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



Can Criminal Debts Be Discharged?

Suppose you’ve run into trouble with the law—maybe you’ve incurred criminal penalties for drunk driving or have been ordered to pay restitution for malicious destruction of property or embezzlement. If you are facing financial challenges, you may be considering a Chapter 7 bankruptcy filing, so that you can permanently discharge some of your debts. Can any of the obligations arising out of the criminal proceeding be discharged in bankruptcy?

The answer—it depends. There are some criminal obligations that are not subject to discharge. For example, any debt you owe for fines or restitution that accompany conviction for a crime simply cannot be discharged. In addition, any fine or penalty imposed by a government agency is not subject to discharge.

However, in New Jersey, certain motor vehicle convictions result in a “motor vehicle surcharge”. This is payable to a state insurance fund. For that reason, courts have ruled that these surcharges can be discharged in either a Chapter 7 or Chapter 13 bankruptcy.

If you have criminal fines, traffic tickets, or non-tax penalties, these will not be dischargeable. We recommend taking steps to pay these, or plan to be paying them.

That said, for many people, a bankruptcy which clears away other debt makes it easier to pay the fines or penalties that must be paid.

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



The Different Grounds for Non-Dischargeability of Debts in a Bankruptcy

The general goal in a bankruptcy proceeding, is, as much as possible, to discharge debts, so that you no longer have a legal obligation to repay them.

Some debts, such as child support, most taxes, student loans, or alimony are automatically non-dischargeable. This means the creditor does not have to do anything to avoid discharge of their debt. Other debts, however, can get discharged unless the creditor disputes the discharge their debt by filing a Complaint for Non-Dischargeability which starts what is known as an “adversary proceeding” (a bankruptcy-specific term for a lawsuit filed inside a bankruptcy case). As a general rule, such a Complaint must be filed within 60 days of the first date scheduled for meeting of creditors in your bankruptcy case.

The Types of Non-Dischargeability Actions that May Be Filed

There are a number of grounds under which a creditor could file for non-dischargeability of debt:

  • You obtained the debt through false or fraudulent pretenses, such as misrepresenting your income or other debt at the time you applied for credit
  • You bought luxury items in excess of the amount allowed under the bankruptcy laws within 90 days of the filing
  • You took out cash advances in excess of the amount allowed by the bankruptcy laws within 70 days of the bankruptcy filing
  • You used dischargeable debt to pay a non-dischargeable obligation—For example, if you use a credit card to pay for child support or taxes, you will likely not be able to discharge that credit card debt.

As a general rule, creditors tend to file objections only with respect to the debt owed them. However, if there is evidence that you have perpetrated a fraud on the bankruptcy system by hiding assets or income, or by transferring money or assets to family or friends, a creditor may ask the bankruptcy court to disallow the discharge of all your debts..

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



Debts for Willful and Malicious Injury

Our bankruptcy laws were enacted to provide debtors with the opportunity for a fresh start. But what if the debts you incurred were the result of intentional acts of misbehavior, even criminal acts? What if you assaulted someone, or if you were grossly negligent and caused serious injury to another person? Should you be able to rid yourself of that obligation by filing for bankruptcy protection?

From a long time, certain debts, for “willful and malicious injury,” have not been eligible for discharge. For almost the entire 20th century (from 1904 to 1998), the “willful and malicious” exception was liberally applied. If it could be shown that the act or behavior was intentional, the debtor could not discharge the obligation.

In 1998, though, the U.S. Supreme Court clarified what was malicious or willful. In Kawaahuau v. Geiger, the debtor was a doctor who was found liable for malpractice and filed for bankruptcy protection because he had no malpractice insurance. The question was whether his intentionally or recklessly not carrying such insurance, leading to an inability to collect for his medical negligence made the malpractice judgment non dischargeable. The Supreme Court said no: “nondischargeability takes a deliberate or intentional injury, not merely a deliberate or intentional act that leads to injury”. Other courts, including the Third Circuit Court of Appeals have said that an act done intentionally which is substantially certain to cause injury, and for which there is no justification or excuse will be treated as willful and malicious. In other words, an intent to cause harm can be inferred and proven form such circumstances.

The “willful and malicious” exception does not apply to mere carelessness. But intentional torts (eg assault or battery, theft) or some act that is illegal will most likely fall within it.

This is something you should discuss with a qualified bankruptcy attorney.

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



Debts for Embezzlement and Violations of Fiduciary Duty

Though many unsecured debts may be discharged in a federal bankruptcy proceeding, some obligations, such as child support, student loans and certain tax debts, are difficult or impossible to discharge. Debts brought about by embezzlement or breach of fiduciary duty are also often among those that cannot be discharged. A recent opinion by the U.S. Supreme Court has provided some clarity as to when violation of fiduciary duty prohibits the discharge of a debt in bankruptcy.

In Bullock v. Bankchampaign, NA, (2013), the Supreme Court justices ruled that, for breach of fiduciary duty to prevent the discharge of debt, it must be shown that the debtor must have either known that his or her behavior was a violation of a fiduciary duty, or must have acted with gross recklessness as to whether or not the behavior was improper.

In the Bullock case, the party who sought to discharge the debt was the trustee of a trust created by his father. Over a period of years, he borrowed money against an insurance policy in the trust, using it for his own benefit. However, he always repaid the loans with interest. Nonetheless, he was sued by his brothers, who were beneficiaries of the trust, and was found liable for self-dealing. The jury rendered a verdict in favor of his brothers, and granted them a monetary award. The debtor could not pay the judgment and filed for bankruptcy protection.

In its ruling, the Supreme Court of the United States concluded that the debtor had been held to the wrong standard—that breach of fiduciary duty requires a knowledge of or reckless disregard for whether the loans were a breach of fiduciary duty. They found no evidence that the debtor had either.

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



Closing the First Meeting of Creditors- it is more important than you think

For anyone in bankruptcy the First Meeting is important. It is where the Trustee places the debtors under oath and asks questions to verify their bankruptcy disclosures, and sometimes to pursue a further investigation. What many people do not realize is that closing that  hearing is just as important. For the most part, the trustee has the discretion to keep the hearing open as long as he or she needs to continue investigating, but there are limits and procedures that must be followed.

Closing the hearing is important because it starts the clock running on the time for the trustee or creditors to object to a debtor’s claim of exemptions. One of the important protections available to individuals in bankruptcy is their right to claim certain types and amounts of property as “exempt”. The exemptions define what property the debtor gets to keep free of claims of most creditors. These exemptions become unchallengeable 30 days after the First Meeting of Creditors is closed, unless there is a written agreement or court order otherwise. F.R.Bankr.P. 4003

So establishing when the hearing is closed is very important. There was a time when trustees had the ability to keep the hearing open for an indefinite time,  simply by announcing that the hearing was being kept open without setting a new date. This left the debtor in limbo. Several courts then held that trustees could not keep the hearing open for an unreasonably long time. In December 2011, bankruptcy rule 2003(e) was amended to require that the notice of adjournment at the hearing include a specified date and time for the hearing. It also required the prompt court filing of a statement specifying the date and time to which the meeting is adjourned. .

So at the First Meeting of Creditors, it is important to ask the Trustee to advise on the record whether the hearing is closed, and if not when the new hearing date will be. Insist that the rule be complied with.



Leaving home? A bankruptcy discharge may not protect you from association dues or liability claims

We see many people who file bankruptcy but decide to move out of a home they cannot afford. As I have said elsewhere, this is not always as simple as it looks and there are traps that even a bankruptcy discharge will not protect you from.

A bankruptcy discharge only discharges those debts that arose before the bankruptcy filing. But consider this scenario. Homeowner H files a bankruptcy then moves out. The home is in foreclosure but it takes another year after the bankruptcy was filed before a Sheriff Sale. Until then, H still owns the home. The home is subject to a condominium or common area association (also called a homeowners association). While the bankrutpcy will discharge debts owed such an association as of the date the bankruptcy is filed, all the association dues, fees or assessments that arise after that filing until H is no longer the owner of record (ie until the Sheriff Sale) are still his obligation. And those “post-petition” debts are not discharged. H will get sued by the association. Any unpaid dues or fees incurred after the bankruptcy can be collected.

Another nasty surprise can arise from lack of insurance. We always tell homeowners to stay in the home even after a bankruptcy, as close to the date they have to move out as possible. Why? Because most homeowners insurance policies have clauses that can result in no coverage if the home is vacant for more than a specific period of time or if the homeowner does not notify the insurance company that the home is vacant (When they get this notice, a cancellation notice usually follows). Vacant properties can be insured, but such insurance is very expensive.

Why is this so important? Consider what would happen if the vacant home catches fire after H has moved out and when he has no insurance. All the neighboring homeowners whose homes were damaged will sue H. H did not discharge these claims in bankruptcy because they did not exist when the bankruptcy was filed. Without insurance H has to pay a lawyer to defend himself, and pay any verdict. Bad news!

Many people tell me that they are covered because the mortgage lender got insurance coverage. If this is not the normal homeowners policy, but instead is “force placed” insurance, it only covers loss of the property and is there to insure the lender gets paid if its collateral is destroyed or damaged. Such policies have no protection for the homeowner.

These are all examples how it pays to sweat the details and get the right advice. For those who live or work in New Jersey or Eastern Pennsylvania, Neuner and Ventura LLP is able to help. For more on related subjects, check out our website and blog.



What is a Discharge of Debt?

Dollar billIn a Chapter 7 or a Chapter 13 proceeding, a debtor may seek the “discharge” of debt. What does that mean and what doesn’t it mean? This blog post looks at what you can expect from a discharge in bankruptcy.

Fundamentally, a discharge means that you, as a debtor, are relieved of any personal liability for the debt. Your creditors can no longer file a lawsuit against you or take any legal action to compel you to pay a debt. There are, however, some caveats:

  • A discharge does not mean that you cannot make payments to a creditor. For example, if you have a personal loan from a relative, and you have it discharged in bankruptcy, you no longer have a legal obligation to pay the loan off, but you can choose to do so.
  • A discharge only relieves you from liability for a debt. It has no impact on liens and encumbrances, such as mortgages. Accordingly, even though a mortgage lender cannot seek to collect money owed on a mortgage, the lender can still foreclose under the terms of the mortgage. The same principle applies to other types of secured debts, including automobile
    loans. Even though the lender may not take legal action to recover the debt, the lender may repossess property pledged as collateral
  • The discharge does not necessarily end your bankruptcy petition The case may continue, even though certain debts have been discharged, as the trustee acquires and sells other assets that can be sold to satisfy creditors.
  • The discharge will end the automatic stay—When you file for bankruptcy protection, an automatic stay immediately goes into effect, preventing creditors from calling, writing, or taking any other action to collect a debt, other than through the bankruptcy proceeding. Once your discharge has been granted, the stay is lifted, to that any debts not included in the discharge may now be collected.

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



Debts Secured by Purchased Personal Property

Classic red Ford MustangMost people want to keep their car or truck, even if it is subject to a “car loan”. However, even staying current on the loan may not prevent a repossession if you do not take certain additional required steps. In a Chapter 7 Bankruptcy, for car loans, (or any other loans to purchase personal property where you put up what you were purchasing as collateral for the loan ) you have to offer the lender a “reaffirmation agreement” that effectively makes that particular loan “non-dischargeable”. This means that after the bankruptcy you will be personally responsible on the loan as though you had not filed a bankruptcy. That means that if you fell behind on the loan or otherwise violated its terms, the lender can not only repossess the car or other collateral, but can also sue you personally for any money due.

This is NOT a requirement in Chapter 13, only in Chapter 7.

Once you file a Chapter 7 Bankruptcy, your attorney should write to all the lenders whose loans must be reaffirmed offering to make that agreement.

This is a serious step. The reaffirmation agreement needs to be signed and submitted to the lender within 30 days after the First Meeting of Creditors and must be submitted to the court for approval before you receive your bankruptcy discharge. If you can show that you can afford the loan payments (or have someone who will make them for you), AND if you have an attorney who will sign off on the agreement saying this is true, the court will almost always approve the agreement. A careful and qualified attorney will want to make sure that the loan is in fact properly perfected by demanding a copy of the signed loan agreement and title or other documents and will not sign off on the agreement if it is in fact a hardship. Attorneys who have done so have been subject to court penalties.

If it appears you may not be able to afford the loan, the procedure is different. In this case, the court will schedule a hearing and you will be required to appear in court to explain why the loan should be approved. Even if payment is a hardship, courts do not necessarily disapprove, but will want to make sure you understand the seriousness of what you are doing.

Please note that car title loans, or other loans where the money borrowed was not used to buy the car or collateral are not subject to these requirements. There is also no requirement that mortgage or home equity loans secured real estate be reaffirmed, and courts will generally not approve these.

If you submitted the reaffirmation agreement and the court did not approve it, most courts hold that you cannot lose the car to repossession as long as you are current. If this happens to you, you or your attorney should ask the court to include in the order disapproving the reaffirmation agreement specific language that makes this clear.

This is another area where the need for qualified and experienced legal counsel is critical.

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



Risking the Loss of a Discharge because of Dishonesty

Signing a documentThe bankruptcy laws were put in place to give honest but unfortunate debtors a chance to return to financial stability. When you enter into bankruptcy, you are entering a fishbowl of sorts. All aspects of your financial life will be subject to examination by a trustee, the court or creditors. As a consequence, there are a number of circumstances where you can risk losing a discharge or having your discharge denied because of misrepresentation or dishonesty. As a general rule, once you have been denied a discharge, you may never again be able to pursue a discharge of any debts you had at the time of the denial.

Here’s how you can risk the loss or denial of a discharge.

  • You lie or make a false statement in any document or proceeding during the bankruptcy process. This can include falsification of assets or income, as well as misrepresentation of debts. When you file a petition in bankruptcy, you essentially make an oath that the representations you make during the process will be true and accurate. If it turns out that you made false statements of fact, or that there were material omissions in your filing, your discharge can be denied or withdrawn.
  • You conceal, destroy, alter or intentionally dispose of information relevant to your financial condition. This includes the destruction of documents that would indicate ownership of property or access to assets.
  • You transfer, remove, conceal, alter or destroy property that may be seized by the bankruptcy court to pay one of your creditors. This rule applies to all such acts within one year before the bankruptcy filing and after the filing.
  • You cannot explain the deficiency or loss of any assets.
  • You refuse to comply with any legitimate order issued by the bankruptcy court.

These problems can be solved or avoided through careful attention to detail and qualified, ethical advose of a bankruptcy attorney. Such advice is very important.

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



Recognized Quality & Experience