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

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.

Regulators report Homeowners Harmed by Loan Companies

Our experience with clients’ attempts to modify their mortgage loans has been disappointing. Neither we nor our colleagues have been able to make sense of the actions of mortgage servicers. Our experience has been confirmed by a recent spot check study of the Consumer Financial Protection Bureau, reported by Bloomberg on October 29, 2014. http://www.bloomberg.com/news/print/2014-10-29/consumer-bureau-finds-homeowners-harmed-by-loan-companies.html.

Back in January 2014, the CFPB implemented regulations covering how mortgage servicers handled these types of transactions. Recently it did a spot check of compliance. The findings?

1. Substantial delays in modifying loans resulting in negative consequences including higher mortgage payments and unjustified damage to borrower credit.

2. Failures to convert successful trial mortgage modifications into permanent ones. The delays meant unpaid interest charged at the old rate was added back into the loan raising the total loan cost.

3. One servicer reportedly sent permanent loan modification documents to borrowers, then after these were signed and returned, changed the terms in ways that were “materially different”

The CPFB and state regulators have already gone after and made settlements for substantial penalties against servicers including Flagstar Bank and Ocwen.  Others including Green Tree Servicing are under investigation.

The mortgage servicing industry handle over $9 trillion in mortgage payments. What the CFBP has found is no surprise to us.

For borrowers facing these types of difficulties, the results can be catastrophic. Aggressive regulation to ensure fairness is long overdue.

Anyone facing the possible loss of a home should seek qualified legal advice without delay, and recognize that loan modification is not always successful or even realistic.

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

Debts Secured by Purchased Personal Property

A hand holding car keys and a remote control for keyless entry isolated over white.Most 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, you can end up losing a car or other personal property under the bankruptcy laws, you can protect personal property from seizure to pay creditors if you “reaffirm the debt.” Reaffirming the debt essentially means that you acknowledge that you owe the money and indicate that you plan to keep making payments (i.e., you don’t intend to discharge the debt). It’s unclear, though, whether you have to have the reaffirmation approved by the bankruptcy court, or whether it’s sufficient to simply submit an application for reaffirmation. There is some precedent to suggest that the mere act of indicating that you plan to reaffirm the debt is sufficient.

It’s important that debtors understand this change in the bankruptcy laws. Before 2005, you could simply stay current on your obligations (after a discharge) and the lender could not repossess the collateral. Now, whether you are current or not, if you have filed a petition in bankruptcy and have not proposed to reaffirm the debt, the lender can take back the collateral.

To get a reaffirmation approved, you must prove to the court that making the payments on the note will not constitute an undue hardship. Your attorney can sign off on this for you, if your attorney reasonably believes that you will have the capacity to make payments, that you can reorganize other debts to make payments affordable, or that you have someone else who can make payments if you cannot. If your attorney is unwilling to sign off on the reaffirmation, the court can schedule a hearing to determine if the debt should be reaffirmed.

Regardless, before you can obtain a discharge, the application for reaffirmation must be submitted to the court. In addition, it’s wise to send a letter to every creditor with whom you wish to reaffirm, asking for the necessary forms.

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

Bankruptcy courts: foreclosure is not time-barred until 6 years after last payment due date specified in the mortgage or note

Last year, one of our bankruptcy judges ruled that once a mortgage lender waited more than 6 years from declaring a default and demanding the entire balance due (“accelerating the loan”) the statute of limitations specified in the Fair Foreclosure Act barred any later foreclosure suit. At the time, many of us thought the result, contrary to the adage that “no one gets a free house”, was surprising.

Many thought this would provide a windfall as they escaped foreclosure. Alas, that ruling, in Specialized Loan Servicing LLC v Washington, was reversed on appeal. 2015 US LEXIS 105794. The District Court, in a persuasive and well-thought out opinion, showed that the statute setting 6 years to foreclose actually stated that the time began to run on the maturity date set out in the loan documents. Acceleration of the loan is not mentioned there or elsewhere in the Fair Foreclosure Act. Moreover, another statute, governing the time to sue on negotiable instruments, did specify that the time ran from default. From this, the District Court concluded that, since the New Jersey Legislature knew how to make a time period run from default, its choice not to do so in setting 6 years to sue under the Fair Foreclosure Act was deliberate.

More recently, another bankruptcy judge, newly-appointed Jack Sherwood, came to the same conclusion in another well-reasoned decision. Hartman v Wells Fargo Bank NA, 2015 Bankr. LEXIS 2783 (Bankr DNJ 2015)

Oh well, for those hoping for a free house it was nice while it lasted.

How Chapter 7 Really Works When Reaffirming a Vehicle

Protecting Your Car When You File For Chapter 7 Bankruptcy Protection

If you face insurmountable debt, you can seek to permanently discharge debt by filing for protection under Chapter 7. The bankruptcy laws limit the type of debt that can be discharged, and also require that reaffirm the debt on any cars or vehicles on which there is a lease or purchase loan. If you own a motor vehicle that you want to keep but which is subject to a auto loan or lease (and assuming it does not have such a large amount of equity that it cannot be fully exempted from sale by a trustee) you still have to take certain steps to prevent a repossession after your bankruptcy discharge.

Reaffirming Your Car Loan in a Chapter 7 Proceeding

A reaffirmation is essentially a new agreement to repay the amount owed on your vehicle. To reaffirm a car loan, you will be required to sign an agreement stating that, in exchange for keeping your car, you agree to continue to make the payments on the car and to remain fully liable on the debt. In essence, this agreement takes the loan out of the debts that will be discharged. The bankruptcy court will review the proposed reaffirmation to make certain that the payment is one you can afford, and that having the car payment will not impose an unreasonable hardship on you and your family. If your attorney, acting as an “officer of the court” can certify to the court that the loan or lease is one you can afford based on your income and expenses, approval typically happens as a matter of course. If your attorney cannot do this, the Court will schedule a hearing to question you about the loan and to determine if it will nevertheless approve the loan.

You can also rescind a reaffirmation agreement within 60 days or at any time before your discharge, and return the vehicle without any further obligation.

If you do not agree to reaffirm the loan and offer to do so, the auto lender will have the right to repossess the vehicle even if you are current on payments. Many auto lenders, especially Ford Motor Credit, are vigorous about this. So to avoid the risk of repossession, an offer to reaffirm, and the signing of a reaffirmation agreement when presented, are necessary.

You want to be careful about entering into a reaffirmation agreement. By doing so, you are essentially agreeing that you will remain fully personally liable for all payments or money due under the car loan or lease without the protection of a discharge in bankruptcy. So, for example, if 6 months after your bankruptcy discharge you fall behind on payments and the lender repossesses then sells the car, it can still sue you for any unpaid balance or deficiency. For a lease, if you owe money at the lease end, you will have to pay up.

Of course, you are protected by the automatic stay, and the lender cannot call, write or take legal action to collect car payments from you until your discharge or until it gets an order for “stay relief”. But once this hurdle is crossed, you could lose your car even if you are remaining current on payments.

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

Options When Facing a Home Foreclosure

Your Options When Facing Home Foreclosure

Foreclosure next exitIf you have fallen behind on your mortgage payments, you may be thinking about seeking protection in bankruptcy. Once you file for bankruptcy protection, you will be entitled to the automatic stay, which prohibits most creditors (including mortgage lenders) from calling, writing or taking legal action to collect a debt from you. The reality, though, is that bankruptcy is rarely a long-term solution to your inability to pay your mortgage. Here’s why:

  • While a bankruptcy discharge eliminates your personal liability on the mortgage obligation, the lien on your home or property generally “passes through” and remains after a discharge. In other words, a bankruptcy does not allow you to continue not paying a mortgage and keep the property indefinitely.
  • If you have enough equity in your home, a Chapter 7 bankruptcy can result in the trustee selling it, paying off the mortgages, giving you some money, and keeping the rest to pay creditors. Under the bankruptcy laws, you are entitled to an exemption for your home, but it’s an exemption on the equity you have in your home. Your equity is the difference between the amount you owe and the fair market value of your home. If you owe nothing on your home, it’s all equity, but you will only be entitled to the exemption amount of equity. Under the federal bankruptcy exemptions, that amount is currently $22,975.00 per individual or $44950.00 for a husband and wife filing jointly. (There are different rules where only one of multiple owners files bankruptcy. If the numbers support it, the bankruptcy trustee will choose to sell your home and give you up to the amount of the exemption in your equity, before using any remaining proceeds to pay off creditors. (This is very simplified. You need to see a qualified attorney to review your situation)
  • If you file bankruptcy under Chapter 13 you can use a bankruptcy plan to bring the loan current, while resuming normal monthly payments. (In New Jersey, this right ends when a Sheriff Sale takes place.) Nonetheless, Chapter 13 can be an effective tool to help prevent the loss of your home, especially if your financial challenges are temporary or tied to a specific event, such as the loss of a job, a divorce or an injury or illness. In addition, you can rid yourself of other obligations that make it difficult to make your mortgage payments. Ideally, when you come out of Chapter 13, you won’t have the overwhelming obligations you previously faced.

You Have More Time Than You Think

A common misperception is that, once your lender has sent notice of foreclosure or initiated foreclosure proceedings, you have little time before you must vacate the premises. In New Jersey, the current reality is that it typically takes eight months or more for a property to make it to a foreclosure sale. In other states the timing and procedures will be different.

For most people the best thing to do as the foreclosure process moves forward is to stay in your home. That way, the home is occupied and homeowners insurance at normal rates remains available. If you vacate the premises, your homeowner’s insurance may not cover any losses, even if you were current on the premiums. Staying in the home allows you to accumulate funds to pay for moving expenses, a security deposit on a rental, or other important purposes.

Until a Sheriff Sale or other sale of the property, some things are critical. Make sure there is insurance providing coverage to YOU in place. When lenders buy insurance after a cancellation (called “forced place” insurance) you do not have coverage. If necessary, buy proper insurance for yourself. Secondly, make sure you stay current on utilities including water bills. Finally, if there is a condo or homeowner association, you will generally want to stay current on those bills as well.

A Short Sale or Deed in Lieu of Foreclosure may make matters worse.

Ironically, those well-meaning borrowers who negotiate a short sale or deed in lieu of foreclosure may make matters worse for themselves. In these situations, the property is sold or deeded back to the lender with a balance still due on the loan. There are important tax consequences and other considerations here.* In other words, these options may be right for some people, but not for everyone.

Whatever your situation, get qualified advice.

The discussion above is very general. Each situation is different. Your choices or options will be dictated by your needs and situation. Understanding all your choices and the risks and benefits of each is essential.

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

* IRS CIRCULAR 230 DISCLOSURE: Pursuant to Treasury Regulations, any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used or relied upon by you or any other person, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing or recommending to another party any tax advice addressed herein.

How to Stop Vehicle Repossession

Steps You Can Take to Avoid Repossession of Your Vehicle

Car on the back of towtruckIf you are behind on your vehicle payments, your lender can typically repossess your car at any time. You can suspend a repossession effort with a bankruptcy filing, as you will be entitled to the protection of the automatic stay once you file. The automatic stay prohibits most creditors (including auto lenders and lessors) from calling, writing or taking legal action to collect a debt outside of the bankruptcy process.

The available bankruptcy exemptions can be applied to the equity you have in the vehicle, and if sufficient should prevent its sale by a bankruptcy trustee. If your vehicle is completely paid off, then its fair market value is all equity. If the equity you have in the vehicle is greater than the exemption amount, the trustee may still take your vehicle, sell it to pay off other creditors and give you the exemption amount in cash after paying off the car loan balance.

If you owe money on your vehicle and are facing repossession, there’s little benefit to filing a Chapter 7 petition, as this will only slow the process of repossession, not prevent it. Unless you will be in a position to bring the loan current or “buy back” the vehicle from the lender in a process called Redemption, a Chapter 7 bankruptcy is only a temporary fix.

Your best option if you choose bankruptcy is often a Chapter 13 filing. In a Chapter 13 proceeding, you will have to resume payments on the loan, but can cure the arrears (ie bring the loan current by paying the back payments through a bankruptcy plan) over as long as 60 months.

In Chapter 13, you may be able to “cram down” your loan and pay the fair replacement value over 3 to 5 years. Essentially, you replace the loan with a new loan that pays the value plus interest, so that at the end of the payments you have bought the car back from the lender. This makes sense only if the loan balance substantially exceeds the market value of the vehicle. While this process is underway and so long as you meet the applicable payment requirements and keep the vehicle insured, the automatic stay protects you, so that your lender cannot seek to accelerate the loan or collect more than you have agreed to pay.

Bankruptcy, however, may not be necessary to stop repossession. The first thing you want to do when you have fallen behind on your car payments — or even if you know in advance that you won’t be able to make a payment when it’s due — is to reach out to your lender to see what your options are. Some lenders have forbearance options, which allow you to pay only interest for a short period of time, or even allow you to make no payments for a month or two. Typically, though, interest will accrue during that period. If you reach any agreement, BE SURE that it is documented in writing and that you keep careful records of all payments you have made or will be making.

The other important thing to do when you are struggling to meet your financial obligations is to prepare a detailed household budget. This allows you to compare income to necessary expenses.

Priorities here are important. For most people, having reliable transportation is a top priority. Without a vehicle, you can’t get to a job. If you can’t get to a job, you can’t pay anyone.

Above all, facing up to these problems early and understanding all the options with the guidance of an experienced and knowledgeable attorney 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. 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

What to Do If You Expect Your Vehicle to Be Repossessed

Protect Your Rights When You Fear Repossession of a Vehicle

It happens to a lot of people — you encounter financial difficulties and find yourself behind on your financial obligations. You may be in arrears on the payment for your car or truck, and may have received notice of a potential repossession. What are your rights and what can you do to protect yourself?

When a repossession can take place without court order.

As a general rule (in New Jersey) your lender or their agent (a repo man) may not “breach the peace” without a court order. This means they cannot use or threaten physical force, and they cannot come into your home, garage or a locked closed area to repossess your vehicle without a court order or without your consent. They may, however, repossess the car on the street, in an open driveway, in front of your house or in any other public place without a court order and without notice to you.

It’s also important to understand that if your car is repossessed with personal items inside of it, you risk never seeing those items again. Accordingly, if you anticipate that your vehicle may be repossessed and you must leave it in a public place, you should take care not to leave any valuables in it.

In New Jersey, as long as the license plates are on the car, you remain potentially liable as the owner for any injury or damage someone operating the car may cause, and you need to keep the car insured. You might consider taking the tags off the vehicle and leaving it in front of your home or in some public place. However, when you do, you will be considered to have abandoned the vehicle and may be cited by police for violating the law.

If you file a bankruptcy case, the automatic stay will protect you from repossession for a limited time. If you file a Chapter 13 case, you may be able to bring the loan current through payments under a bankruptcy plan over 3 to 5 years, or you may have other options through the “cramdown” provisions of the Bankruptcy Code. However, if you know that you won’t be able to bring the account current and want to avoid the fear and hassle involved with an actual repossession, we recommend making arrangements to voluntarily surrender the car to the lender at an agreed location (which may be an area dealer). When you do, be sure to remove the license plates when you get to the drop off location. If you are a New Jersey resident, you should surrender them to the nearest DMV office, where you will get a receipt that you can use to remove the vehicle from your auto insurance.

Reliable transportation to get to and from work is often essential to getting back on your feet financially. When this is threatened, getting qualified legal advice and doing some careful planning is essential.

Contact Our Office

At Neuner & Ventura, LLP, we work hard to alleviate the stress, anxiety and confusion 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 us at (856) 596-2828 or send us an e-mail. Evening and weekend appointments are available upon request.

Representing Clients across South Jersey

Recognized Quality & Experience