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Bankruptcy & Credit-Frequently Asked Questions

We are South Jersey Bankruptcy attorneys providing debt relief advice and representation. With 25 years of in-depth experience and board certification, we can help people steer their way out of trouble and obtain debt relief under the Bankruptcy Code and other laws. Especially in these days of financial crisis, skilled, experienced guidance is essential.

First Meetings of Creditors-what is it and why is it important
First Meeting of Creditors-I cannot come. What do I do?
How do I get to courts or hearings?
Do I need a bankruptcy? Can't I just dig out of debt myself?
Should I use a debt settlement firm?
Pension, IRA or 401K withdrawal-good idea?
Saving my home-will the lender lower my payments or give me a deal?
Saving my home or car in Chapter 13
Short Sale-should I use a short sale to avoid foreclosure?
Taxes-I owe back taxes
Will I have to go to Court?
Will my neighbors or boss find out?
What about my security clearance?

How do I get to courts or hearings?
See our Directions to Bankruptcy Court page

Will I have to go to court?
Going to court is fairly rare, for most people who file bankruptcy. On the other hand, everyone who files a bankruptcy will have to go to a hearing before some type of bankruptcy trustee. This is called a "First Meeting of Creditors" or section 341(a) hearing. There, the trustee (and sometimes creditors) can ask questions about your bankruptcy and financial matters. Steve Neuner has conducted thousands of these hearings himself as a trustee and knows the questions trustees will need to have answered. If you are represented by an attorney who knows the process and has taken the time to prepare you and prepare himself, these hearings can be predictable, and stress-free.

Although you will most likely not have to go to court yourself to testify, this sometimes becomes necessary. For example, a creditor or a trustee could seek to challenge your right to a discharge. Steve Neuner has filed or defended hundreds of motions and bankruptcy court suits. If you have to go to court, you will want an attorney to guide you who knows the ropes.

What is the First Meeting of Creditors and why is it important?
This is really the formal hearing with the representative of creditors, where each debtor is required to testify under oath and answer questions about assets, finances and provide information. Usually, this hearing is in a hearing room in a courthouse or an office. In Chapter 7 and Chapter 13 cases, the hearing is conducted by the trustee. In Chapter 11 cases, a representative of the United States Trustee presides. Creditors can appear and ask questions but this is rare except in big or hotly disputed cases. Usually their involvement is limited.

For most debtors, this is their first and only appearance at a hearing. If their attorney is knowledgeable and prepared, he or she has already assembled the documents needed to answer the questions likely to come up. Properly prepared, a debtor should have a pretty good idea what these questions will be. In fact, most trustees send out notice ahead of time listing the documents and information needed.

This hearing is very important. Not being prepared can result in complications, more hearings with more time off from work, delays, expense and anxiety. You and your attorney should have supplied the information the trustee needs, or bring it to the hearing.You should prepare by reviewing again your Petition, Schedules and other papers you filed. If there is anything inaccurate in them, you should tell your attorney and be prepared to correct that error, and disclose and explain why it happened. Any type of dishonesty or concealment can have bad side-effects. You could lose your discharge, or your property, or your right to claim property as exempt. You could face civil or criminal action.

DO: Arrive on time with your papers.
DO: Bring your government issued photo-ID and original Social Security Card, paystub with your full Social Security Number, W-2, 1099 or other form of approved original document to verify your Social Security Number.
DONT: Bring any type of weapon. If your hearing is in a courthouse, leave your cellphone in your car or outside.

Directions to First Meeting Hearing Rooms in New Jersey

I cannot come to the First Meeting of Creditors. What do I do?
The answer depends on why you cannot make it. If you have another important commitment that you cannot break, your attorney should call the Trustee in advanceto reschedule. You may be required to provide information or documents the Trustee has asked for, in order to be allowed to do this. If you are unable to come because you are ill or disabled, or are going to be out of town for a lengthy period of time, your attorney can arrange for the First Meeting to be conducted by telephone, but this will require a court order. Your attorney should know all this and know how to handle these situations.

Should I use a "short sale" to avoid foreclosure?
Short sales are where you try to sell your home even though it will not sell for enough to pay off the mortgages and sale costs. We recommend this only if you do not have other debt problems that will require a bankruptcy to deal with, and if you are fully aware of all the problems. On the one hand, not having a foreclosure on your credit record can help you rebuild good credit later, and can make it easier for you to rent another place to live. On the other hand, any such benefit is likely to be minimal if you end up filing a bankruptcy anyway. And most lenders will not pay you any money to move out, and may not even pay all the fees of your broker or attorney. Worse, they will not tell you what they will do for you by way of a deal until you have signed a sale contract. At that point, you have become legally obligated to sell your home, and unless the sale contract is carefully drafted with a clear "escape clause", the lender will have you over a barrel. We have seen many situations where the lender will insist on your paying any balance over time by a new promissory note. Thus, short sales can mean high risk and no benefit! Or they could be your way to avoid bankruptcy.

And if you do not go ahead with a "short sale", you will be able to live in your home literally "rent free" for 6 to 12 months and maybe longer. In that time, by not making your mortgage payments (which the lender will not accept anyway) you can save up thousands of dollars that can be used to move, pay a security deposit to a new landlord, or help you deal with other pressing problems. While this alternative is not necessarily right for everyone, it is something to consider

If you are considering a short sale, we can help you stay out of trouble. Call us at 856-596-2828 for a free consultation

Should I take money out of an IRA or profit sharing plan?
Answer: almost never. In New Jersey and most other states, money that was legally placed into an IRA, pension, 401K or 403B profit sharing plan, including by rollovers, cannot be reached by creditors or a bankruptcy trustee to pay debts. (There are a few exceptions, including the IRS, and to pay child support). For most people in financial difficulty, this money may be the only "nest egg" they will have. And you pay a hefty tax and penalty on an early withdrawal, in most cases. This tax obligation cannot be discharged in a later bankruptcy.

Before thinking of taking an early withdrawal, you should speak to us to understand your options. Call 856-596-2828 to schedule a free consultatIon.

IRS Circular 230 Disclaimer: To ensure compliance with IRS Circular 230, any U.S. federal tax advice provided in this communication is not intended or written to be used, and it cannot be used by the recipient or any other taxpayer (i) for the purpose of avoiding tax penalties that may be imposed on the recipient or any other taxpayer, or (ii) in promoting, marketing or recommending to another party a partnership or other entity, investment plan, arrangement or other transaction addressed herein

Can't I just get the lender to lower my interest payments or reduce the balance owed?
We just have not seen this happening yet, but things are changing all the time. Do ask about this, but don't rely on the lenders to solve your problems for you. Consider all your choices, including bankruptcy. In our experience, lenders will only deal with borrowers in trouble if they are convinced that the borrower cannot be convinced to pay, and will only offer something if they are also convinced you CAN pay. One tactic that had worked for us with creditors is to, literally, prepare the bankruptcy, and send the lender the draft bankruptcy schedules, with an explanation how poorly they will do if a bankruptcy is filed! This has worked in some instances. Even then, there are no guarantees and no one should rely on lenders being caring or lenient with them. They are interested in making money and cutting their losses. A Chapter 13 bankrupty might help you achieve the same thing, with court protection. PLEASE NOTE: while there is presently talk about changing the law to let bankruptcy judges "restructure" mortgages this is not yet the law, and if and when passed, will no doubt require careful and experienced advice.

Chapter 13- Can I save my home using Chapter 13? Can I keep my car? How much do I have to pay?
Yes you can, and you will have legal protection in doing so. Chapter 13 allows most individuals and families to restructure their debts through a simplified form of personal reorganization, under a court approved plan that lasts for 3 to 5 years. This plan can provide for you to bring your mortgage or other car loans current through payments made to the Chapter 13 trustee, in addition to your keeping current on the loans after you file. However, there are several requirements for success. First, you need to be able to afford the payments you will have to make. Secondly, in addition to bringing these mortgages or car loans current you will have to pay any taxes, child support or alimony you owe (and certain other "priority debts"). And depending on your income and assets, you may have to pay something towards your other debts. The starting point is to carefully assess what you can afford and to see a qualified and experienced bankruptcy attorney as soon as possible.

I owe back taxes. What can I do about them?
Unfortunately, most taxes cannot be discharged in bankruptcy, but a bankruptcy can help nevertheless. First, most tax penalties can be discharged. Second, some older taxes may be dischargeable. And by discharging other debt, you will be left in better financial shape to make payments to pay off the taxes you are left owing. Or you may be able to use a Chapter 13 Plan to pay off taxes in full. The rules can be complex in application.

This is an area where careful planning and knowledgeable guidance is critical. If you need help with back taxes, please call us at 856-596-2828 to schedule a free consultation.

I am owed money and need to file a claim or other notices. Go to our Creditor Rights page for help.

Should I use a debt settlement firm?
Debt settlement firms actively market their services on the Internet. However, the Government Accounting Office, in a report issued April 22, 2010 found that many of these firms charged high up front fees, had a low successs rate, less than 10%, and made false promises to lure customers. As reported by the Washington Post on April 23, 2010, consumer advocacy groups have complained that these firms were "charging hefty upfront fees before calls to creditors are made...misleading consumers in sales pitches and instructing them not to pay bills." Very often, the same or better results can be achieved at less cost with a court-supervised and approved Chapter 13 bankruptcy plan.

Before signing contracts for "debt settlement services" contact us at 856-596-2828 for a consultation so we can review all your alternatives with you. WE DO NOT "SELL" BANKRUPTCY..WE WORK TO HELP YOU FIND THE RIGHT SOLUTION FOR YOU.

Do I need a bankruptcy? Can't I just dig out of debt myself?
You might be able to, but many people underestimate how much debt they have or how "financially underwater" they are. They also do not know how much it cost to try to pay off credit card debt at very high interest rates. To find out for yourself, go to our bankruptcy resources page for some helpful links and budget worksheets.

Better yet, contact us at 856-596-2828 for a consultation so we can review all your alternatives with you. WE DO NOT "SELL" BANKRUPTCY..WE WORK TO HELP YOU FIND THE RIGHT SOLUTION FOR YOU.

Will my neighbors, family or boss find out?
Possibly, but not likely, unless you owe them money. Although a bankruptcy is a public court proceeding, there are so many filed that newspapers of general circulation do not publish them. If you have special concerns, we can help you defuse any harm and deal with them.

Can I lose my job because of a bankruptcy?
The Bankruptcy Code prohibits employers from discriminating in employment decisions on the basis of a bankruptcy. People who are bonded or who have security clearances may have specialized concerns that we can help you with.

Will bankruptcy affect my security clearance?
Whether your security clearance will be affected is depends on several factors and there is no hard and fast rule. However, several sources suggest that if you need bankruptcy and are upfront with your chain of command, the honest debtor filing bankruptcy is not likely to have problems. The US Air Force site says the following: "The status of your security clearance can be affected, but it is not automatic. The outcome depends on the circumstances that led up to the bankruptcy and a number of other factors, such as your job performance and relationship with your chain of command. The security section will weigh whether the bankruptcy was caused primarily by an unexpected event, such as medical bills following a serious accident, or by financial irresponsibility. The security section may also consider the recommendations and comments of your chain of command and co-workers. This is an issue that can be argued both ways, so as a practical matter your security clearance probably should not be a significant factor in making your decision about whether to file bankruptcy. The amount of your unpaid debts, by itself, may jeopardize your clearance, even if you don't file bankruptcy. In that sense, not filing for bankruptcy may make you more of a security risk due to the size of your outstanding debts. By the same token, using a government-approved means of dealing with your debts may actually be viewed as an indication of financial responsibility. Eliminating your debts through bankruptcy may make you less of a security risk. There is no hard and fast answer here, with one exception: it never hurts to have a good reputation with your co-workers and your chain of command."

Can I "withdraw" my bankruptcy?
If you are in a Chapter 13 bankruptcy and did not start in another chapter, yes. Otherwise, debtors in Chapter 7 or Chapter 11 do not have a "right" to withdraw their bankruptcy, and must show the court and the trustee that dismissing their bankruptcy will not prejudice the rights and interests of creditors. The court has discretion to refuse to dismiss a bankruptcy case. If your attorney can show that continuing your bankruptcy will not result in your unsecured creditors receiving any payment, the chances of being able to dismiss your bankruptcy are usually pretty good. If you want to end the bankruptcy because a trustee or a creditor has discovered that you have something of value that can be sold or collected to create money for creditors, you can expect a hard time, especially if there was any delay in your asking to get out of bankruptcy. Just because you may want to pay your creditors yourself is rarely enough.

I am in a Chapter 7 bankruptcy and the Trustee wants to sell something I want to keep. What can I do?
This should not have come as a surprise if you were straightforward with your attorney and he did his job. However, sometimes the unexpected happens. First, you should work with the trustee to establish the real value of the item you want to keep, and how much money the trustee would be left with after paying sale costs, your exemptions, and any mortgages or liens. This is the "net benefit value". This figure is usually less than what it would cost you to replace the item. Talk to your attorney to see if you can pay the Trustee this net benefit value. You might be able to "redeem" the item in this way. If not, you and your attorney should consider whether converting to Chapter 13 makes sense. However, you should ask your attorney about the additional cost of doing this.

For a graphical map of the progress of bankruptcies under the different chapters, click here.

I want to rebuild my credit after my bankruptcy. What do you suggest?
First and foremost, you must budget and control your spending. Understand that credit is buying the use of other people's money, and your price can be very high if you do not have good credit. That said, the sooner you can start establishing that you can handle credit responsibly. For more information, please go to our page on Bankruptcy and Your Credit.

For a expense budget, you can use our Excel spreadsheet by clicking here.

Finally, read our webpage on identity theft.

If you need our help feel free to call us, after you have reviewed our disclosure page. The initial telephone consultation for new clients is always free, and most initial office consultations are either free or at reduced cost.

For new clients, we will want to see you in the office. To make the best use of that meeting, we urge you to download and fill out our client questionnaire, (click here if you have a business, or click here if otherwise)

We will take the time to talk over with you all your options and to help you with the planning process that will help you take control of your life. When you leave our offices, you will either have a plan or be

IF YOU WOULD LIKE OUR HELP, WE ASK YOU TO CALL US AT (856) 596-2828 FOR AN APPOINTMENT. Please first read a notice about bankruptcy required by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 by clicking here:

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