On Friday, you received a Notice of Commencement of Bankruptcy Case.

Are you out of luck? Do you risk being last in line to get paid along with many other creditors?

Maybe not!

If the customer received the products you shipped within twenty days of filing a bankruptcy case, then you may be entitled to claim that the value of what goods were shipped in the ordinary course of business within twenty days should get a higher status in the payment ‘food chain’. This means a better chance to get paid once the customer files a bankruptcy reorganization plan.

To get ‘administration claim ‘status you must ask the Bankruptcy Judge to agree that your debt for the value of the goods you shipped are entitled to administrative claim status. Administrative claims get paid ahead of other debts incurred before the bankruptcy case filing or after twenty days from the case filing.

See Bankruptcy Code Section 11 U.S.C. 503(b) (9). Just possibly you are no longer ‘last in line’.

Sometimes all a business needs is breathing room and to control some of its creditors so it may reorganize.

There are a few paths that it can take.

Bankruptcy may be a great option, but it may not be the best option based on the goals of the business owners. Outside of bankruptcy, there are certain state laws that may assist with creditor negotiation or shutting down without filing a bankruptcy. Whatever the path, it is imperative to protect business owners that have personal guarantees. 

Our firm has been helping businesses in and outside of bankruptcy for decades. We can help you find a solution that lets your business survive and thrive.

The first thing to do is to call the mortgage lender or servicer and explain your circumstances. See if you can negotiate a way to get caught up. Be completely candid and explain your difficulties (if they are temporary such as illness or a short-term interruption in employment or job loss).

If you believe that you will not be able to make mortgage payments for 2 or 3 months be aware (at least in New Jersey) many mortgage lenders will refer the matter out to an attorney to start foreclosure after three months. You may be able to delay this by asking a mortgage modification or a forbearance agreement. This will require that you give the mortgage company financial information. 

Our New Jersey Law Firm can help you earn a mortgage modification

If you know you have equity in your home, you may want to consider selling your home. Here is how you can calculate the equity:

1. Determine what homes similar to your own might sell for.
2. Subtract an estimated 10% cost of sale (including the customary 6% real estate commission).
3. Subtract the amount that you owe on your mortgage.
4. Subtract the amount that you owe on any home equity line of credit that is secured on your home.
5. The remaining balance is the potential equity in your home. Will this be enough for you to start over in a rental or to allow you to purchase a smaller home that meets your needs?

Please consider whether a Chapter 13 bankruptcy proceeding might help you. Because bankruptcy laws are complex, you should consult with an experienced bankruptcy attorney. Chapter 13 was created in order to help homeowners save their homes from foreclosure and to become current on the mortgage. If you need time to get caught up with your mortgage, you may be able to protect your home in a Chapter 13 bankruptcy.

My office has been handling Chapter 13 cases for many years. I invite you to give me a call at (908) 782-9333.

You meet with a potential client about a recent auto accident personal injury claim. The client has suffered serious injuries and may be entitled to a significant jury verdict or settlement. However, the potential client does not tell you that he or she is involved in an active bankruptcy case to have his or her debts discharged. You learn that your client has also not told his or her bankruptcy attorney that he or she has been injured and may have a personal injury claim. Very often, clients do not realize the importance of disclosing these potential claims.

What duty do you have, as a personal injury attorney, to discover or determine the existence of a client’s or potential client’s bankruptcy?

REDUCE YOUR RISK

If you fail to take action to see if the client has or will file a bankruptcy case, this could seriously harm your case or your right to receive legal fees for your hard work, time and risk.

A debtor’s (a debtor is someone who files or plans to file a bankruptcy) failure to disclose personal injury claims in a bankruptcy proceeding can have serious consequences for themselves, their bankruptcy attorney and you as their non-bankruptcy personal injury attorney.

Anyone who files a bankruptcy must answer question 5 of the Statement of Financial Affairs in the bankruptcy petition. This question asks:

“Within one year before you filed a bankruptcy case were you a party to a lawsuit, court action or administrative proceeding? List all such matters including personal injury cases, small claims actions, divorces, collection suits, suits to establish paternity, support custody modifications and contract disputes.”

As part of the answer to paragraph 5, your debtor client must fill in a blank whether the case is pending, on appeal or is concluded.

Many personal injury attorneys make this inquiry. More do not ask this question. But what should the non-bankruptcy attorney do to take additional steps to verify a client’s status either in or out of bankruptcy? The easy answer is to look up the client’s status on PACER (Public Access to Court Electronic Records).

HOW TO SEE IF YOUR CLIENT HAS FILED A BANKRUPTCY

PACER is used by all federal courts, including bankruptcy courts, to save electronic records of all cases filed. New Jersey Bankruptcy Courts have been using PACER for at least the last 30 years. In my firm, we use PACER daily in our bankruptcy work whether we represent debtors, creditors or have persons involved in foreclosure proceedings. We also use PACER to determine whether we can proceed with a collection or foreclosure case. We do not want to violate the automatic stay or the discharge injunction after a case is concluded.

What if your client or perspective client is unsure if they have a personal injury case? It is useful to run a PACER search using the client’s name and social security number. This will show cases that have been filed, are ongoing or whether the case is now concluded.

If you need help using PACER you can go to the U.S. Bankruptcy Court for the District of New Jersey’s website and register to use PACER. There is no charge to open an account.

PACER will charge you approximately 0.10 cents per page. Often, a search will not cost more than 10 or 20 cents. It is an inexpensive way to protect your fees, your client’s case and your reputation.

What if you learn your client is in bankruptcy or after you file suit you learn a bankruptcy case has been filed?

A cause of action for personal injury is part of the bundle of property rights that constitute a bankruptcy debtor’s estate. This applies whether your client has filed a Chapter 7, Chapter 11 or Chapter 13. Your best cause of action is to contact your client’s bankruptcy attorney and discuss the matter fully.

If there is a Chapter 7 case filed and your client was injured prior to the Chapter 7 case being filed then the claim belongs to a Chapter 7 Trustee. A Chapter 7 Trustee will want all information about the case. The Trustee has the right to control settlement or whether the case should proceed to trial. Your client will have the right to exempt a portion of the personal injury settlement. Your client may be able to exempt at least $27,900 under the Bankruptcy exemption statute 11 U.S.C. Section 522 (d) (11) (D). There may be additional exemptions which would increase your client’s rights in his or her personal injury case.

In Chapter 13, your client must tell the Chapter 13 Trustee about their claim. Your client must get any settlement approved by the Bankruptcy Court. The Trustee will want any recovery over the exemption amount of $27,900 to be paid for the benefit of your client’s creditors.

PROTECT YOURSELF BY STAYING HIRED

Any attorney handling a personal injury case for someone in bankruptcy or about the file a bankruptcy should obtain an order from the Bankruptcy Court approving their retention as special counsel. The procedure for obtaining such an order is simple. It requires a modest amount of legal work. Debtor’s counsel has the necessary pleadings as Court-approved forms. You will need to do a conflict search to be sure you have no adverse interest or to any of the debtor’s actual or potential creditors. Failure to get this order may mean you will not receive fees.

GETTING SETTLEMENTS AND CONTINGENT FEES APPROVED

How do you get your settlement approved by the Bankruptcy Court?

Settlement approval can be done by bankruptcy attorneys in two required ways. First, a motion to approve the settlement must be filed and all creditors must be noticed. A notice of proposed settlement of controversy must be prepared by the debtor’s bankruptcy counsel and filed with the Bankruptcy Court. The Court Clerk will then send the notice to approve settlement. The notice sets deadline dates by which any creditor, Chapter 7 Trustee or Chapter 13 Trustee must file and serve written objections to the proposed settlement. In the absence of any objection, the bankruptcy judge usually will approve the settlement. When there are written objections, the Court must hold a hearing.

In Chapter 13 cases, all assets acquired either at or after the case has been filed are subject to the rights of the bankruptcy trustee for the benefit of your client’s creditors. For this reason, the Chapter 13 Trustee can require periodic reports from you regarding the status of the personal injury case, issues in the case and what you believe the proposed settlement range of the case may be.

WANT TO LEARN MORE?

If you have further questions or would like our office to assist you with determining whether your client is in a bankruptcy, I invite you to contact me.

Here is what the IRS wants you to know:

Getting a letter from the IRS can make some taxpayers nervous – but there’s no need to panic. The IRS sends notices and letters when it needs to ask a question about a taxpayer’s tax return, let them know about a change to their account or request a payment.

When an IRS letter or notice arrives in the mail, here’s what you should do:

Read the letter carefully. Most IRS letters and notices are about federal tax returns or tax accounts. Each notice deals with a specific issue and includes any steps the taxpayer needs to take. A notice may reference changes to a taxpayer’s account, taxes owed, a payment request or a specific issue on a tax return. Taking prompt action could minimize additional interest and penalty charges.

Review the information. If a letter is about a changed or corrected tax return, you should review the information and compare it with the original return. If you agree, you should make notes about the corrections on your personal copy of the tax return and keep it for your records. Typically, you as a taxpayer will need to act only if you don’t agree with the information, if the IRS asked for more information or if you have a balance due.

Take any requested action, including making a payment. The IRS and authorized private debt collection agencies do send letters by mail. Taxpayers can also view digital copies of select IRS notices by logging into their IRS Online Account. The IRS offers several options to help taxpayers who are struggling to pay a tax bill.

Reply only if instructed to do so. Taxpayers don’t need to reply to a notice unless specifically told to do so. There is usually no need to call the IRS. If a taxpayer does need to call the IRS, they should use the number in the upper right-hand corner of the notice and have a copy of their tax return and letter.

Let the IRS know of a disputed notice. If you do not agree with the IRS, you should follow the instructions in the notice to dispute what the notice says. You should include information and documents for the IRS to review when considering the dispute.

Keep the letter or notice for their records. Taxpayers should keep notices or letters they receive from the IRS. These include adjustment notices when the IRS takes action on a taxpayer’s account.Taxpayers should keep records for three years from the date they filed the tax return. Keep everything the IRS sends you.

Watch for scams. The IRS will never contact a taxpayer using social media, phone calls or text messages. The first contact from the IRS usually comes in the mail. Taxpayers who are unsure whether they owe money to the IRS can view their tax account information on IRS.gov. If someone calls you claiming to be from the IRS, it is probably a scammer. Do not send the caller any money or give them any identifying information. Ask them to write to you if they are really from the IRS.

Think of a Note and Mortgage as two chains. The first chain is the Note. Its legal effect is that the bank or other lender has a chain between itself and your wallet. They have the right to make you pay money by suing you to collect the money from you.

The second chain is a tie between the bank and your home. This is the legal effect of a Mortgage (but in very simple terms).

A Chapter 7 or Chapter 13 bankruptcy discharge entered at the end of your case, cancels, or cuts the chain between the bank and your wallet. You no longer have the obligation to pay.

However, it does not mean that the mortgage lender loses its rights in your home or other real property as collateral. The bank can still foreclose on your home if they are not paid. This applies whether you have a first, second or multiple mortgages on your home. One of them will want to foreclose in order to get paid.

If you sell your home but have not dealt with your second mortgage, you will need to pay the mortgage off when you sell the house.

Do you have questions? Please contact our office. We look forward to speaking with you.

The bankruptcy filing creates the automatic stay or injunction of collection efforts of debts.

Once a bankruptcy discharge is entered, you must wait one (1) year after your bankruptcy discharge before we can file a motion with the State Court to cancel the judgment. A judgment that has been obtained against you in the Superior Court of New Jersey and docketed (filed) with the Superior Court’s Judgment Unit in Trenton becomes a lien on all real estate you own in the State of New Jersey.

New Jersey Statute N.J.S.A. 2A:16-49.1 requires that you wait one (1) year before a motion can be filed to cancel the judgment of record in the State of New Jersey Superior Court Judgment Unit. This work is not included in your bankruptcy case. It is not part of your bankruptcy lawyer’s legal fees.

Once we have your bankruptcy discharge, we can diary ahead one year and send you a reminder to see if you want us to do this work.

In the past, title companies who may want to insure refinancing your mortgage or a second mortgage or who may want to insure the title of the buyer of your home may require this be done. The motion can be filed at any time after one (1) year from your bankruptcy discharge. If you have questions or want to have this work done, please contact our office.

When you file a Chapter 7 bankruptcy, the bankruptcy removes the personal obligation to pay. It does not cancel or discharge mortgages. Chapter 13 cases are very different.

The mortgage lender may only sue against the property by foreclosure once your bankruptcy case is over or a Bankruptcy Judge gives them permission to do so. This permission cannot be obtained if you have brought the mortgage current or obtained a successful mortgage modification.

A Chapter 7 will not cancel a mortgage. A Chapter 13 may cancel a mortgage if it is a second or third mortgage and the property is worth less than what you owe on your first mortgage.

In order to lien strip, we must file a motion with the Bankruptcy Court. This is usually part of your Chapter 13 plan. If your Chapter 13 plan is confirmed (approved by the Bankruptcy Judge), the Bankruptcy Judge will condition the removal of the second mortgage on your successful completion of the Chapter 13 plan.

Remember that the holder of the second mortgage has the right to object to your plan.

Once you have made all of your Chapter 13 plan payments, the Chapter 13 Trustee will send your attorney and you a “payments complete” letter. This is our signal to file a motion with the Bankruptcy Court to obtain an Order to cancel your second mortgage with the County Clerk’s Office. Once we have the order and have it recorded with the County Clerk (such as the Clerk’s Office in Flemington, New Jersey), there is no longer a second mortgage on your home should you want to sell your home and only pay off the first mortgage. If you want to keep your home, continue to make payments on the first mortgage until that mortgage is paid off in full years later.

Even after your case is closed, we can still file this motion if for some reason it has not been done already.

Federally guaranteed student loans may be able to be discharged or cancelled in bankruptcy. New Jersey student borrowers who need to cancel student loans backed by the U.S. Department of Education now have more guidance from the Department of Justice.

You still have to show “undue hardship” so a judge can order your student loan to be cancelled. The very tough “undue hardship” standard you previously needed to prove to end your obligation to repay the federally backed student loan has been relaxed. These rules do not yet apply to private student loans. For private loans, Bankruptcy Judges must require that you prove “undue hardship” under the old, not yet relaxed standards.

There is a lot you must help your New Jersey bankruptcy lawyer prove in order to secure a discharge of the student loan. We help our Hunterdon, Somerset and Warren County clients collect and organize the required information. 

The government has set clear, very transparent expectations that it wants you to meet if you are no longer able to pay your federally guaranteed student loans. There is a 15 page information form we can help you complete and provide to the federal government and the court. Here is a link to the form being used in one Bankruptcy Court:

Student Loan Discharge Guidance – Attestation Form

The federal government wants to understand your present financial circumstances, whether your inability to repay will continue and whether your inability to repay is in good faith so they can make a decision as to the dischargeability of your student loans.

It is a lot of effort but it is worth it. Give our office a call today to schedule a free 1 hour, no obligation consultation to discuss your options.

1. When a bankruptcy is filed, all debt collection efforts must stop. The Bankruptcy Court Clerk issues a court order called the automatic stay. It is an injunction or a restraining order. This order is issues as soon as your case is filed. It stops a foreclosure on your home, apartment or a repossession of your car immediately.

1. Instead of keeping away someone who wants to hurt or annoy, it orders your creditors not to take things away from you or to even contact you.

STAY AGAINST USING THE STATE COURT COLLECTION PROCESS

This includes law suits, wage garnishments, seizure of your bank account, car, or other property. The County Sheriff cannot sell off your home in a foreclosure. The people who repossessed your car must give it back. The Court Officer who froze your checking account must “unfreeze” it. The pay garnishment from your pay check must end.

This is a very powerful tool for you.

CREDITORS AND BILL COLLECTORS MAY NOT CONTACT YOU

The phone calls to ask you for money must stop.

The letters from bill collectors must stop.

Bill collectors may not contact your employer, family or friends.

Our law firm’s website (www.williamwolfsonlaw.com) has information on how to deal with bill collectors, including pay day lenders.

STAY AGAINST AUTOMATIC BANK WITHDRAWALS

If you have given someone permission to automatically take money from your bank account (an ACH withdrawal) this must stop. Tell your bank. Go visit your bank and sign the forms needed so they can stop the automatic withdrawals.

PAY DAY LENDERS

Many are out of state. Some are not even in the United States. They will just keep calling to keep you on the phone in the hope you will weaken and let them take money from you or someone else. Explain that you do not plan to pay them and that they should not talk to you again or call you.

Ask them for their name, address and where to write to them. These bill collectors often do not care to respect laws that prohibit them from threatening you with arrest. They cannot have you arrested. Police departments do not work for bill collectors.

Ask them to leave you alone.

Ask them the interest rate they are charging you. Write it down.

Ask them to mail to you proof of what you owe, what you signed and a copy of all charges and payments.

New Jersey law makes charging too much interest a criminal offense. Charges in excess of 30% interest are prohibited unless there is some special reason allowing the charges.

If you have filed a bankruptcy case or have hired a lawyer to do so, ask them to call your attorney, identify the attorney and hang up. Always keep track of the callers and what they have said so you attorney can ask a bankruptcy judge to decide if the caller should be penalized by the Bankruptcy Court for a stay violation.

The time to hire a lawyer familiar with foreclosure and bankruptcy is NOW! Do not let any more time go by. Once a foreclosure sale is held and the sheriff’s gavel hits the table, you no longer own your home. It’s simply a matter of the county sheriff processing the remaining paperwork before you are required to leave your home. You will get a visit from the bank or buyer’s representative asking about your plans to go. Sometimes you may be offered a small sum of “move out” money if you leave quickly and do not damage what used to be your home.

Contact us today to discuss your options. 

The Chapter 13 sections of the Bankruptcy Code say that you can try to save your home by filing a Chapter 13 case BEFORE the sale of your home. Here is what the law says about curing a “default” (missed payments) in your mortgage:

a default with respect to, or that gave rise to, a lien on the debtor’s principal residence may be cured under paragraph (3) or (5) of subsection (b) until such residence is sold at a foreclosure sale that is conducted in accordance with applicable non-bankruptcy law;

If you have received a foreclosure notice and have not already taken action to hire an experienced bankruptcy or foreclosure lawyer, you should do so well before the foreclosure sale date.

Many intelligent people in and out of businesses do not learn how to use money and the protections offered by the legal system except by trial and error.

Sometimes the wreckage is just too much to work and earn your way out of it. The problems occur whether through divorce, illness, theft, substance abuse, business failures, job loss, underemployment, returning from incarceration, etc.

There are many tools to help individuals get back on their feet. The legal system provides some, but not all of the remedies. A combination of self-help and professional help and guidance is needed.

In my work, I try to find the least difficult way to solve a client’s problems.

Bankruptcy laws are a tool to get a fresh start in your financial life. It can save homes from foreclosure, cars from repossession and stop the bill collectors from calling, etc. While you can file a bankruptcy case on your own, the bankruptcy laws are complex and not easily understood. You can make a serious mistake that may prevent you from getting the help you want from the law. You can lose a home, cars or the money in your bank or savings by not filing a bankruptcy case soon enough. I know of individual cases where people waited to file for bankruptcy protection until after foreclosure sales and lost their homes.

A lawyer who handles bankruptcy cases is able to properly guide you through the case preparation and dealing with the trustees. Creditors and the courts cannot advise you about your rights and legal duties. I have decades of experience helping people and businesses in financial difficulty. My office has a certified paralegal who assists me in preparing my clients’ court filings. We would appreciate the opportunity to meet with you to discuss your financial circumstances and your best options.

         One solution is to use the exemptions available to protect property used to help get a fresh start in life. But these property exemptions are limited in amounts. 
Another answer to this difficult problem is for the parents to set up a Spend Thrift Trust for their son or daughter. The advantage to using a Spend Thrift Trust is that a third party (also called a trustee or fiduciary) has control over the money or other trust assets and the adult child does not. Therefore, Bankruptcy Trustees and other creditors are not able to take the property in the trust. This even protects money that the adult child receives from the trust.
Another solution can be to make the adult child the beneficiary of the parents’ Investment Retirement Account or 401(k) account. Bankruptcy laws and New Jersey law protect these accounts from ever being available to bankruptcy trustees or the adult child’s creditors.

1. Do not use your credit cards once you’ve made your decision to file.

Once you’ve made your decision to file bankruptcy, do not incur additional debt that you don’t intend to repay.  You could lose the right to cancel the debt in bankruptcy.  One of the worst things you can do before filing bankruptcy is run up a bunch of credit card debt assuming it will be discharged in bankruptcy. The bankruptcy law changes enacted in 2005 lowered the threshold on luxury purchases to $500 and extended the abuse period to 90 days prior to filing.  Purchases in this abuse period are asking for extra scrutiny. These amounts change every 3 years.

2. Do not repay family members or friends

Family members or friends cannot be treated any better than other creditors.  In the eyes of the law, relatives have the same legal status as other creditors and you are not permitted to treat relatives differently than other creditors.  In some circumstances, the trustee can reclaim the amount paid to the family member for distribution to all creditors in the same class.  While it feels good to repay a family member, it will feel bad when a trustee sues them to recover the money you paid your parents or sibling or best friend.

3. Do not liquidate your retirement account

Retirement accounts are generally exempt property in a bankruptcy no matter which chapter you file.  It is not necessary that you liquidate your retirement funds prior to filing.  Some clients liquidate their retirement accounts and still owe substantial sums.  Early withdrawal of these funds makes you liable for penalties and taxes which may not be discharged in bankruptcy.  Don’t trade Visa for the IRS as a creditor. 

4. Do not transfer property out of your name

Don’t transfer property out of your name prior to filing bankruptcy.  The Trustee can undo property transfers if a fair price is not received or if made with intent to defraud, hinder or delay a creditor.  This includes transfers to friends or relatives also.  You may lose your right to have your debts cancelled in bankruptcy.

5. Do not use your equity line of credit to pay off debt

Under federal law, you have the opportunity to claim an exemption for the equity in your home.  This means you can go through bankruptcy, and still have this equity.  If you use your equity line to pay off debt or take out a second mortgage, you may be converting debt which would have been discharged in bankruptcy into debt which you will still have to pay in order to keep your home.

6. Always tell your attorney the truth and fully disclose all of your concerns

The courts take the rules very seriously and can  refer a case for  criminal charges if intentional fraud  or lying under oath is committed.  Even if the Court does not  go that far,  a Bankruptcy Judge  can refuse to discharge a particular debt, or dismiss the entire case.  Many of the issues you are concerned about can be addressed within the provisions of the Bankruptcy Code.  Speak openly and honestly with your attorney regarding all financial issues.  Remember, your attorney is an advocate for your desired outcome.  They can help you more when you make a full disclosure.  A full and completely accurate disclosure of all assets and debts is the best way to avoid problems in a bankruptcy case.

Once you have disclosed all of your financial information, your goals for the future, plans for your family, your business, etc. and have asked your attorney all of your questions you will feel better prepared to enter bankruptcy with a vision of a fresh future.  

                In New Jersey, if you do not pay your traffic fines, the Municipal Court and the Division of Motor Vehicles may suspend your driver’s license. If you are caught driving while your license is suspended, there are serious consequences such as a longer suspension and more traffic fines.

Once a Chapter 13 bankruptcy case is filed, the license must be restored if previously suspended for failure to pay traffic fines. You must complete your Chapter 13 Bankruptcy case and receive a discharge. If you do not, you may still owe the fines. You risk another attempt to suspend your driver’s license for non-payment.

 New Jersey Bankruptcy Judges can order licenses restored once a case is filed under Chapter 13 if you have unpaid traffic fines. Fines discharged in Chapter 13 Bankruptcy cases may not need to be paid in full.  

Fines are not discharged in a Chapter 7 case. This is because (1) the Bankruptcy Code creates an exception for individuals filing Chapter 13 cases and (2) because Chapter 13 cases involve a repayment plan for your debts. If you need to file a Chapter 7, your attorney can help you make payment arrangements with the Municipal Courts.

Chapter 13 cases are cases for individuals or couples with regular sources of income or the ability to pay creditors monthly payments. A potential Chapter 13 case filer must comply with certain other requirements.

If your license suspension for non-payment of fines is preventing from getting back your financial future, getting a good job or supporting your family, and you want to know more, give me a call today at 908 782 9333. Our first consultation is free. 

                   Bill Wolfson

In divorce cases, the term ‘equitable distribution’ means dividing up property and debts in a way that is fair between two people who no longer will be married to one another.

Many of our clients are surprised to learn that some debts arising out of divorce may be capable of being discharged in a bankruptcy case.

Equitable distribution of property acquired during a marriage may be discharged in a Chapter 13 case but NOT in a Chapter 7 case.

The key take away is to be certain the debt everyone thinks is equitable distribution of property is not actually for alimony, or child support for maintenance.  This is because a bankruptcy judge must make an independent decision about whether or not the debt can be discharged in a bankruptcy case even though the judge hearing the divorce case and the former couple may have decided what these debts are for and what they were negotiated to accomplish.

Most post-divorce debts one former spouse owes to the other ex-spouse are either (a) domestic support obligations, i.e. alimony, child support, maintenance (including reimbursement of governmental support) or (b) equitable distribution or an adjusting of paying for property, handling joint debts to others such as car loans, mortgages or credit card debts.

Bankruptcy Courts discharge or cancel (wipe out) alimony or child support debts under any Chapter of the Bankruptcy Code. In fact, the Bankruptcy Code gives these obligations the right to be paid ‘off the top’ or a higher priority than many other types of debt.

Alimony and child support are very important in Bankruptcy.   Before anyone who files a bankruptcy (whether Chapter 7 or Chapter 13) may get a discharge of other non- domestic support debts like alimony or child support, they must file a sworn statement certifying they either are current with support or alimony payments, have made arrangements to become current or have no domestic support obligation. Without this important statement, there can be no discharge.

How do we know when a debt or obligation (like paying for health insurance or school tuition for a child) is a domestic support obligation?

 Sometimes a property settlement may be agreed on or court ordered in the divorce court but looks like equitable distribution of property. Very often, a division of property at the time of a divorce is designed to achieve the same goals as alimony or support.  At the time the soon to be ex- spouses sign a marital settlement agreement or a judge orders them divorced and property divided up, bankruptcy is usually not in the picture.

The law can be a little tricky sometimes depending on the facts.

One example is when one spouse buys out the other spouse’s interest in the family business by regular payments over time. Some bankruptcy Courts decided that the (debtor’s obligation to make regular payments to his former spouse in lieu of her interest in debtor’s business was contemplated to allow former spouse to meet necessary living expenses and was found to serve a support function). Here, discharge of this debt was denied.

Another example is when a debtor’s assumption of the obligation to pay second mortgage on marital residence was considered support because it was intended to facilitate maintenance of dependent former spouse’s housing.

Do you want to know more? I invite you to call me at 908 782 9333.

Your personal, family and household debts are coved under the FDCPA. This includes money owed for the purchase of a home, an automobile for general transportation, medical care, and non-business charge accounts. Business debts are not covered, even if you are personally liable.

A debt collector is anyone, other than the creditor, who regularly collects debts for others. This includes (1) collection agencies, (2) attorneys who regularly collect debts or foreclose mortgages, (3) companies that regularly acquire debts after they are allegedly in default (there are many companies which buy bad credit card debts, delinquent mortgages, etc.).

A debt collector may contact you in person, by mail, telephone or telegram. However, it cannot be at inconvenient times or places. It must be between 8:00 AM and 9:00 PM local time. A debt collector may not contact you at work if it should know that your employer does not permit it. A debt collector also may not contact you if you are represented by an attorney and the collector knows it.

You can stop a collector from contacting you by writing a letter to the collection agency telling them to stop contacting you. Once the collector receives your letter, it may not contact you again except to state that there will be no further contact to inform you if the collector or creditor intends to take some specific action.

If you send such a letter be sure to do the following: (1) keep a copy, (2) send it by means that generates a receipt (e.g. Certified Mail, fax, Federal Express), and (3) keep the receipt.

DO YOU WANT TO KNOW MORE? PLEASE CONTACT US.

If you believe you are being mistreated by a debt collector, I invite you to call me to discuss the situation. In future posts we will discuss what information must be provided to you by a debt collector, specific debt collection practices that are prohibited by law, and what to do if a debt collector violates the law.

New Jersey is a “foreclosure first” state. This means that the holder of a first mortgage must sue for foreclosure and complete the foreclosure with a sheriff’s sale before suing the homeowners for money. The second mortgage holder and other junior mortgage or judgment holders are not bound by this law. They can bring suit for money when the borrower misses a payment.

New Jersey has a group of laws called the Fair Foreclosure Act. It applies only to mortgages taken out by home owners. The Fair Foreclosure Act requires notices from the mortgage lender to the borrower along many steps in the foreclosure process.

The first of these is a Notice of Intent to Foreclose. This is sent 30 days before the lender’s attorney files a foreclosure law suit. It informs the home owners of how much they must pay, when they must pay and where they must send the money to avoid the start of a foreclosure proceeding. THIS IS AN IMPORTANT RIGHT! It may keep the start of a foreclosure off of a credit report. It can save money on legal fees, worry and many, many sleepless nights.

After the 30-­day period has expired without the payment requested by the mortgage company having been made, their lawyers are able to file a foreclosure law suit and have the county sheriff serve a Summons and Foreclosure Complaint on all property owners and on others who may have some interest in the property. The Summons and Complaint comes with an application for the Court’s foreclosure mediation program. This can help home owners deal with their mortgage lender under the supervision of a Court­ appointed mediator. The time period to answer the complaint or to ask for mediation is very limited, so it is critical that you act quickly once served.

For more information, please see my other posts related to foreclosure.

DO YOU WANT TO KNOW MORE? PLEASE CONTACT US.

All businesses have risks. If we worried only about the risks and not the rewards of owning your own business and its profits, no one would ever open a business. Smart, successful business owners acknowledge the risks exist. Then they manage or try to minimize these problems by following a few guidelines. You may have a great product or provide excellent services. Positioning yourself to be successful is the other half of the battle. Here are some of the guidelines:

1. Keep your business finances separate from your personal finances.

• Form a Limited Liability Company (LLC) or a Sub-Chapter S Corporation.
• Get both a Federal and a NJ Tax Identification Number (TIN).
• Open bank account(s) in the name of the business. Clearly show that it’s the business writing checks and incurring debt, and not you, personally.

2. Be wary of giving personal guarantees.

Personal guarantees put you and your assets “on the hook” for payment of debt related to the business even if you operate as an LLC or S Corporation. A personal guaranty is just like co-signing a loan. Would you co-sign a loan for someone who could not or might not pay it back?

3. Talk to your accountant and insurance advisor.

They are not just “salespeople” trying to sell you something. They are professionals. They are licensed and regulated by the State of New Jersey. They have valuable knowledge. These professionals have useful information and offer sound advice. Good ones will not sell you what you do not need. Good ones will tell you the best way to form, organize and protect your business, your personal assets and yourself. For example, if you have employees, then you MUST have Worker’s Compensation Insurance.

My next post will focus on things to keep in mind to protect yourself from customers, lenders, vendors, and landlords.

I encourage you to contact me to discuss issues related to your current business or the one you are thinking about starting.

DO YOU WANT TO KNOW MORE? PLEASE CONTACT US.