current and past due child support
  • Attach any refunds from state or federal revenue agencies
  • Report your overdue support obligations to a credit reporting agency

The filing of a bankruptcy petition will have no impact on your obligation to pay ongoing support, or on custody or visitation determinations. The court may also modify your support order.

Pension Loans

If you borrowed money from a 401(k) or other company retirement plan, the imposition of the automatic stay won’t prohibit your employer from deducting an amount from your paycheck to repay the loan.

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.

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.

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.

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.

When Can I Start Rebuilding My Credit after a Bankruptcy?

How Soon Can You Start Reestablishing Credit after Bankruptcy?

If you’ve had to file bankruptcy, for any reason whatsoever, you may be wondering how soon you can start to rebuild your credit, as well as the best ways to do so.

You Can Start Immediately

There are no legal restrictions on how soon you can begin to reestablish credit after a bankruptcy. Though you may find fewer opportunities to do so, and incur greater expense, there are companies that will take the risk. You should understand, though, that the interest rates and penalties assessed to sub-prime borrowers (which you will be after a bankruptcy filing) are significantly higher than for most borrowers.

The reality, though, is that you should take some time to get on your feet before you try to incur any new and significant debt. By simply paying your existing obligations—rent, utilities—in a timely manner, you start to rebuild your creditworthiness.

Depending on the type of bankruptcy you filed, you may actually become more attractive to some lenders after a bankruptcy. In fact, it’s pretty common for persons who’ve just completed a bankruptcy to start receiving offers for credit cards, often within a month. Some may be secured credit cards—where you must deposit a certain amount to have the card—but they can help you begin to rebuild yoru credit. The key is making payments in a timely manner.

If you filed Chapter 7 liquidation, your debt-to-income ratio, one factor considered by lenders, will be dramatically reduced. If you have income, but little debt, a lender may perceive that you can afford to take on a new obligation. You can reap the same benefit in Chapter 13, but it typically takes longer, as you will be paying down existing debts over a three-to-five year period.

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.

Can An Attorney Help Me Modify the Terms of a Loan?

Can a Lawyer Help You Obtain a Loan Modification?

You may be experiencing financial difficulties and considering a bankruptcy filing to get a fresh start. However, your problem may be limited to one or a couple of loans that you simply can’t afford to pay. Can an attorney help you renegotiate the terms of those obligations such that they become affordable and you don’t have to seek protection in bankruptcy?

The answer is yes. Furthermore, most lenders would prefer to restructure your loan than have you file for protection in bankruptcy. Once you file for bankruptcy protection, your lender is prohibited from calling, writing or taking any legal action outside of the bankruptcy proceeding to attempt to collect on the loan. During the period of the bankruptcy, you generally don’t have to make payments and cannot be subject to legal action. In addition, if you file a bankruptcy petition, your creditors (including your lender) will likely incur legal fees to protect their interests.

An experienced bankruptcy lawyer will know how to work directly with your lender to work out new payment arrangements that lower the interest rate or extend the repayment period, or both. In many instances, your attorney can get late fees and penalties waived, and may be able to get any past due amounts folded into the new principal balance.

You can, of course, try to work directly with your lender. Your lender, however, doesn’t have your best interests at heart, but is only trying to protect his or her organization’s best interests. An attorney is duty bound to zealously represent you, and will make certain that you understand all your legal rights. Your lender may limit discussions to a single option, one that is best for the lender. A lawyer will make certain you understand all your options, and will fight to get the best outcome for 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 856-759-6022 (toll free at 866-662-3191).

Why Is Bankruptcy Called Chapter 7?

What Is a Chapter 7 Bankruptcy?

If you have been wrestling with a large amount of debt – and you don’t see any way to pull yourself out of your financial problems – Chapter 7 could help you. Legal counsel, or a friend or family member, might have mentioned this form of bankruptcy to you, which is called ‘Chapter 7’ because it is provided for in Chapter 7 of Title 11 of the United States Code. (When Congress passes a law it become part of the United States Code. Title 11 of the United States Code provides for the country’s bankruptcy laws and is known as the Bankruptcy Code)

In a Chapter 7 filing, you are allowed to permanently discharge certain debts; that means that once the bankruptcy proceeding is finalized, you won’t ever owe that money again. However, there are some caveats:

  • You must qualify to file for protection under Chapter 7. The 2005 revisions to the bankruptcy code established what is known as the “means test.” The means test requires that, to be eligible to file for Chapter 7 protection, you must show that you lack the resources (means) to repay any money to your creditors over a three-to-five year period (as set forth in Chapter 13 of the bankruptcy laws).
  • Some debts cannot be discharged under Chapter 7. You cannot rid yourself of certain tax obligations, student loan debt, or child support or alimony in a Chapter 7 filing.

Once you file for bankruptcy under Chapter 7, you get the protection of the automatic stay, which prohibits your creditors from calling, writing or taking any other action outside of the bankruptcy proceeding to try to collect your 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.

Debt Settlement vs. Debt Consolidation

If you are struggling financially, weary of the incessant calls and letters from creditors, you have likely seen advertisements on television or the Internet offering debt consolidation or debt settlement. These are two distinctly different programs, each with its own risks. Here’s an overview of the two concepts:

Debt Consolidation

With debt consolidation, you work with a finance company or lender of some sort, combining all or many of your debts into a single payment. Ideally, you will pay off high interest credit cards and other loans with a lower interest consolidation loan. Most lenders will require that you secure the consolidation loan with equity from your home, or some other collateral, or that you get someone with strong credit to co-sign for you. If done properly, a consolidation loan can dramatically lower your monthly interest expenses.

Debt Settlement

In the debt settlement model, instead of combining debts and paying them in full, you (or typically a “credit counselor” or debt settlement company)attempt to negotiate a reduced payoff of a debt. Debt settlement is a very risky enterprise, particularly if the company you are working with is not well-known or operating in your best interests. Debt settlement companies take payments from you while they are negotiating with your creditors, but don’t make any payments until they have negotiated a deal. If you are unable to make the monthly payments to a debt settlement company, you will often find that the debt settlement company will keep all the money that you have paid them as “fees”, without having actually settled any of your debts. Furthermore, in New Jersey it is against the law for anyone other than an attorney to charge you for assisting you with “debt settlement” and as a result most debt settlement operations in New Jersey operate in violation of state law.

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 856-759-6022 (toll free at 866-662-3191).