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New study shows bankruptcy for those that need it improves long-term creditworthiness

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Study Shows Bankruptcy Can Improve Credit

A common concern we have heard about bankruptcy is the negative impact it has on a person’s credit score. While this is always a legitimate concern, it has to be balanced against the cost and effect of letting out of control debt jeopardize or delay a return to financial stability. A new study shows bankruptcy can improve credit. We have previously reported on a study by the New York Federal Reserve Bank showing that a bankruptcy improves the chances of returning to financial stability and creditworthiness after a few years. A recent study by LendingTree confirms and supports this. Their analysts looked at over a million LendingTree users, comparing those who filed bankruptcy in the past 7 years against those who did not. Here is what they found:

  1. Loan costs and rates are higher initially for those who file bankruptcy but this effect diminishes over time so that within 1 to 5 years, the credit scores have rebounded recovering part if not all of the initial loss.
  2. Even a few years after bankruptcy, borrowers may find themselves getting loan terms not much different from what others are offered. In substantial part, this is because they have removed large debt burdens and have a better ability to pay new loans which cannot be discharged again for years.
  3. After 5 years, 75 percent of those who filed bankruptcy are eligible for new loans. Some achieve this much sooner.
  4. The difference in average scores of those who file bankruptcy vs those in similar situations who do not is less than 50 points and this difference narrows over time.

What the study apparently did not look at is the cost of not filing bankruptcy when needed. This can be substantial. For example, we have seen people who have lost their homes, depleted their protected retirement savings,  or have done without needed medical care or medical insurance in a fruitless struggle to stay current on credit cards.

Our bankruptcy attorneys always encourage our clients to carefully examine their budgets and their overall financial picture to make the right decision. Bankruptcy is not right for everyone, but in many cases may be better for everyone.

Protecting yourself from fraud and identity theft

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Protecting yourself from fraud and identity theft

We were recently contacted by the author for feedback on this article which is well-written really on-point and provides valuable advice.  https://www.dccu.us/blog/protect-yourself-from-fraud-in-2018/

It is not uncommon that identity theft or misuse of credit or credit cards is one of the factors that leads our clients into bankruptcy.

Our bankruptcy attorneys also strongly recommend that following a bankruptcy discharge, our clients check their credit report, which can be done once a year free of charge at www.annualcreditreport.com. All the discharged debts should still appear but should have a zero balance as having been “discharged in bankruptcy.”

Defending Collections Lawsuits on Credit Cards

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Worried couple reading credit card bill sitting on a couch

Collections Lawsuits on a Credit Card Debt

It can happen to just about anyone. Things are going well, you’ve got a great job, so you feel confident putting a few extra items on a credit card. Before you know it, you have a hefty balance, but it’s okay, you’ll just pay it off over a few months. Then disaster strikes…you get laid off or sick and suddenly, you’re being hounded by credit card companies. Maybe you’ve even been served with a complaint. What’s your best course of action when you have to defend a collections lawsuit on a credit card debt?

The first thing you need to do is retain legal counsel. Don’t try to defend a lawsuit by yourself. It may seem like you are saving money, but it can cost you a lot more in the long run. Contact a New Jersey bankruptcy attorney for assistance.

Next, collect all records you have related to the debt—any receipts, any records of payment. Your bankruptcy attorney will want as much accurate information as possible. In addition, request that the collection agency or its legal counsel produce all records they have. There’s a good chance that they have little to nothing, as most credit card collections are conducted by companies or people who have purchased the debts at a fraction of their face value. They may have little or no documentation other than the alleged amount of the debt.

If you haven’t hired a bankruptcy attorney yet and you’ve been served with a complaint, make certain you file a response to the complaint. The technical term for this is an “answer” to the complaint.

Send it to the court by certified mail and send a copy to the law firm and/or the collection agency that had you served. If you have been served with a complaint, though, it’s probably time to step back and look at the broad picture—is this a single problem or do you have far-reaching financial problems? Often, it’s better to attempt to negotiate a payment plan than to litigate. You may actually end up paying less through a negotiated settlement and you won’t have legal or court costs.

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 bankruptcy attorney. Evening and weekend appointments are available upon request.

Representing Clients across South Jersey

Recording calls with debt collectors to document or deter abuse-watch out for these and other traps!

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Calls With Debt Collectors

We have all heard the recordings telling us that our call “may be recorded for customer service”… Many of our clients in financial distress are dealing with debt collectors. Although there are well-established rules about what collectors can or cannot do, we hear all the time about abuses, such as threats of criminal action, repeated calls at late or early hours, calls of employers or relatives. If you have had calls with debt collectors, contact a New Jersey bankruptcy lawyer about your case.

We suspect that these abusers think that most people will put up with the abuse and if they do pursue legal remedies, it will be a “swearing contest” in court. While debt collection is legal and proper, we have recommended that our clients document each call and consider recording such calls, but only if certain procedures are carefully followed.

In many states, including California and Pennsylvania, it is illegal to record a call or other interaction without the consent of all parties. So if the call originates in one of those states, a violation could trigger criminal action, or civil penalties. See Tape-recording laws at a glance

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So here is our recommendation: Start the interaction and your recording with a statement something like “I am recording this call, and will record any further calls from you. If you do not want to be recorded hang up and do not call again. If you continue or call again, I will assume you and your company consent.” If the person says they do not consent then hang up.

If a collector leaves a message on your answering service, save the recording. They knew they were being recorded and cannot complain.

Watch out for debt collection scams. Whenever dealing with a collector, be sure to get the name or extension number of who is calling, the name and address of the collection agency, the name of the creditor, the account number, and a telephone number to call back “in case we get disconnected.” Never give any information over the phone, such as Social Security or credit card numbers, dates of birth where you work etc. They are calling you. If they do not have this information that is their problem. Do not fall for the “we need this for verification” scam. Your goal is to get information from them. If they want further information, tell them to put it in writing and send it to the address they have so you can review it with an attorney.

Finally, most old debts have been sold off to debt buyers. While this is legitimate, sometimes companies or collectors who do not really own the debt may try to defraud the true owner by trying to collect on someone else’s debt. Or phony debt collectors. Be wary.

More importantly, if you are having trouble with debt collectors, get legal advice about your rights and options. And please note, every state and situation is different. This post is intended only to alert you in a general way to the potential issues and problems. It is no substitute for qualified and individual legal advice.

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 bankruptcy lawyer. Evening and weekend appointments are available upon request.

Representing Clients across South Jersey

Keeping debt collectors honest and how best to respond to them

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How to Talk to Debt Collectors

We see a lot of people who are dealing with sometimes abusive debt collectors. A recent New York Times article, Jan 13, 2017: How to Keep Debt Collectors Honest and at Bay provides some excellent advice. Among the tips provided (and our tips) are:

  1.  If you are at all unsure that the debt is valid or the amounts are correct, demand documentation to validate the debt. (Debt collectors often do not have this information but be insistent).
  2. Put all requests in writing. In fact, demand the name of the collector, a mailing address and contact information, the name of the original creditor, and the name of the current owner of the debt.
  3. Don’t assume that the collector or the party they claim to represent really own the debt. A lot of bad debts get sold off. Some collectors have attempted to collect “stolen” debt accounts that they do not own.
  4. Do not let collectors call you at work or call neighbors. Demand that they stop, orally and in writing. Keep all those papers.
  5. If the debt is older than 6 years since you first defaulted (unless you entered into a payment plan after that) any suit may be barred in New Jersey by the statute of limitations. (if it is a store credit card, the limitation is 4 years). Demand the date when the debt first became past due.
  6. Do not put up with abuse. If this happens, tell the collector you are recording the call and if possible record it. (Recording a call without notice is a criminal violation in many states and if your collector is calling from one of those states you could get in trouble)
  7. Finally and most importantly, you need to assess your finances and get professional advice. Start with doing a budget for just your basic living expenses (ie food, shelter, transportation, medical care etc). Often there is no money left over to pay debts being collected, or not enough. There are budget forms for you to use on the Forms page of our website. http://www.nv-njlaw.com/bankruptcy-forms/
  8. Finally, do not be reluctant to use bankruptcy as a tool to pay, settle or obtain relief from your debts. As we have noted in another blog post, at least one study has shown that those who used bankruptcy to overcome financial distress later had better credit and better access to credit than those who did not.

Contact a New Jersey bankruptcy attorney for help with debt collectors and other financial troubles.

The Most Effective Way to Discharge Debt – Be Honest with Creditors

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In a Chapter 7 liquidation bankruptcy proceeding, you have the right to discharge certain debts in exchange for the sale of non-exempt property. That right, though, is not absolute. If there’s evidence that you have been less than forthright with the bankruptcy court, or that you have engaged in wrongful conduct, the bankruptcy court has the power to deny a petition for discharge. Here are some of the situations where your Chapter 7 discharge petition to discharge debt may run into problems.

Dishonesty in Obtaining Debt

If you incurred debt through false pretenses, through fraud or misrepresentation, or through illegal acts, that debt may not be subject to discharge. For example, if you embezzled $100,000 from your employer, but spent the money, you cannot file for bankruptcy protection to discharge the restitution requirement. Likewise, if you obtained credit cards or consumer loans through fraud or misrepresentation, including the falsification of income or debt, the creditor to whom you owe that money may ask the bankruptcy court to deny discharge.

Another way to lose the right to discharge debt is to fail to disclose income or debt during your bankruptcy proceeding, or to otherwise mislead or lie to the bankruptcy court. You must fully disclose all information about the assets, debts and income, and ignorance will typically not be an acceptable defense. Hire a bankruptcy attorney, tell your attorney the truth about everything, and you’ll be fine.

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 bankruptcy attorney. Evening and weekend appointments are available upon request.

Representing Clients across South Jersey

Dos and Don’ts of Home Loan Modifications

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Home Loan Modifications

If you are struggling to make your monthly mortgage payment, you may be considering pursuing a home loan modification. Here are some things you want to be certain to do, as well as some pitfalls to avoid.

Dos

The most important thing to do when investigating the possibility of a home loan modification is to be realistic. Your lender has no legal obligation to change the terms of your loan. They will only give serious thought to doing so if it’s in their best interests, so you’ll have to put yourself in their shoes and try to determine why you should be allowed to modify the loan.

You’ll also want to put together an honest budget before you take any further steps. Look at how much income you have, as well as your other expenses, and be realistic about what you can afford per month. Don’t try to negotiate a modification if you won’t be able to stay current.

Do consider filing a Chapter 13 bankruptcy petition. It may be the best form of home loan modification available. You’ll have the added bonus of the automatic stay in bankruptcy, so that creditors can’t bombard you with calls and letters.

Don’ts

Don’t assume that your modification is permanent—verify it. If your lender agrees to a modification, be careful to clarify that it’s not just a trial modification. A lender will often allow you to amend the terms on an informal basis, but retains the legal right to reinstate the original terms. Keep thorough records of every correspondence between you and the lender, so that you have evidence that the modification is permanent.

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 bankruptcy attorney. Evening and weekend appointments are available upon request.

Representing Clients across South Jersey

Challenges to the Discharge of Luxury Purchases and Cash Advances

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One of the advantages of a Chapter 7 bankruptcy is that it allows you to permanently discharge certain debts, meaning that you will no longer have personal liability for them. As a general rule, credit card debt can be discharged, but there are limits.

Under the bankruptcy laws, any debts arising from the purchase of luxury goods  within 90 days of your petition for bankruptcy  made from a single creditor will be presumed to be fraudulent and non-dischargeable, if the purchases total more than  $650. This result is not automatic. The creditor has to file a Complaint in the bankruptcy seeking non-dischargeability. If it does so, the burden is on the debtor to prove that the purchases or resulting debt were not made with intent to defraud the creditor. Stated another way, a creditor will not be required to prove that you did not intend to pay or that you intended to discharge the debt in bankruptcy. Instead, you will have to  introduce evidence to demonstrate that the purchase was not a luxury, but necessary for the support or maintenance of the debtor or a dependent or spouse, or that the purchase was not made for a fraudulent or improper purpose.

For purposes of the bankruptcy law, a luxury item is considered to be any goods or services not reasonably required by the debtor for his or her own support or for the support of any legal dependent. While the determination of whether an item is a luxury item depends on circumstances, items like food, gas, clothing and furniture are more likely to be considered non-luxury than jewelry, home appliances, books, or a computer.

The same presumption applicable to luxury purchases also applies to cash advances on a credit card or other open end credit plan made within 70 days of filing, to the extent that these total more than $925. This does not apply where the cash advance is for a business purpose.

We generally recommend that our clients stay away from these kinds of purchases or use of credit. Like any unusual or suspect financial dealings, these will commonly result in suspicion and greater scrutiny across the board. When anticipating a bankruptcy, it is generally best to play it straight and stay within the bounds applicable to the “honest but unfortunate debtor”.

That said, a certain amount of legitimate planning going into a bankruptcy is permitted. The wisest course of action is to consult with and follow the advice of an experienced and ethical bankruptcy lawyer.

Contact Neuner & Ventura, LLP

At Neuner & Ventura, LLP, our bankruptcy lawyers 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 bankruptcy attorney. Evening and weekend appointments are available upon request.

Representing Clients across South Jersey

Can Student Loans Be Discharged?

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It’s getting to the point, for many, where the cost of a college education is one of the biggest of life’s expenses, greater even than the cost of a home. Not surprisingly, as many college graduates struggle to find good jobs, many consider bankruptcy as an option to get their finances under control. The key question—can student loans be discharged in a federal bankruptcy filing?

Though many people don’t know it, there are limited circumstances where student loan payments can be wiped out under the bankruptcy law. Under what is known as the Brunner test (so named because of the U.S. Supreme Court case that laid down the principles for discharge of a student loan), you can discharge student loan obligations if you can demonstrate that repayment would cause you an “undue hardship.”

Under Brunner, a debtor can eliminate student loan debt by showing all of the following:

  • The debtor does not have sufficient income to maintain a minimal standard of living for himself/herself and dependents
  • The debtor has no reasonable prospect that the current financial situation is likely to change
  • The debtor has made a good faith attempt to pay off student loan debt

It’s important to understand that, without evidence to the contrary, most courts will presume that a debtor’s income will increase over time and that a debtor will be able to attain a minimal standard of living. Accordingly, any debtor seeking discharge of a student loan payment will need to affirmatively demonstrate that his or her situation is not likely to change. A debtor may introduce the following types of evidence to support that claim:

  • A mental or physical disability
  • Lack of education or training
  • Poor quality of education
  • Lack of job skills
  • Age of debtor

Exploring the options for income based repayment or discharge of student loans through various federal programs is a good idea and also a necessary first step. You can find information about what types of loans you have at this site: https://www.nslds.ed.gov/nslds/nslds_SA/. Information about federal student loan forgiveness and cancellation can be found here: http://studentaid.ed.gov/repay-loans/forgiveness-cancellation

If you resort to a bankruptcy, discharging student loans will require that you file a “bankruptcy lawsuit” in the bankruptcy seeking a judgment of dischargeability.  Achieving success is possible, but difficult at present. Hopefully courts or Congress will find a way to ease the path to dischargeability.

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 with an experienced New Jersey bankruptcy lawyer, 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 bankruptcy attorney. Evening and weekend appointments are available upon request.

Representing Clients Across South Jersey

Debts for Willful and Malicious Injury

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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 with an experienced bankruptcy lawyer, 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 bankruptcy attorney. Evening and weekend appointments are available upon request.

Representing Clients across South Jersey

New Jersey Bankruptcy Attorneys

We have over 30 years of experience providing sound bankruptcy counsel to businesses and individuals in southern New Jersey. Steven R. Neuner has been certified as a business bankruptcy lawyer by the American Board of Certification and has served as a bankruptcy trustee since 1993. He is a New Jersey Super Lawyer and carries a 10.0 rating with Avvo. We know from experience that every legal situation is unique.

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