Archives for May 2013

Upfront and Honest

Marlton, NJ—After three decades of practicing bankruptcy law for creditors and debtors alike, as well as serving as a mediator and arbitrator, Steven Neuner knows every side of the federal bankruptcy code. Read More at Law.com

Student Loan debt? Here are some resources and ideas

Student loans are one of the largest categories of consumer debt today. Many people are worried or struggling to pay these loans. Worse, any student loan under a government sponsored program or with government guarantees, AND private student loans that meet tax qualifications under section 221(d)(1) of the Internal Revenue Code are not dischargeable in bankruptcy.

However, there are programs that provide assistance with repayment or partial or full discharge of certain types of loans.

Federal loans have a variety of payment plans and options for those who qualify, including partial forgiveness of the loan, income contingent repayment plans, or extended payment terms, up to 25 years. These options are, at present, limited or non-existent for ParentPlus loans

Certain types of public service can qualify you for a partial discharge.

Loan consolidation is available, but has to be approached carefully. Done wrong it could result in loss of available repayment plan benefits.

Loan foregiveness may be available, especially if the loan was given to fund a trade school education where the school failed to pay a refund, falsified certain representations as to student benefit or made other false statements.

The first thing to do in these situations is to find or obtain the loan documents. A financial aid department may be a good resource. Better yet, when you take out the loans, be sure to keep all the paperwork and applications!

This area is complex and the results are very much a product of the particular type of loan and the facts. It never hurts to ask the government agency administering the loan program for advice and information. However, you should do your own research.

Here are some on-line resources we have heard about:

http://ibrinfo.org/

http://paybacksmarter.com/

For some people who are drowning in debt, a personal bankruptcy may be what is needed to eliminate other debt so more income can be devoted to repaying student loans.

 

How Chapter 7 Really Works When Keeping Your Home

Keeping Your Home in a Chapter 7 Bankruptcy Proceeding

If you are significantly behind on your house payments and have either been served with notice of foreclosure proceedings or fear that foreclosure is imminent, you can often keep your house by filing for protection under Chapter 7 of the federal bankruptcy laws. The bankruptcy will not necessarily remove the mortgage as a lien on your home but under the right circumstances a bankruptcy can make it possible for you to keep your home and get a fresh financial start. In fact, many homeowners who file for Chapter 7 are able to stay in their homes and avoid foreclosure.

How Can You Keep Your Home in a Chapter 7 Bankruptcy Proceeding?

In a Chapter 7 filing, you are allowed to permanently discharge certain debts in exchange for the sale of nonexempt property. For example, you cannot get rid of child support arrearages, most tax debts and student loan payments. You can also claim certain types and amounts of property as exempt from sale, typically under state or federal bankruptcy rules. Federal rules allow you to claim a certain amount of equity in your home as exempt from creditors in a bankruptcy proceeding — this is known as the homestead exemption.

New Jersey does not have a state homestead exemption, but persons filing for bankruptcy in New Jersey can use the federal bankruptcy exemption, which is $22,975 per person. If a husband and wife file bankruptcy jointly, the exemption can be double that or $45,950.00! So, if you file for Chapter 7 and the net equity in your home (after broker commissions, costs of sale, and trustee commissions of about 5%), the bankruptcy trustee will not attempt to sell the home to satisfy other creditors, because there would be no benefit to other creditors from doing so. In this case, the Trustee files a “notice of abandonment” which in effect releases the home and its exempt equity back to you.

Note that if you want to keep your home, you will still have to remain current on the mortgage payments or make arrangements with the lender to cure any arrears.

For many people overwhelmed with debt, a bankruptcy frees up their available income to pay their mortgage. And while a bankruptcy discharge will not remove a mortgage lien against a home, it does eliminate personal liability for a possible “deficiency” if the home is not worth the total amount due after a foreclosure sale.

Chapter 13 provides other options for people to save their home. Check our blog or website for more information about that.

Contact Neuner & Ventura, LLP

Let us help you take back control of your life! We understand the stress, anxiety and confusion that can be associated with a potential bankruptcy filing. We offer a free initial consultation to every new potential bankruptcy client. (We do, however, reserve the right to charge a fee to review any work done by another attorney). For an appointment, call Neuner & Ventura at (856) 596-2828 or send us an e-mail. Evening and weekend appointments are available upon request

Representing Clients across South Jersey

How Chapter 7 Really Works When Reaffirming a Vehicle

Protecting Your Car When You File For Chapter 7 Bankruptcy Protection

If you face insurmountable debt, you can seek to permanently discharge that debt by filing for protection under Chapter 7. The bankruptcy laws limit the type of debt that can be discharged, and also allow you to reaffirm the debt on any property that you want to exempt from the bankruptcy sale. If you own a motor vehicle and don’t want to lose it in bankruptcy, there are specific steps you can take to protect your property.

Reaffirming Your Car Loan in a Chapter 7 Proceeding

A reaffirmation is essentially a new agreement to repay the amount owed on your vehicle. To reaffirm a car loan, you will be required to sign an agreement, stating that in exchange for keeping your car you agree to continue to make the payments on the car. The bankruptcy court will review the proposed reaffirmation to make certain that you need to have the car, that the payment is reasonable and that having the car payment will not impose an unreasonable hardship on you and your family. You can also rescind a reaffirmation agreement within 60 days and return the vehicle without any further obligation.

You want to be careful about entering into a reaffirmation agreement. By doing so, you are essentially agreeing that the protections of the bankruptcy laws do not apply to the car. If you include the car in a bankruptcy filing, you are protected by the automatic stay and the lender cannot call, write or take legal action to collect car payments from you, other than through the bankruptcy court. If, however, you reaffirm your car loan and you fall behind on your payments, the lender is not affected by the automatic stay and you will be liable for the entire unpaid amount of the loan.

Contact Neuner & Ventura, LLP

Let us help you take back control of your life! We understand the stress, anxiety and confusion that can be associated with a potential bankruptcy filing. We offer a free initial consultation to every new potential bankruptcy client. (We do, however, reserve the right to charge a fee to review any work done by another attorney). For an appointment, call Neuner & Ventura at (856) 596-2828 or send us an e-mail. Evening and weekend appointments are available upon request

Representing Clients across South Jersey

The Simplest Chapter 7 Bankruptcy Filing

For many, simply the word “bankruptcy” conjures up visions of mountains of paperwork, complex filings, meetings with creditors and hearings in bankruptcy court. After the 2005 revisions to the bankruptcy laws that mandated that anyone seeking to permanently discharge debt under Chapter 7 submit to a “means test,” it may seem that the days of a “simple bankruptcy” are over. You may have to determine which debts qualify for discharge, as well as what assets are exempt from sale under state or federal laws.

Nonetheless, there are still situations in which you can quickly and effectively complete a Chapter 7 bankruptcy and get a fresh financial start. Even if the process takes longer than expected, you will benefit from the automatic stay, which goes into effect immediately, preventing creditors from calling, writing or taking legal action to collect a debt.

Here are the conditions that will make it easiest for you to file and complete a bankruptcy with little or no difficulty:

  • Your household income is less than the state median — Typically, if your income is below the state median, you are free to file either Chapter 7 or Chapter 13, and do not need to undergo the complex calculations set forth in the means test.
  • You own few or no assets — If you have significant assets, you will have to determine what assets you can keep and which may be sold to satisfy your creditors. If you have few assets, chances are good you will be able to keep everything.
  • You have no secured debt (mortgage, car note or any obligation secured by collateral) — If you have secured debt, the bankruptcy court must make a determination as to who has priority regarding the proceeds of a bankruptcy sale. With no secured debts, the proceeds are simply shared by your creditors.
  • Your creditors have no basis for an allegation of fraud against you — Allegations of fraud happen rarely, but when they do, they take a long time to resolve.
  • Your bankruptcy does not involve any business debt — Business debts are often larger and more complex than most personal debt.

Contact Neuner & Ventura, LLP

Let us help you take back control of your life! We understand the stress, anxiety and confusion that can be associated with a potential bankruptcy filing. We offer a free initial consultation to every new potential bankruptcy client. (We do, however, reserve the right to charge a fee to review any work done by another attorney). For an appointment, call Neuner & Ventura at (856) 596-2828 or send us an e-mail. Evening and weekend appointments are available upon request.

Representing Clients across South Jersey

US Supreme Court clarifies when trustees may lose their right to a discharge

By far, the right to a discharge of debts is the most valuable benefit of a bankruptcy filing. Discharge of particular debts can be denied under limited circumstances when the creditor files a timely suit in the bankruptcy court. One of the grounds for such non-dischargeability applies to debts for “defalcation while acting in a fiduciary capacity” [ie acting as a trustee].   The term defalcation generally means causing a loss or acting in violation of required standards of conduct. Fiduciaries are held to higher standard of conduct and trustworthiness than others, but not everyone who is placed in that position fully understands or appreciates the obligations that come with it. What was unclear until recently was whether a trustee acting without ill intent whose actions did not cause actual loss could be held liable and such liability could be made non dischargeable.

In Bullock v BankChampaign NA, the United States Supreme Court answered this question. There, the debtor had served as trustee of his father’s trust created for him and his four siblings. The trust had one asset, a life insurance policy with cash value. The trust allowed borrowing against the value of that policy. Three times, Mr. Bullock authorized such borrowings. In all cases, the borrowed money was repaid with interest. In two instances, the borrowed money was used to buy assets that Mr. Bullock and his mother jointly owned. Thus, Mr. Bullock personally benefitted from some of the borrowing, although no money was lost.

His brothers sued him in Illinois state court. Finding that he had violated his fiduciary duties by engaging in “self-dealing” that court entered  a judgment against him requiring him to repay the benefit he received along with costs and attorneys fees. BankChampaign was appointed the new trustee. After Mr. Bullock filed for bankruptcy, BankChampaign sought to have the unpaid judgment declared non-dischargeable. The lower courts all held that Mr. Bullock’s conduct was a sufficient violation of his duties that the debt should not be discharged, even though there was no actual loss and no proof of ill intent.

The Supreme Court reversed and sent the case back to apply the new standards it announced. To be non-dischargeable “defalcation” in the absence of actual loss, bad faith, moral turpitude or other immoral conduct, it held, there must be more. The trustee must have knowingly engaged in wrongful conduct, or else  recklessly disregarded  a “substantial and unjustifiable risk” that his conduct will turn out to violate a fiduciary duty. The risk, it held, “must be of such a nature anddegree that, considering the nature and purpose of the actor’s conduct and the circumstances known to him, its disregard involves a gross deviation fromthe standard of conduct that a law-abiind person would observe in the actor’s situation”

As noted above, many people take on fiduciary obligations without a proper understanding or appreciation of the high standards imposed on them. A common example is the family member acting as trustee for a parent’s estate. For such persons, this decision not only clarifies the limits of non-dischargeability, but also provides  needed relief  where innocent mistakes are made.  In proper circumstances, this decision will prevent the innocent technical violation from becoming a life-long liability.

That said, anyone serving as a guardian, trustee or executor should seek legal advice to avoid these types of problems from arising in the first place. With years of experience as fiduciaries or representing them, we can provide the needed help.

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