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.

The Impact of Bankruptcy on Jointly Owned Property

Family in car lot, looking at red car.If you face a mountain of debt and have concluded that the only way you can get a fresh start is through a personal bankruptcy filing, you may concerned about the impact of a bankruptcy on jointly owned property. What if you are named on the bank account of a parent or elderly relative as a convenience to facilitate the payment of their bills? What if you had a parent or friend co-sign a loan for you?

Creditor or Trustee access to Jointly Held Property

The simple reality is that (with few exceptions) any property in which you have any ownership interest is potentially subject to being used to pay creditors in a bankruptcy proceeding, unless you can properly exempt it. The good news is that the amount of the jointly held property available to the bankruptcy court will typically be only your individual interest.

In New Jersey, money in a joint bank account is presumed to belong to each account owner in the same proportion as each contributed money to the account, unless there is clear and convincing evidence of an intent to make a gift.

A common situation we see is where an elderly parent adds a child as a joint account holder “for convenience” so the child can help manage the money or pay bills. If you are the child and can document that the money all came from the parent without an intent to make a gift, a trustee will probably leave it alone. But if you have not filed a bankruptcy, the bank account could be subject to a bank levy by one of your judgment creditors without notice. Then the account is frozen until you or your unhappy parent can go to court (weeks later) to show that the money is not yours.

We recommend against this arrangement. Parent and child should go to the bank and make arrangements for the child to have signature authority on the account under a power of attorney.

Another potentially troublesome situation arises where a parent takes title to a car that a minor child bought or is paying for using her own money. Usually this is done “for insurance purposes”. The car is still an asset of a bankruptcy estate, and is still subject to a sheriff’s levy ordered by an unpaid judgment creditor. In a bankruptcy, we have generally been able to protect the car under the theory that the car is “legally but not beneficially” owned by the parent.

These types of situations are just some of the examples that can arise. If you are facing financial difficulties, we counsel against keeping your money or assets in joint names with others. However, before transferring things around, you need to get qualified legal advice that can come from such transfers if done improperly.

Contact Our Office

Let us help you minimize the stress, anxiety and confusion that come with a personal bankruptcy filing. At Neuner & Ventura, LLP, we offer a free initial consultation to every 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

Bankruptcy and Inheritance

Inherited Property and Bankruptcy

What are the potential implications if you found yourself struggling to meet your financial responsibilities and successfully discharged debts through a Chapter 7 proceeding only to find some months later that you are receiving money or property from someone who has died? Is the money yours free and clear? Will you be required to give some or all of it to the bankruptcy court to be distributed to your creditors? The answers can be complicated, but here are some general rules.

The Treatment of an Inheritance after the Completion of a Bankruptcy Filing

If you filed a Chapter 13 bankruptcy you become entitled to receive life insurance money or other money or assets from someone who has died before the three-to-five year period of repayment is over, you must disclose what has happened and may have to turn over any proceeds unless you can demonstrate to the bankruptcy truste that those assets are exempt or some other exception applies. As a result, your plan payments may end up being modified, or you may have to contribute the unprotected portion of what you inherited to pay debts through your bankruptcy plan.

If, on the other hand, you filed for protection under Chapter 7, whether or not you must turn over inherited assets, life insurance proceeds or other inherited funds depends on how much time has elapsed since you filed for bankruptcy. If the person you are inheriting from died within 180 days of your filing, and if you are receiving the money outright, it will generally be considered part of the bankruptcy estate, and must be disclosed. (There are or may be exceptions for money or assets that you inherit through a valid trust). Accordingly, the bankruptcy trustee can use it to pay your creditors, unless you can claim it as exempt. Any portion of the inheritance that cannot be exempted will be used to pay creditors. But an inheritance that you receive more than 180 days after a Chapter 7 filing will not be part of the Chapter 7 bankruptcy estate.

If this situation happens to you, you should promptly seek qualified legal advice as soon as you know you are receiving money or property because someone has died. With the right advice and planning, you will be guided to do the right thing and make use of whatever rights or tools are available to you.

Contact Neuner & Ventura, LLP

At Neuner & Ventura, LLP, we know the personal challenges that come with a potential bankruptcy filing. We offer a free initial consultation to every 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

Protecting Your Rights with Aggressive Creditors

Your Rights When a Creditor Bullies You

When you are struggling to make ends meet, the stress and anxiety can make your life miserable. The last thing you need is an aggressive creditor or collection agency calling you at all hours of the day or night, threatening you with legal action or even calling family or neighbors and telling them about your personal debts. You don’t have to be a victim of offensive or inappropriate tactics by bill collectors. You have rights.

Personal Debt

For a “personal, family, or household” debt, you have a wide range of rights under a federal statute, the Fair Debt Collection Practices Act (FDCPA). This law limits the hours during which a creditor or collection agency may call you. It also requires that debt collectors stop communicating with you if you provide written notice that you want no more contact. It also forbids communication with any third party (other than your spouse or attorney) except to obtain location information. (Note this does not apply to “business debts”, nor does it apply to a creditor who is contacting you to collect their own debt.)

If you have a debt collector or creditor who is harassing you, we recommend that you take the following steps:

  • Log all calls — Ask for the name of the debt collector and the company they represent. Get a phone number as well.
  • Hire an attorney — Once you are represented by counsel, you can simply tell all debt collectors to direct any further communications to your lawyer.
  • If debt collectors continue to call, record the conversation (you should always advise them that they are being recorded. Recording calls from states such as California can result in criminal or civil liability).

Business Debt

The FDCPA does not apply to business obligations. If you are being hounded because of a business debt, your best course of action is to retain legal counsel and to advise any debt collector that they must communicate only with your attorney. If they disregard your request, you should log all calls and record conversations, if possible.

Whether or not these laws apply, you may have other protections.

Contact Neuner & Ventura, LLP

At Neuner & Ventura, LLP, we provide a free initial consultation to every client. We do, however, reserve the right to charge a fee to review any work done by another attorney. To set up a meeting, 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

Disposing of Property Before You File for Bankruptcy

When you are struggling to get your finances in order, you may choose to sell assets that you don’t need, with the hope that you can make enough money to resolve your problems. You may be tempted to “gift” items of value. If you find that you still need to seek bankruptcy protection, you may face questions from the bankruptcy court or trustee about the disposition of those assets. We tell our clients that “bankruptcy is a fishbowl…it is safest to be able to be transparent”. You must always take care to avoid the appearance that your actions involved a fraudulent transfer.

Taking the Right Steps to Avoid Potential Problems

The most important thing to do is make certain that any sale is clearly what would be considered an “arm’s-length transaction.” This essentially means that the terms of the transaction do not reflect that the parties have common interests or that any favoritism was involved because of the relationship of the parties. The classic example of a fraudulent transfer is the sale or gift of extremely valuable property to a family member or friend for far less than its market value. One of the best ways to show this is to get a fair-market appraisal or some other reliable evidence of value of the goods sold. For cars, sites like www.kbb.com are good. For other property besides real estate, EBay or Craigslist may provide evidence of possible market value.

You need to be careful as well with gifts to charitable organizations, from a church to a soup kitchen or other nonprofit. You may be required to show that the organization is bona fide and that you make similar donations on a regular basis. You may also be required to show that you will not be a primary beneficiary of the donation. For example, it may be considered a fraudulent transfer if you donate a piano to your church when you are the church pianist.

Regardless of how you distribute property before a bankruptcy, it is critical that you keep accurate records. Ideally, your records should show what you sold or gave away, who the recipient was, the goods’ fair market value and whether there were other potential buyers.

If you are in such a situation, you should not delay in getting early qualified legal advice, in case a bankruptcy or similar action becomes necessary.

Contact Us

We provide a free initial consultation to every client. We do, however, reserve the right to charge a fee to review any work done by another attorney. For an appointment, call our office at (856) 596-2828 or send us an e-mail. Evening and weekend appointments are available upon request.

Bankruptcy and Divorce — Which Comes First?

Far too often, the underlying cause of divorce is financial difficulty. Even if financial problems are not the cause of a divorce, they can arise when you no longer have two incomes to pay for your lifestyle or when, having separated, the spouses now have two households to support. If you are considering filing for divorce or if you know that your spouse plans to seek a divorce, a personal bankruptcy filing may become necessary. So a key question is the timing and order of these proceedings. Should you file for bankruptcy first? If so, what will be the impact on your divorce and on your soon-to-be ex-spouse?

Unfortunately, the interplay of divorce and bankruptcy is complex and very much dependent on the facts and circumstances. But a few things are generally true. First, getting early advice from an experienced bankruptcy attorney about how a bankruptcy may impact a divorce is essential. Bankruptcy counsel and divorce counsel should confer at key points in the process.

Bankruptcy or Divorce first? Don’t do them together if possible.

We generally recommend completing the bankruptcy or the divorce first rather than having both in play at the same time. That said, which should be done first depends on the parties and how well they get along, as well as the financial situation and the financial pressure being exerted by creditors. All things being equal, we generally recommend filing the bankruptcy first, but this is not always best. And in some cases, it makes good sense to file a bankruptcy even though a divorce is pending (eg. To discharge debts that are making it hard to settle the divoce. Again, “the devil is in the details”. We can also say that in most instances, using bankruptcy as a litigation tactic against a spouse is ineffective and can backfire.

If you finalize Your Divorce First

If you finalize your divorce before filing for bankruptcy, a lot of ambiguities and complexities may be done away with. Property will generally have been divided, and the amount due for child support, alimony or equitable distribution will have been decided. Unless there has been fraud or collusion, bankruptcy courts generally honor the results of a previous divorce judgment. But, while child support or alimony obligations [“Domestic Support Obligations”] cannot be discharged in a bankruptcy proceeding, in a Chapter 13 bankruptcy equitable distribution or other non-DSO obligations owed to the ex- spouse who is not filing, can be discharged. These can include unpaid attorneys fees owed to your own divorce attorney. If you agreed to pay some of your ex-spouse’s debts for her, this also might end up being non-dischargeable. There are other potential complications that are too fact based and complex to go into here. Anyone doing this needs to review a potential divorce settlement with bankruptcy counsel.

If You File for Bankruptcy First

If you are married when you file for bankruptcy, you can choose to file bankruptcy individually or jointly. If you file individually, you will receive the protections afforded under the law — prohibition of calls, letters or legal action by creditors — but your spouse will not. Because your spouse won’t be protected, he/she may be subjected to harassment by creditors and may be liable for the full amount of the debt. If you file jointly, you will both be protected, but you will both take a hit on your personal credit rating.

A Chapter 7 filing prior to a divorce can simplify the divorce proceedings, as most all debts will be discharged. A joint bankruptcy filing by a husband and wife (either with the same attorney or with separate bankruptcy counsel) may be wise. Spouses who work together can generally fare better than those who do not. A Chapter 13 bankruptcy may help under certain circumstances, even though such cases take 3 to 5 years to complete.

Contact Neuner & Ventura, LLP

We offer a free initial consultation to every potential bankruptcy client. We do, however, reserve the right to charge a fee to review any work done by another attorney or under unusual circumstances. To schedule an appointment, call our office at (856) 596-2828 or send us an e-mail. Evening and weekend appointments are available upon request.

Representing Clients across South Jersey

Filing for Bankruptcy Again — Do You Still Get Protection from Creditor Harassment?

The Impact of a Second Bankruptcy Filing on the Automatic Stay

Under the federal bankruptcy laws, when you file for protection in bankruptcy, whether under Chapter 7 or Chapter 13, you are immediately entitled to the benefits afforded by the “automatic stay.” The automatic stay prohibits creditors from calling, writing or taking any other action to collect the debt from you, other than through the proceedings in the bankruptcy court. There are situations in which, even though you have the right to file for bankruptcy protection, you may be denied the protection of the automatic stay. This blog post provides an overview of those circumstances.

Actions that Can Cause You to Lose the Automatic Stay

When you file a new bankruptcy petition, whether or not you are eligible for the automatic stay will depend on how your prior bankruptcy case was resolved. If you had one bankruptcy case dismissed in the past 12 months (unless the dismissal was because you did not qualify under the “Means Test” or because your budget left you the ability to pay something meaningful to your creditors) the automatic stay will only last 30 days. To keep it you have to show the bankruptcy court that you are re-filing in good faith. This usually requires a satisfactory explanation for the previous dismissal, and a showing that “things are different now”. If you have had two dismissals in the last 12 months, there is a presumption of bad faith, and no automatic stay goes into effect. To get the benefit of the automatic stay you have to overcome this presumption and convince the bankruptcy court that your third filing in 12 months was in good faith..

The “takeaway” lesson here is not to let a bankruptcy case be dismissed if you can avoid it. If you filed under Chapter 13 and it is not working out, you are better off converting to Chapter 7 in most cases. Better yet, make sure you and your attorney have carefully analyzed your options so that you do not end up in a bankruptcy that is not right for you. As always, having the right advice from an experienced lawyer is critical.

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. We do, however, reserve the right to charge a fee to review any work done by another attorney. For an appointment, call our office at (856) 596-2828 or send us an e-mail. Evening and weekend appointments are available upon request.

Representing Clients across South Jersey

Filing for Bankruptcy Again — Rights and Restrictions

Filing Bankruptcy a Second Time

The bankruptcy laws were enacted to give people a second chance, in recognition that circumstances or poor decisions can lead to situations that can only be remedied by the discharge or reorganization of debt. But what if you get a few years down the road from a bankruptcy and find yourself in the same situation again? The cause could be something completely out of your control — an injury, illness or divorce. Can you seek bankruptcy protection again? If so, what are the limitations?

Multiple Bankruptcy Filings

Under the Bankruptcy Code, you can almost always file another bankruptcy after having previously done so. There are no prohibitions against filing a Chapter 7, Chapter 11 or Chapter 13 bankruptcy more than once. Unless the previous bankruptcy was dismissed within 12 months before, a new bankruptcy will provide you protection from creditors through the “automatic stay”. This protection ends when the case is closed or when a court enters an Order granting “stay relief” to a creditor (generally limited to creditors with collateral, called “secured creditors”

The lasting protection from bankruptcy comes through the bankruptcy discharge, and this is not available if you have filed too soon after a previous bankruptcy where you received a discharge. If your previous case was filed under Chapter 7 bankruptcy and you got a discharge, you won’t be eligible for another discharge in Chapter 7 for eight years from the date of the first filing, or four years if you choose to file a new case under Chapter 13. If your first filing was a Chapter 13 bankruptcy, you can qualify for discharge with another Chapter 13 once two years have passed since your first filing. If, however, you want to file a Chapter 7 petition after a prior Chapter 13 bankruptcy, you must wait a minimum of six years from the date of the first filing to have the right to discharge your debts.

Sometimes a bankruptcy without a discharge can still be a good idea.

Sometimes a new bankruptcy that does not end in a discharge can still be a valuable tool. Typically, this will be a Chapter 11 or Chapter 13 case where the goal is not to discharge new debts, but instead to use the bankruptcy to bring a mortgage current, pay off taxes or other debt, or even to force creditors to accept payment terms. This is a whole new subject we have covered elsewhere (see articles and blogs on Chapter 20 bankruptcy)

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. 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 creditors in bankruptcy can lose out by “sleeping on their rights”

At recent bankruptcy conference I attended, we reviewed a lot of recent cases. These all reinforce something I have told many people over the years: when faced with a bankruptcy of someone who owes you money, delay and inaction can be a costly mistake.

Some examples: A mortgage creditor who failed to object to a modified Chapter 13 bankruptcy plan that gave the homeowners two years to sell their home and a similar period to sell their business equipment (also part of the bank’s collateral) lost the right to later seek permission to foreclose on the home through a motion for stay relief. It made no difference that before the modified plan was confirmed by the bankruptcy court, the debtors had agreed that the bank could have stay relief if they failed to meet certain payment obligations. The later approval of the modified plan controlled.

In another case, the bank had an Assignment of Rents on the debtor’s rental property that gave it the right, if the bank served notice of default, to collect the rents directly from the tenants. Although the debtors defaulted, the bank did nothing, and the debtors continued to collect the rent (while not paying the bank). The bankruptcy trustee stepped in to try to get the rents back. The court said no because the rents belonged to the bank IF they asked for them.

I had another case recently where a landlord who was owed rent by a tenant in Chapter 13 did nothing for the first few months when the tenant seemed to be resuming payment (but not paying the past due amounts which were supposed to be paid bakc under the Chapter 13 Plan). The deadline for the landlord to file a proof of claim passed without the landlord filing a claim. The debtor stopped paying rents. The landlord has probably forfeited its right to get paid anything on its back rents owed when the bankruptcy was filed.

There are many other examples I could provide. The takeaway for creditors is to start acting as soon as you learn of a bankruptcy filing, especially in Chapter 11 and Chapter 13 cases. When in doubt file a proof of claim and stay on top of what is happening. Pay attention to all notices and deadlines in them. Most importantly, creditors need to find out what the bankruptcy means for them and  develop a plan of action.

With over 30 years of experience representing creditors, trustees and debtors, we are able to help with timely and cost effective advice.

 

How to Find a Good New Jersey Bankruptcy Attorney

If you have decided that bankruptcy is the best option to resolve your financial challenges, you may have discovered that there is no shortage of bankruptcy attorneys in New Jersey. The obvious question then becomes—how do you find the one that will best meet your needs? It’s a very important decision, as your future financial well-being may depend on it.

The Key Factors When Looking for a Bankruptcy Lawyer

When evaluating potential bankruptcy counsel, you want to examine three important components:

  • What is the quality of the attorney’s work?
  • What level of customer service can you expect?
  • To a lesser extent, how much will it cost you?

It’s extremely important that consider more than one bankruptcy attorney. You may like the first one you contact, and you may end up hiring that person. But you need to have a comparison to know that you are getting the most skill and customer service for the most reasonable price.

Evaluating the Attorney’s Skill Level

You should look at your initial meeting with an attorney as being an interview for both parties. Pay attention to the types of questions the attorney asks you—how detailed are they? Some of the questions you want to ask:

  • How many bankruptcies has the attorney handled? How many years has the attorney been practicing in the bankruptcy courts? Is bankruptcy the focus of the attorney’s practice?
  • Is the lawyer listed in public or professional directories? What is the attorney’s rating with Avvo or other services?
  • What certifications does the lawyer have? The American Board of Certification issues these certifications to those who pass a qualifying examination, remain in good ethical standing, and maintain at least 20 hours per year of continuing legal education in the field for which certification is given. (Steven R. Neuner is now certified as a Business Bankruptcy Specialist and has held this certification for 20 years)

Determining How You Will Be Treated

The most skilled lawyer in the world can still leave you stressed out or anxious if the level of customer service is lacking. How interested does the attorney seem in your case? Does the lawyer spend time personally asking you questions or are you simply given a form to complete? In addition, how easy was it to get through to the attorney? If you left a message, how quickly did the attorney return your call?

Confirming the Cost of Bankruptcy

If you are considering filing for bankruptcy, it’s not generally in your best interests to simply look for the least expensive bankruptcy counsel. There is a lot at stake and your biggest concern should be value for what you need to spend, not the total cost. You need to have confidence in the other two factors—the attorney’s competence level and willingness to provide a high level of customer service—otherwise, you may save money with a “bargain basement” firm or “bankruptcy mill”, but you will increase your stress and anxiety, and you may end up not getting the outcome you want or need. This is a field where the cost of mistakes can be high.

Confirm with the attorney whether you will pay a “target” or flat fee for your bankruptcy, or whether you will be billed by the hour. “Target” or flat fees are generally available and allow you to reasonably predict your costs. If your case is complex or the time and complications are not predictable, this may not be advisable. But most responsible attorneys can and should explain how they arrive at their fees.

Also, do not forget costs. Filing a bankruptcy and doing it properly includes costs for filing fees and two required courses. A careful attorney will want to get a judgment search, a credit report and other “due diligence” to make sure that nothing important is missed. These costs are generally not great. You do not want to end up being “low balled”. Ask what costs are included.

Contact Neuner & Ventura, LLP

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

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