Archives for June 2017

The New Jersey Bankruptcy Exemptions

When you want to liquidate debts in a bankruptcy proceeding—permanently discharge them so that you no longer owe anything—you must do so through a Chapter 7 petition. When you file, you’ll immediately get the benefit of the automatic stay, which prevents your creditors from calling, writing or taking any other action outside of the bankruptcy proceeding to collect the debt. You’ll be able to permanently discharge many debts—student loans, certain tax debts and family law arrearages are generally not subject to discharge. In exchange, you will be required to sell non-exempt property, with the proceeds used to pay your creditors, in part or in full.

The New Jersey Bankruptcy Exemptions

When you file a Chapter 7 bankruptcy petition in New Jersey, you have a choice—you can take the exemptions available under New Jersey law or under federal law. You can’t, however, pick and choose between the two. Here’s an overview of the New Jersey exemptions:

  • The Homestead Exemption — Most states allow you to exempt some equity in your home. New Jersey does not. If you want to claim a homestead exemption, you’ll have to use the federal exemption schedule.
  • Cemeteries and burial plots — Burial plots and cemetery property are fully exempt
  • Motor vehicles — You can claim up to $1,000 in equity (the difference between the fair market value and anything you owe on the vehicle) on a car, truck or motorcycle
  • Pension and retirement accounts — All public pension funds are fully exempt
  • Life insurance proceeds — These are exempt if there’s a clause in the insurance policy that prevents it from being used to pay the beneficiary’s creditors.
  • Personal property — There’s a $1,000 exemption for household goods and furnishings and all clothing is fully exempted

Contact Neuner & Ventura, LLP

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

Representing Clients across South Jersey

The Homestead Exemption in a New Jersey Chapter 7 Bankruptcy

When you seek to permanently discharge debts in a Chapter 7 bankruptcy filing, part of the deal is that you get to claim some property as exempt, so that it can’t be taken by the bankruptcy trustee and sold to satisfy your creditors. The exemption customarily identifies how much equity can be protected in your home, as well as how much personal property can be kept. Each state has its own schedule of exemptions or you can choose the federal exemption.

The Homestead Exemption in New Jersey

Unlike many other states, New Jersey does not have a homestead exemption for people seeking bankruptcy protection under Chapter 7. Accordingly, if you want to protect any of the equity in your home during a Chapter 7 proceeding, you must choose the federal exemption.

That’s not to say, however, that a homeowner cannot protect any interest in a homestead in New Jersey, but it’s a fairly complicated legal process to do so. Under New Jersey law, a married debtor can claim an exemption for any survivorship interest in property, provided the property is held “by the entirety” with his or her spouse. “By the entirety” is a legal term that refers to a specific type of property ownership, where the parties are not allowed to sell or transfer their individual interest without permission from the other parties.

You can, of course, choose the federal exemptions, but you must use the federal exemptions for all your property (you can opt for the New Jersey exemption on some and the federal for other property). Currently, the federal homestead exemption amount is $22,975, but it is subject to change every three years. You can use the federal homestead exemption for a wide range of real property, including homes, co-ops, condominiums, mobile homes and even burial plots.

Contact Neuner & Ventura, LLP

At Neuner & Ventura, LLP, we provide a free initial consultation to every client. To set up a meeting, call Neuner & Ventura at 856-596-2828 or send us an e-mail. We do, however, reserve the right to charge a fee to review any work done by another attorney. Evening and weekend appointments are available upon request.

Representing Clients across South Jersey

Third Circuit Court of Appeals: Chapter 13 debtors may have a grace period to complete their plan after 60 months

The Bankruptcy Code specifies that Chapter 13 plans must provide for payments over no more than 5 years or 60 months. Yet it is not unusual even where the debtor has made all payments to end up with a shortfall at the end of the case due to increased fees or other expenses or other reasons. In Klaas v Shovlin, the Third Circuit Court of Appeals, in a ground-breaking ruling at the circuit court level, held that a bankruptcy court can give debtors in this situation a short but reasonable grace period to pay what is needed.

At the end of their 60 month plan, the Klaases owed another $1123 due to an increase in the trustee’s fee while the plan was underway. The Trustee moved to dismiss the case for that reason. Had that occurred, the Klaases would not have received the discharge they had paid for. Within 16 days after the motion was filed, they paid the difference and the Trustee withdrew the motion. However, a creditor who had joined in the motion objected that the late payment was invalid. The Bankruptcy Court disagreed.  The Creditor then filed a separate lawsuit in the bankruptcy court to deny the Klaases their discharge.  A year later the Bankruptcy Court ruled that as a matter of law the discharge was properly issued.

Both rulings ended up before the Third Circuit Court of Appeals, which ruled that a bankruptcy court has discretion, even after 60 months, to give debtors a grace period to complete plan payments and get a discharge. It found support for this in both the statutory language which limited the length of plans without a specific cutoff for completing payments, and in the purpose of Chapter 13 to afford debtors more flexibility in achieving a fresh start. It rejected the argument that a bankruptcy plan is akin to a contract, and strictly governed by its terms.

The Court cautioned that debtors do not have an absolute right to cure an arrearage after 60 months. Instead, a bankruptcy court can grant a grace period in its discretion applying various factors including how diligent the debtors have been in paying, the time needed to complete payments, what prejudice to creditors would be in allowing the late payment,  how late in the plan term did the issue come up, and whether the shortfall was caused by something the debtors did or failed to do.

Because the Klaases had been diligent and were not at fault, the Third Circuit held that the Bankruptcy Court got it right.

Chapter 13, in the right circumstances, can provide welcome and much-needed relief. However, it requires knowledgeable guidance, and care in fashioning a payment plan, diligence in payment, and attention to detail. We handle these cases regularly and are available to help those who need this special form of relief.

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