Being resilient in midlife debt crises

Many of the people we see and help are facing a debt crisis in midlife. This should not be surprising. Being laid off or having medical problems with high medical bills are common causes.

This article from the New York Times caught our eye as particularly helpful: “How to Boost Resilience in Midlife”. It contains many of the nuggets of advice we provide to clients.

We hope it is useful and helpful. If you are in a debt crisis, or are not sure whether a crisis is looming, I looking at your monthly net income and comparing it to what you have to spend to live and stay employed. We can help guide you and if you come to meet with us, we will ask you to do this beforehand so that we can help you get a handle on the finances. As always, we will explore the non-bankruptcy options, and if we recommend a bankruptcy we will explain why and what is involved.

Drowning in debt? Losing your home? Here is how to overcome the stress and take back control of your life.

Are you drowning in debt that threatens your life and livelihood? Facing the loss of your home from foreclosure? No doubt you are feeling scared, angry, ashamed or in denial. These are understandable and common reactions, but will they make the problem worse not better. The New York Times recently posted a series of articles which point out how stress does not have to get you down and provide ways to deal with it, reduce its harm and even use your daily stress to make you stronger. NY Times, 7/30/2017- How to be Better at Stress

If you are in this situation, this series of  articles is a must read. It reinforces the approach we try to take in guiding people through these situations. First, take a deep breath and don’t panic or grasp at “too-good-to-be-true” promises. Secondly, take a good look at what the problem is, and plan. Get professional advice from people who are experienced and whom you think you can trust and who can help you map out alternatives. Consider and accept the worst case outcomes, but plan and hope for the best. Third, talk about the situation, with your spouse, children, family, and legal or financial advisers.

If you are in this situation, it may well not be one of your own creation. Even if it is, learn from what you might have done wrong, accept your own role, then stop obsessing over it. Time to move on.

Likewise, recognize what you may not be able to control (decisions by others to hire you or not, expenses greater than income), and work hard to make things happen that you can control (eg job search, cut back spending where possible). Maintain hope and confidence.

It’s not easy but done right, it achieves results. Most of our clients get back on their feet and move one to financial stability and happiness. The hardest thing is often controlling spending and accepting necessary down-sizing. But being able to afford the basics of living and supporting your family is a great achievement, and cause for celebration.

If you need our help or guidance, we are available to help you map out the choices and options that are right for you.

Bankruptcy vs. Debt Reconsolidation

If you are struggling to keep your head above water financially, you may have considered bankruptcy as an option to get a fresh start. However, under the bankruptcy laws, you must undergo “credit counseling” before you can complete the bankruptcy process, so that you can determine if there are other options that will allow you to resolve your problems without bankruptcy. One of those options is what is known as “debt consolidation.” So why wouldn’t you just pursue debt consolidation, rather than incurring the stigma of a bankruptcy?

What Is Debt Consolidation?

Debt consolidation involves pooling all of your debts together and thereby making your debt more manageable. In the process, you can clear up longstanding debts, simplify the payment process and perhaps reduce both payments and interest rates. It’s important to understand, though, that it’s consolidation—it won’t reduce your debt at all. At best, it will lead to lower monthly payments and a longer period of time to pay off your debts. There’s another option, known as debt settlement, where you can actually negotiate reduced payoff amounts.

Which Is Best for You?

There are advantages and disadvantages to both strategies:

  • With a bankruptcy filing, you’ll be working with an attorney, so you have less concern about fraud or misrepresentation by the person who’s assisting you. With a bankruptcy filing, you’ll immediately have the protection of the automatic stay, so that your creditors will be required to stop contacting you in an effort to collect the debt. Additionally, with a bankruptcy, the slate will be wiped clean, often in a very short period of time. Even if you don’t qualify for Chapter 7, you can have a fresh start in three to five years.
  • With a debt reconsolidation, you won’t take the hit to your credit score that you’ll get with a bankruptcy filing. However, you’ll still have most or all of the debt, and you may still struggle to stay current. If you can’t, your credit record could be more negatively affected by a debt consolidation than a bankruptcy. In addition, if your consolidation includes debt settlement, you may have to recognize forgiven debt as income.

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

How Condo Fees and Assessments are Treated in Bankruptcy

If you are struggling to meet your financial obligations and you live in a condo or are part of a homeowners association, you need to be careful with respect to any dues or assessments—the bankruptcy may extinguish your personal liability, but the homeowners’ association or condo association may still be able to enforce a lien on the property. Here’s how it works.

If you file a liquidation proceeding under Chapter 7, any HOA or condo dues owing at the time of the petition can be discharged—you won’t have to pay them. But the discharge is only with respect to your obligation to pay the debt. The lien remains and the lienholder has the right to enforce the lien—to foreclose on the property to collect the amount due. If you don’t keep the house and it goes to a foreclosure sale, or is sold to a new buyer, the lienholder will typically collect the amount due at the time of closing or out of the proceeds of the foreclosure sale.

In addition, any fees, assessments or dues accruing after the bankruptcy filing are not discharged. Again, the HOA or condo association may choose to place a lien on the property, hoping to collect out of the proceeds of a foreclosure or other sale. But the lienholder may instead opt to enforce the lien against you.

If you opt not to stay in the house, the HOA or condo association will have little recourse. However, if you do stay in the home, you will want to make arrangements to pay any past due assessments, fees or dues, as the lien that attaches to them will remain in force.

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

Can I Save My Home from Foreclosure with a Bankruptcy Filing?

Bankruptcy Filing

If you are behind in your mortgage payments and fear that a foreclosure proceeding may be imminent, or if you are already facing foreclosure action, you may be considering filing for bankruptcy protection, so that you can save your home. It’s more than a question of if you can save your home, though. You also want to consider whether it’s in your best interests to try to save your home. Here are some factors to consider.

A Bankruptcy Filing Will Suspend a Foreclosure Action

You can temporarily suspend all legal action, including foreclosure proceedings, by filing for bankruptcy protection. With a Chapter 7, you can often keep a certain amount of equity in your home while forfeiting other assets, but you won’t be able to keep your home and discharge the mortgage. With a Chapter 13, you can restructure payments on your home to make them more affordable.

Reasons For and Against Trying to Save Your Home from Foreclosure

The first question you need to ask yourself is whether or not you can realistically afford your home. If not, there’s no point in trying to save it. You’ll be better suited by trying to sell it for fair market value, even if that’s less than what you owe. In such a situation, you may be able to dispose of the property through a short sale. This will discharge any remaining liability for mortgage payments, but may cause you to recognize income on your taxes, though the Foreclosure Tax Relief Act may minimize the impact.

If you have equity in the home, though, it may be a good idea to try to save it. If you file bankruptcy and discharge other debts, you may be able to bring your mortgage current and keep it that way, provided you don’t incur new debt.

Another question to ask yourself—is it more important that you have reliable transportation or that you have a nice home. If you work from home, transportation is not as important, but if you need a vehicle to get to your job, you may be better off downsizing your living arrangement.

Contact Neuner & Ventura, LLP

At Neuner & Ventura, LLP, we know that the bankruptcy process can be intimidating and confusing. We offer a free initial consultation to every client. For an appointment, call our office 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

NY Fed Study shows that for those drowning in debt, a bankruptcy results in a faster improvement in credit scores

A February 2015 study by the Federal Reserve Bank of New York looked at households in financial distress who are in or descending into insolvency,  and compared the results of their filing bankruptcy vs not doing so. Insolvency after the 2005 Bankruptcy Reform. Most of these households were facing lawsuits or collections, unpaid medical bills, and not enough money to pay these debts. Surprisingly, after a year to a year-and-a-half, those who filed bankruptcy had better credit scores and better access to credit!

Here is what the study found:

  • “both the balances in collection and the fraction of individuals with court judgments grow after insolvency for individuals who do not go bankrupt, whereas bankruptcy filing immediately stays collection efforts and court judgments”
  • individuals who filed bankruptcy had better access to new credit, opening “a larger number of new unsecured accounts.” NOTE: this does not account for how favorable or unfavorable the credit terms were. Most likely these are high interest credit card accounts. Because a bankruptcy discharge bars another bankruptcy discharge for 4-8 years, this makes sense,  as compared to those with unmanageable debt.
  • For those who were “newly insolvent… the individuals who do go bankrupt have lower credit scores than those who do not go bankrupt, which is consistent with them having a higher default risk”
  • BUT  by a year post-bankruptcy,  “the individuals who go bankrupt experience a sharp boost in their credit score after bankruptcy, whereas the recovery in credit score is much lower for individuals who do not go bankrupt. “

This coincides with what we have been saying for a long time. A bankruptcy may be a better option for those who are drowning in debt with no realistic prospect of turning things around. Either way, the goal is to get back to financial stability and financial health.

Too many people put off consideration of bankruptcy as an option, and end up making things worse for themselves and their families.

The starting point is a consultation with a qualified bankruptcy attorney who will take the time to help you review your budget and your options. Properly done, this easily takes an hour.

Whether or not bankruptcy is right for you, our firm is available to help.

 

Seniors in financial trouble recommended to consider using bankruptcy to help protect assets.

A recent New York Times article,  Bankruptcy Can Help Seniors Protect Assets, NY Times, June 30, 2015, makes a point that I have been making for years. Those in or near retirement need to be concerned about preserving their ability to support themselves as they age, and that means protecting the assets that make self-support possible.

Instead, I have seen too many people deplete IRA’s or retirement accounts to pay creditors. These accounts are protected from creditors and in bankruptcy (special rules protect all IRA’s in New Jersey. In other states the protection is there but more limited). Social Security income is also protected. Using up retirement funds means there will be less income or resources to meet our personal or health needs as we age.

While paying debts is laudable, it is a fools errand if the result is to make one destitute, or to leave debts for our estate to clean up after we die. A concern over one’s credit score should be less of a concern: with a fixed income, seniors should not be borrowing money that may not be paid back.

The starting point, as always, is a clear headed look at the available income and necessary living expenses. If one can afford to pay the debts one has while having a reasonable cushion for the inevitable unexpected expenses, a debt management plan may be best.

Even here, be leery of firms that promise to settle all your debts for a fee. Non profit organizations should be preferred.

Whatever the situation, a careful review with a qualified bankruptcy attorney is always in order. Knowing the options available is a wise first move. Whether or not bankruptcy makes sense for you, knowing what is available provides a good baseline to evaluate other options, and the relative short-term and long term costs they involve.

Even the big guys are guilty of making matters worse through denial-Detroit’s bankruptcy experience is an object lesson for many others

As you know the City of Detroit filed a Chapter 11 bankruptcy, and after a lengthy and expensive process, is emerging from Chapter 11, ostensibly with its finances in order and its future brighter. A recently reported interview with the now-retired bankruptcy judge who handled the bankruptcy suggests that in the years leading to its bankruptcy, Detroit’s city fathers fell victim to a common malady, namely desperation and denial, and that this led to expensive mistakes.

According reports of an interview given by Judge Steven Rhodes, the city made an expensive and ill-considered deal to try to fend off  the pension default that ultimately was a major impetus to its bankruptcy filing. The suggestion is that the City would have been better off had it simply bit the bullet earlier.

This syndrome of denial and “kicking the can down the road” is, in my experience, all to common, and leads to desperate and ill-considered attempts to stop the inevitable bankruptcy.

A common example is the business owner who borrows money against her home (or from the IRS by not handing over employee withholding trust funds) to keep a failing business alive. To be sure, saving a viable business and carrying it through a temporary rough patch is not a bad thing. The problem is that too often, there has been no effort to find out what is causing the problems, and no effort to deal with those problems.

Another face of this is the refusal to even consider the option of bankruptcy as an alternative until quite late in the game. Sometimes by the time this is considered, the situation has gone from bad but cureable to desperate and incurable.

Our advice to business owners is to always consider all the options, and to do so earlier rather than later. An early bankruptcy might solve critical problems that will only get worse and save the business, whereas later matters have gotten out of hand, and the once-saveable business is doomed.

Individuals are just a guilty of this. I cannot count the number of times I have seen couples  whose solution to mounting credit card debt caused by income that was not enough to cover their spending was to borrow against home equity or emptying retirement accounts.  The underlying problem is still there, and like Detroit, they are just “kicking the can down the road”

The lesson of Detroit is that financial problems do not get solved unless one gets to the source. Short term solutions, such as borrowing more money to meet a cash flow deficit, just delays the inevitable and makes matters worse.

It is never too soon for people or businesses in financial trouble to engage in careful and broad based planning. All choices and options should be considered.

Mediation now required in New Jersey Bankruptcy Court- but you have more choices than first appears

Anyone who has experienced the rigors and the expense of litigation knows its costs both personal and financial. Any attorney who does a fair amount of litigation knows that ultimately, most cases settle. Unfortunately, this often happens after the parties have bloodied each other.

Mediation is a process where a neutral third party meets with the parties and their attorneys to explore settlement. The Mediator cannot impose a settlement. A good one can, however, help the parties get past the posturing to what really is at issue and to help them find better alternatives that litigating. Done well, the process can be quite valuable. Even where a settlement is not reached during the mediation, in my experience, the process gets the parties talking and thinking about settlement as an alternative. Both as a mediator and as a litigant, I have found many times that the mediation produced a settlement after the mediation was over.

The New Jersey Bankruptcy Court has just imposed a requirement that every “adversary proceeding” (a bankruptcy term for a lawsuit in the bankruptcy court) filed after May 1, 2014 must go to mediation, unless the parties can convince the court to opt out.

The court has selected a panel of mediators. All are good, and some are superb. But the selection of the right mediator is an important decision. The mediator must be someone who commands or will command the trust and respect of the parties and their attorneys.

In selecting a mediator for your case, do keep in mind that you are not limited to the mediators on the panel. The parties can designate and select anyone who is otherwise qualified. DNJ LBR 9019-2(b)(2).

Both Steven Neuner and Joanne Ventura are experienced mediators. Mr. Neuner has served for over 6 years on the New Jersey Superior Court mediation panel, and has served as a bankruptcy mediator in several cases. His background and experience as a trustee and a respected bankruptcy practitioner brings a unique perspective to bear. Joanne Ventura is a divorce mediator with years of experience and extensive training, as well as a familiarity with the bankruptcy process.

If you are facing a mediation in bankruptcy court, please feel free to consider selecting one of us to help.

New Jersey foreclosures and loan modifications: improving and moving faster, but for how long

I just moderated a seminar for lawyers on the current state of foreclosures and loan modifications. The latest intelligence is that new foreclosure filings in New Jersey are moving from the filing of the Complaint to Sheriff’s Sale in 6 to 12 months. This is a far cry from the three-years-plus that was the accepted situation 6 months ago. The reasons are several. First, due to a 2011 temporary moratorium on filing and processing of foreclosures by six major mortgage loan services, the backlog of pending cases has been largely reduced. Second, the Superior Court foreclosure processing unit has add staff to deal with the workload. Third, the Court has set up electronic filing systems for foreclosures, that make it simpler and easily for court personnel to process new filings.

How long the current relatively fast processing of foreclosures  will continue is uncertain. Currently, there are 60,000 to 100,000 pending cases. Many, we are told, are older cases stalled by new documentation requirements for entry of a foreclosure judgment. And several sources has told us that there is a potential avalanche of other foreclosures waiting to be filed. Some believe that when this hits, we will be back to a three or even four year delay from start to finish.

Several unknowns still exist. Are lenders more willing to modify mortgage loans? The best answer is, it depends on who holds the loan. (Remember that almost all these mortgages are held by investor trusts. The “lender” is really only a loan servicer hired by the trustee). There are new state programs to help homeowners keep their homes. But many sources report instances of ridiculous and inconsistent treatment by lender representatives who process loan modification programs. It is still a long and uncertain road. Seeking Professional help, either through legal counsel, a HUD-qualified housing counselor, or one of the reputable sources who prepare the applications, is a wise move.

We are seeing more instances in which substantial reductions in loan balances are being offered by lenders. This is a hopeful sign as well.

Stay tuned. It is still wild and woolly out there.

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