Short sale or bankruptcy? That is the question.

Here in NJ, I rarely recommend a short sale to a debtor. In NJ, deficiencies are not waived automatically or by statute and the lenders often pursue debtors for those deficiencies. Rarely do I see a potential client whose only debt is the delinquent mortgage or mortgage they no longer can afford. I could see it happening, but it most definitely is rare.

Also, there are so many short sales on the market, the chance of the home even selling or for a price the lender is willing to accept is rare also. if it does happen, it’s often many, many months or years later. I’ve found that bankruptcy usually is a better solution – it wipes out the deficiency, avoids any tax issues on a cancelled debt now or in the future and it frees you from your other debts as well. It really gives you the fresh start, the “do-over” to start again with a clean slate.

If you think a bankruptcy might be the right option for you and need legal advice about this or any other legal matters, contact a knowledgeable bankruptcy lawyer in your area. If you are in the North New Jersey counties of Passaic, Sussex, Bergen, Morris or Essex and would like to schedule a consultation with my office, feel free to call us at 973-440-2317 or complete my contact form at www.YourBankruptcyFirm.com or www.MannLegal.biz.

Can I be fired or lose my job for filing bankruptcy?

No, at least not legally.  Federal law 11 U.S.C. 525(b) is the section of the bankruptcy laws that prohibits your employer from firing you because you filed for bankruptcy or had debts that were dischargeable in bankruptcy. This applies whether you work for the government or a private employer. This law even prohibits your employer from firing you if the discharged debt is a debt owed to your employer (e.g. you work for Chase bank and have a Chase credit card that had a balance that you discharged in bankruptcy).

What you need to decide is whether or not this should be a reason not to get the relief from your debts you may desperately need with the help of bankruptcy. In most instances, I do not believe this is a real concern that should deter you. First, it is highly unlikely your employer even will know about your bankruptcy filing. Second, even if they do find out, since it is unlawful to terminate your employment because of that, respectable employers who are concerned about complying with the law will not fire you because of it.

If you are fired as a result of filing bankruptcy and have a good track record with your employer, it should not be too difficult to prove that it was this illegal discrimination that was the basis for your termination. In that case, you should be able to file more confidently knowing you won’t be fired or if you are because of this, you will have recourse against your employer.

If you are a new employee or have a history of disciplinary or other issues that could form the basis for your termination, you may want to think more carefully before you file for bankruptcy, as it will be easier for an employer to fire you because of it. But don’t forget, it still is unlikely your employer will know about your filing, unless the employer is a creditor listed in your petition.

If you are a new employee or have had issues with your employer AND your employer also is a creditor, then you may want to weigh the decision to file bankruptcy more carefully. You definitely should seek the advice and assistance of an experienced bankruptcy lawyer in helping you make that ultimate decision.

Another consideration about this is to remember that bankruptcies and debts should be erased from your credit report after 7 years. If they still are on your credit report, they may be included in a background check if you are applying for a position where the salary is $75,000 or more. The law says that you can’t be fired or removed from the hiring process for a new job due to a previous bankruptcy filing, but a prospective private employer can choose not to hire you or any employer may choose to fire you for ANY other legal reason. Realistically, they probably won’t tell you the reason or if they do, they won’t admit to an unlawful reason, like discriminating against you because you filed for bankruptcy.

That is a brief statement of the law on this issue. While it is important to know what the law says, it also is important to be realistic. Even though the law prohibits firing an employee for filing bankruptcy, that does not mean it does not happen. If you can prove that is what happened (you were fired solely because you filed for bankruptcy), then you may have legal recourse against your former employer and should consult with an attorney in your area.

If you think a bankruptcy might be the right option for you and need legal advice about this or any other legal matters, contact a knowledgeable bankruptcy lawyer in your area. If you are in the North Jersey counties of Passaic, Sussex, Bergen, Morris or Essex and would like to schedule a consultation with my office, feel free to call us at 973-440-2317 or complete my contact form at www.YourBankruptcyFirm.com or www.MannLegal.biz.

How badly will bankruptcy affect my credit score?

 

Credit scores are funny things. The calculation is a mystery, as is some of the logic behind it. The formula is a secret of the companies who generate the scores. We know generally that if we pay our bills on time, our score will be better. If we do not, it will be worse. Other than that, we do not know for sure and there is much debate about how many things affect your score. Credit scores also are fluid. They go up and down almost constantly as our lives, including our credit lives, change almost constantly.

The reason I mentioned all of this is that I do not believe it is something to fret over as much as so many of us do, especially the impact of filing a bankruptcy upon your credit score and your life.  Credit scores, in and of themselves, are meaningless. It merely is the impact of that score on your ability to get credit and that which the credit gets you (the new home, new car, new clothes, etc.) that is meaningful. So, to answer the question “how badly will a bankruptcy hurt my credit?”, the answer is not much at all – it may even help it, though not in the way you first might think. Let me explain.

High credit scores help you get credit (loans to buy stuff). Credit helps you get things you couldn’t otherwise afford. If you’re seriously thinking about filing bankruptcy, your credit score probably isn’t all that good already. Thus, It going lower isn’t really something you need to worry about. There is a mid-range of credit where anything that impacts the score can dramatically impact your ability to obtain credit (roughly 600-700). On the other hand, when your score is very low (below 500 or so), or really even very high (above 750), whether it goes even lower (or even higher) does not change your credit situation much, if at all. A really, really low credit score (300) does not hurt you more than a really low credit score (350). In real terms, if your credit score is 400, it does not make any difference in your world if it goes down to 350 because of a bankruptcy filing. Either way, you’re not getting credit. Frankly, it probably isn’t a good idea to be applying for more credit anyway, as you probably can’t afford the bills you have and therefore should not be incurring more debt or yet another bill.

If you are unable to pay your debts, your credit score will continue to decline as you continue to default. That decline will continue as long as you struggle (and fail) to pay all your debts on time. If you stretch that out for months or years, you continue to suffer financially and emotionally and your credit score suffers along with you. On the other hand, if you file bankruptcy, your credit score will be impacted initially (though likely a “so what” as explained above). But….. once your bankruptcy is over and you reestablish good payments and good credit, your score will start to improve sooner than if you continue struggling (and failing) to pay the bills and debts you cannot afford.

So, should worrying about a reduced credit score be something that stops you from filing bankruptcy? In my opinion, in most circumstances, that’s one of the last things you should worry about or that should stop you from filing when it’s otherwise appropriate to do so.

If you think a bankruptcy might be the right option for you and need legal advice about this or any other topics, contact a knowledgeable bankruptcy lawyer in your area. If you are in the North Jersey counties of Passaic, Sussex, Bergen, Morris or Essex and would like to schedule a consultation with my office, feel free to call us at 973-506-4881 or complete my contact form at www.YourBankruptcyFirm.com or www.MannLegal.biz.

Bankruptcy’s Benefits

When people think about bankruptcy, they do not get warm and fuzzy at the thought of it. Some fear bankruptcy. Some hate it. Some are confused by it.  Bankruptcy is not something we strive to achieve in life. It is not a goal or an aspiration. Unfortunately, many contemplating bankruptcy think of themselves as failures. I do not know anyone who thinks of bankruptcy and has happy thoughts. What those people do not focus on, and in my opinion should, are the many benefits that bankruptcy offers. As I have said in other posts, bankruptcy is a tool to achieve an outcome. Nothing more, nothing less. If it’s the right tool for you at the right time, it is one you should use. If not, do not. It’s that simple. Here are some of those benefits in using the bankruptcy tool:

1. Stop a wage garnishment  or levy on your assets (or both)
2. Stop a foreclosure
3. Stop a repossession of your vehicle
4. Avoid your utilities from being shut off (or getting them turned back on if they’ve been shut off already)
5. Avoid having to go to court when you’ve been sued for debts you owe
6. Permanent escape from unaffordable debt
7. Relief from the overwhelming stress of having debt you cannot afford
8. Freedom from the fear and harassment of creditors and collection agencies
9. Rebuild your credit / credit score
10. Keep your home, vehicles and cherished household items
11. Reclaim your life
12. Gain control of your finances
13. Restore peace in your family
14. Regain hope for the future
15. Get a financial “do-over”

Should everyone file bankruptcy? Of course not. Should everyone who is in debt file bankruptcy? Not necessarily. Depending on numerous factors such as the amount you owe, your ability or inability to repay your debts, whether you are in the middle of a divorce and more… these and many other factors will help determine, with the advice of an experienced bankruptcy lawyer, whether and if so, when you should consider bankruptcy and what type of bankruptcy, if any, you should file.

If you think a bankruptcy might be the right option for you and need legal advice about this or any other related topics, contact a knowledgeable bankruptcy lawyer in your area. If you are in the North Jersey counties of Passaic, Sussex, Bergen, Morris or Essex and would like to schedule a consultation with me, feel free to call my office at 973-506-4881 or complete my contact form at www.YourBankruptcyFirm.com or www.mannlegal.biz.

Can I use Bankruptcy to wipe out my car loan and still keep my car?

 

I heard something very disturbing last night. A potential client (“PC”) came in for an initial consultation, wanting to file for bankruptcy. She had very little debt, comparatively speaking, of course. Her biggest problem was that she was not earning enough money to pay her monthly expenses. While I explained to her that a bankruptcy will not fix that problem and offered alternative possible solutions, she inquired about her car. She has a 2008 vehicle that she purchased new. Her payments are almost $400 / month, which is a lot for her. She can’t afford this car and wants to get rid of it, but needs a reliable vehicle, as she is a single mother with 2 small children and a full-time job. She advised me that she heard from several people that by filing for bankruptcy, she could keep her car and not have to pay for it anymore. WHAT???!!!

After admonishing her about getting legal advice from non-lawyers and applauding her for coming to me to get proper legal advice, I explained that simply is not true. Bankruptcy does not let you keep an asset and not pay for it. In simple terms, bankruptcy doesn’t get you free stuff. When she told me not one, not two, but several people had told her the same thing, I realized I must be something out there about it, lest people make bad decisions based on incorrect information.

If you think a bankruptcy might be the right option for you and need legal advice about this or any other related topics, contact a knowledgeable bankruptcy lawyer in your area. If you are in the North Jersey counties of Passaic, Sussex, Bergen or Morris and would like to schedule a consultation with me, feel free to call my office at 973-506-4881 or complete my contact form at www.YourBankruptcyFirm.com.

What are the types of bankruptcy and what are the differences between them?

For most individuals, the primary types of bankruptcy you will consider filing are a Chapter 7 or a Chapter 13 bankruptcy.  A Chapter 7 is what is sometimes referred to as a “straight” or liquidation bankruptcy and the Chapter 13 is referred to as the “repayment” bankruptcy. The primary difference between them is that the Chapter 7 wipes out all eligible debt without any repayment and in a Chapter 13, you typically pay back a portion of your debts. This article will focus on who is eligible for a Chapter 7 and why you would opt for that Chapter.

In my opinion, if you are eligible to file a Chapter 7, that usually is the way to go. After a successful Chapter 7 filing, you are free from the burdens of your dischargeable debts. You do not owe them anymore. You cannot be sued, your wages cannot be garnished, your property is not at risk of being seized by any of your creditors. It is as if those debts never existed. Sounds good, right? It is, if you’re eligible to file and if your debts are eligible for discharge.

Eligibility to file:

In New Jersey, a person is eligible to file a Chapter 7 bankruptcy if they meet the income requirements and you have not filed a Chapter 7 in the last 8 years or a Chapter 13 in the last 6 years in most cases. The income requirements are more generous than you would think so do not rule yourself out as eligible without speaking with a knowledgeable bankruptcy lawyer. That’s it, for the most part.

Eligible debts:

Certain debts are eligible to be discharged and others are not. For the most part, unsecured debts such as credit card debt, medical debt or personal loans typically are dischargeable. Many secured debts also usually are dischargeable as well, including mortgages and car loans. Beware – just because the loan itself is discharged in bankruptcy, that does not extinguish the lien against the property. A more detailed discussion on that topic will be covered in a future post.

Some taxes are dischargeable, contrary to what many think. Certain other debts that for the most part are not dischargeable are: some taxes, most student loans and child and spousal support.

So, if you want to find out for sure whether or not you are eligible to file and get relief from your debts using bankruptcy as your tool, contact a knowledgeable bankruptcy lawyer to assist you.

Uncontested Divorce in New Jersey

Uncontested Divorce in New Jersey.

Chapter 7 and Inheritances

What happens if, after you file for a Chapter 7 bankruptcy, a parent, spouse or other family dies leaving you some money or other items of significant value? Does this affect your bankruptcy? Are you entitled to keep the inheritance or must you turn it over to the Trustee or your creditors? The answer to these questions is, of course, it depends. What does it depend on? Let’s discuss.

You file for a Chapter 7 bankruptcy. You are a typical “no asset” case, meaning you don’t have any assets to be liquidated and distributed to your creditors. You may or may not own a home, but even if you do, the debt on it exceeded your equity or the equity in your home (and other assets) was within the exemption limits.

You filed your Petition. You may or may not have had your 341 Meeting (Meeting of Creditors) and you may or may not have received you discharge. Your bankruptcy may or may not have been closed by the Court. According to Section 541 of the Federal Bankruptcy Law (11 U.S.C. 541), if you receive or become entitled to receive an inheritance within 180 days of the filing of your bankruptcy petition, then the inheritance is part of you bankruptcy “estate.”

In practical terms, what that means is that is anything you inherit falls outside of any of your exemptions, the Trustee most likely will claim the inheritance and distribute it to your creditors.

The good news is that if your right to inherit is acquired 181 days or longer after you filed your bankruptcy petition or the amount of your inheritance is within your exemptions, you may be able to keep everything you inherited. As always, you should contact a bankruptcy lawyer in your area for specific advice tailored to your individual circumstances.

I can’t file for bankruptcy – I’ll lose my house (car, boat, etc.)!

 

This has got to be the #1 misconception I hear on an almost daily basis from people. They often refuse to consider filing for bankruptcy relief because they believe, often incorrectly, that they will lose their home or car. This is not necessarily true and one should not refuse to consider bankruptcy as an option under the (oft-mistaken) belief that it always is true.  Let me explain.

For the purposes of this discussion, I am going to focus on the more frequently used chapter of bankruptcy law – Chapter 7. This is the chapter under which you get rid of your dischargeable debts (typically).  When you file for relief under Chapter 7 of the Bankruptcy Code, you (referred to as the ‘debtor’), are asking the Court to wipe out your unsecured debts and perhaps some or all of your secured debts as well.

Since the economy has taken such a big downturn, so many home mortgages that once were secured by the property no longer are secured, at least in part. For example, a home that used to be worth $400,000 that had an outstanding mortgage of $300,000 had a completely secured loan. There was $100,000 in equity in the house. The entire amount of the mortgage owed to the lender was secured by the value of the property. But….

Fast forward to 2011 . That same home now is worth only $200,000, yet the debtor still owes $250,000. That debt is partially unsecured since the debt exceeds the value of the property by $50,000 and there is no equity in the house. In fact, there is what is sometimes referred to as ‘negative equity’ or the house being ‘underwater.’ Essentially, you owe more than the house is worth. The difference between those 2 values is the amount by which your house is underwater.

Either way, if the equity in your home is less than the exemption amount you are entitled to use in your jurisdiction and you can afford to get and keep your house payments current, you likely get to wipe out your dischargeable debts AND keep your house. Isn’t that a relief?

Can I keep my tax refund if I file for bankruptcy?

Yes…. maybe. If you are planning to file for bankruptcy and have gotten (or expect to get) a tax refund, you should plan carefully so you can keep all or part of that refund.

If possible, you should file your tax return and get and spend your refund on permissible purposes prior to filing. Your refund is an asset, whether it’s cash in hand or you have the right to receive it in the future. If you wait until after filing for bankruptcy to file your return, or do not get your refund until after filing for bankruptcy, the Trustee appointed by the Bankruptcy Court may be able to take all or part of that refund to pay your creditors.

All is not necessarily lost, though. If the amount of your refund can be claimed in whole or in part as an exempt asset under the bankruptcy laws, you still could be able to keep the portion of that refund that is exempt.

Whether you should file for bankruptcy before or after filing your tax return or receiving your refund, what the “permissible purposes” you can spend your refund on and whether or not all or part of your refund is exempt depends on your particular facts and circumstances. You should speak with a bankruptcy attorney in your area for answers to these questions and more about your particular circumstances and how they impact your rights and obligations under the bankruptcy laws.