While most of us look forward to a fresh financial start after bankruptcy, filing Chapter 7 or Chapter 13 doesn't necessarily eliminate all of your debt. Currently, Congress is considering proposed federal legislation to allow student loans in bankruptcy filings. But, they currently are not forgiven. Sometimes, neither are your back taxes.
Some people think if they have a hey-day and go on a spending spree just before filing for bankruptcy, they won't have to pay for those items. Guess what? Bankruptcy court officials aren't that stupid. It's called fraud.
]]> However, if you are honest and facing serious economic hardship, it won't take long for you to rebuild your credit score and get approved for a mortgage, a car loan, and even get new offers for credit cards.While filing Chapter 7 or 13 can certainly help you reduce or reorganize your financial situation, it does take sacrifice on your part. It could mean losing your house or living very frugally for a few years. But it can be done and allow your family peace of mind with your new economic sense and a fresh financial start.
Source: USA News & World Report, "5 Bankruptcy Myths Debunked," Susan Johnston, May 14, 2012
]]>The NJSTARS program, originally passed in 2004, allows students to receive a college degree from New Jersey's public institutions at a reduced cost. The state will now pay at least half of a student's tuition at community colleges. The tuition benefit from the enhanced program will pay $1,250 per semester. Unfortunately, student loan interest rates will double unless Congress enacts a new law by July 1. If not passed, the two would seem to cancel each other out and students would still be left footing the whole bill.
]]> In today's economy, our college students are graduating with hundreds of thousands of dollars in student loans and credit card debt, and no possibility of a job. In fact, student loan debt is estimated at more than $1 trillion. That's one-fifteenth of the national debt. Recent grads remain unemployed and deferments can't go on forever. Those interest rates will accrue and double the original unpaid principal amount.By halting the doubling of government tuition loan interest rates, and allowing individuals to roll their student loan debt into their personal bankruptcy debt relief or repayment plans, we can help stave off our children spiraling into a black hole of debt before they even get their first job.
Source: nj.com, "College students need tuition help," May 6, 2012
]]>One of the most common refrains I have heard is, "I'm not like the rest of your clients." It is far too easy to generalize and group together those that are forced to seek Federal Bankruptcy protections. There is no "like" to anything with our various clients. The truth of the matter is that the only common link amongst our clients is financial hardship. The need for bankruptcy protections does not descriminate along any common denominator.
Since the inception of this firm, we have had the honor to represent some of the finest individuals imaginable. While it is easy to imagine and label those seeking bankruptcy protections as out of control spenders with little contemplation of consequences, reality paints a vastly different picture. Those that were previously in a position of financial strength are suddenly vulnerable due to any number of variables. Loss of income/employment, illness and divorce are just a few of the circumstances that can suddenly arise and shake the very foundation of one's personal finances.
It is my firm belief that everyone knows an individual that has had to seek the relief of bankruptcy protections. Be it a friend, neighbor or family member, all of us have known someone who has faced financial obstacles that seem insurmountable. It is imperative to understand that these obstacles are rarely self created. There should never be a 'Scarlet Letter' labeled to those in need of assistance nor should there be any generalizations as to how they got there.
A daily review of current events displays famous actors, singers and athletes in need of bankruptcy relief. What isn't laid out in print are the millions of others trying to save their homes, address past due obligations and obtain fresh starts. These individuals share little in common other than a need to restore their personal finances. The Federal Bankruptcy Code offers a key to unlock the many doors closed with financial hardship. Those in need of the key do not fit into any convenient categories or stereotypes and they come from each and every walk of life.
]]>It all started two years ago when a debt collector left a message insinuating that her house would be repossessed if she didn't pay her debt. It is against the law for debt collectors to use scare tactics like implying that your property will be seized or make empty threats about lawsuits. Luckily, she saved the message. The message, as it turned out, was from a company called a debt buyer. Debt buyers purchase old debts from creditors who have given up trying to collect their money. Debt buyers often use illegal threatening tactics.
]]> The woman sent a cease and desist letter via certified mail to the company after the first phone call. Exactly 23 minutes after the company signed for the letter, another call was made to the woman. She answered the phone because the caller ID indicated that the call was coming from the local sheriff's department. In actuality, it was the debt buyer calling to harass her about the cease and desist letter. Another illegal tactic is a practice called "spoofing" in which the debt buyers manipulate caller ID information.The man on the line repeatedly called her vulgar names and made disgusting violent sexual threats. Again, the answering machine was recording. Feeling threatened and violated, the woman sued. The debt buyer company did not show up for court appearances and the judge awarded the record judgment, calling the company's actions malicious.
Source: abcnews.go.com, "W.Va. Woman Fights to Collect $10 Million from Debt Collectors," Elizabeth Leamy, April 25, 2012
]]>Foreclosure filings and sheriff auctions are up drastically compared to this time last year, but significantly below the numbers we saw in 2010. New Jersey was part of a $25 billion settlement between five large mortgage lenders and state and federal officials that were accused of "robo-signing" foreclosure paperwork and cutting corners to get people evicted quicker.
]]> While a state Superior Court judge allowed those lenders to begin foreclosure proceedings again, many were waiting for a settlement in a state's Supreme Court case regarding an East Orange property. The owners challenged their foreclosure because they said their lender didn't properly identify itself and only the mortgage servicer was identified in their notices. As a result, notices must now identify the actual lender of the mortgage loan, not just the mortgage servicer. Large banks will have tens of thousands of foreclosure notices to correct before they can continue moving forward with foreclosure proceedings.Chapter 13 bankruptcy is one way to avoid foreclosure, keep your house, stop repossession and garnishment of your wages while figuring out a comfortable payment plan.
Source: NorthJersey.com, "Foreclosure auctions on the rise in Bergen and Passaic," Kathleen Lynn, April 16, 2012
]]>According to a new study by the National Bureau of Economic Research, the number of personal bankruptcy filings jumps drastically at the beginning of year. Some cash-strapped families in Burlington County will finally be able to afford to pay for their Chapter 7 and Chapter 13 filing and legal fees with their tax return.
Since 2005 when the U.S. bankruptcy laws changed and the cost of legal and administrative fees spiked, many families have had to wait for debt relief until they could afford to pay for filing. The average cost to begin a fresh financial start went from $921 to $1,477. The U.S. Government Accountability Office attributes the increase in costs to new regulations requiring the verification of additional information to prevent bankruptcy abuse. While the number of bankruptcies has decreased overall since the 2005 change, the number of abuses has not.
]]> However, financial experts agree that raising costs to prevent abuse is counterintuitive and merely hurts the people who need bankruptcy protection and relief the most. When people are living check to check and barely keeping their head above water, they cannot pay the thousands of dollars required to achieve relief from their overwhelming debt until they get a windfall from something like a tax return.Source: usatoday.com, "Tax refunds being used to pay for bankruptcy filings," Christine Dugas, April 13, 2012
]]>During the loan modification process, our clients have informed of numerous shared experiences: excessive time spent submitting the same documentation over and over again, deadlines for definitive answers that never come about, scam agencies that make outrageous promises and subsequently take no action. The only certainty appears to be that nothing is certain with a proposed loan modification.
In New Jersey, the United States Federal Bankruptcy Court has taken provisions to attempt some assistance with this process. In August of 2011, The Federal Bankruptcy Court approved a process whereby clients can request a loan modification as part of their bankruptcy proceedings. At the inception of the request, the mortgagee assigns a representative to work directly with debtor's counsel in efforts to effectuate a loan modification. Thereafter, the mortgagee can obtain the requisite documentation needed to determine whether or not a loan modification is feasible and warranted.
While this process does not guarantee a loan modification will be granted by the lender, it does help avoid many of the complications associated with the process. To date, many of our clients have been able to retain homes that may have otherwise been lost if not for this new process.
I highly encourage individuals facing foreclosure to contact our office about this program. Upon so doing, we shall be able to determine whether or not the individual qualifies for this program and what steps should be taken to assure retention of the residence.
]]>While still in the testing phase, the new site hosted by the U.S. government's Consumer Financial Protection Bureau already contains tuition information from 7,500 universities and colleges. It's called Paying for College and is a cost comparison worksheet. You can plug in different schools, different grants and scholarships, and GI Bill benefits you may get from different schools and compare them. The website even gives you estimates on textbooks and your monthly student loan payment for 10 years after graduation. You can even get information on student loan default and graduation rates for each school.
]]> The Consumer Financial Protection Bureau developed the site as a way to make universities sand colleges more open about tuition, student fees and other costs. The bureau says that students don't always have the ability to realize the long-term impact of student loan debt. According the U.S. government, student loan debt now exceeds credit cards and auto loans to the tune of $1 trillion. The average graduate carries a student loan of about $25,000.Source: phillyburbs.com, "New site to calculate potential student loan debt," April 11, 2012
]]>The only reason you would pay a debt collector is if your debt has been reassigned or purchased. If your student loan, car loan or credit card debt has been purchased by another party, the ownership of that debt is transferred to the collector and they have a right to 100 percent of the payment. If the debt has merely been assigned to a debt collector, their job as the hired gun is to try and get you to pay back your debt. The collector gets a portion or percentage of whatever monies they collect on behalf of the creditor.
]]> If your credit debt has been sold, the original creditor should not be sending you collection notices, or making annoying calls. If you are not sure who the creditor is, ask. Whomever you ask should be able to tell you who the original creditor was and exactly how much you owe. If they are unable to do so, tell them to stop harassing you. If they do not have that simple information, you most likely will not have to pay that debt.Source: ehow.com, "Debt Collectors Vs. Creditors," Wanda Thibodeaux, April 17, 2011
]]>Some company's argue that your credit report may illustrate a pattern of poor habits in your personal life. They are also afraid that individuals with large credit or debt problems may be more apt to steal from the company. While the Fair Credit Reporting Act requires employers to get your written permission before running a background check -- you know that little box you check when filling out an application -- what job seeker is going to say no in this economy? The good news is employers have to provide a copy of the credit report to you, along with an explanation of why they didn't hire you. You also have a right to dispute the information included in your credit information.
]]> Under the proposed New Jersey bill, if an applicant believes they were rejected because of their credit score, they must prove that it was the sole reason for the decision. They would have the right to sue for damages and relief up to $5,000. In addition, employers cannot use bankruptcy against you. It is against federal law for employers to discriminate against job applicants just because they previously filed for Chapter 11 bankruptcy.Source: nj.com, "Bill before New Jersey legislature aims to protect job applicants from unfair credit checks," Joan Quigley, March 20, 2012
]]>More important, your attorney can get those harassing phone calls to stop by holding the bill collectors accountable for violating an automatic stay or discharge order. An attorney will contact debt collectors and let them know that any correspondence involving your debts must now be directed to the lawyer's office. Your bankruptcy attorney can also examine any correspondence you receive from creditors for any violations of the FDCPA
In addition to the legal action your attorney will take to protect you from the harassment, there is a code of conduct, a set of rules established in the FDCPA that must be followed by creditors and debt collectors.
]]> Do: They must identify themselves, give the name/address of the original creditor, notify you of your right to dispute the debt, provide a verification of the debt, and file a lawsuit in the proper venue (where you live or where you lived when you signed the contract).Do not: They must not call at crazy hours, continue to call after you've asked them not to, call repeatedly, call you at work, talk you after they know you've hired an attorney, misrepresent themselves, threaten arrest, use profane or abusive language, tell other people about your debt, or contact you using an public form of media like a web site or post card.
Source: Reuters, "Is Your Debt Collector Breaking the Law?" Cynthia Hsu, March 7, 2012
]]>The survey questions addressed the financial burden of medical care including paying bills, paying bills over time, and having bills that could not be paid at all. One in three respondents said they were in the midst of dealing with medical care financial burdens. One in five said they were having trouble paying their bills and 10 percent said they had medical bills that they could not pay at all.
]]> The youngest and the poorest were the ones having the most trouble paying their medical bills. As people get older, they reportedly have less difficulty paying their medical bills. The study did not draw any conclusion as to why people over 65 years of age had a lower chance of being in a family that had trouble paying their bills.Surprisingly, the statistics did not change much during the last five years. A smaller survey conducted in 2007 showed similar figures. Experts assumed that the number of people unable to pay their medical bills would have increased during this climate of recession, unemployment and the growing ranks of the uninsured. However, it is more likely that people have simply cut back on health care spending like preventative care, prescriptions, and dentist or doctor visits.
Source: The Washington Post, "1 in 5 US families say they struggle to pay medical bills; half say they can't pay a cent," March 6, 2012
]]>The National Association of Consumer Bankruptcy Attorneys is calling for the inclusion of student loan debt which now exceeds credit card debt for the first time ever. Because student loans fees and interest rates do not include limits, they are crippling those who have had to defer their payments over and over while struggling to secure gainful employment.
]]> Prior to 1976, both federal and private loans were allowed to be discharged under bankruptcy rules, but unless one can prove "undue hardship," they currently cannot be included in any debt relief avenues. The current proposed legislation would at least provide some relief for graduates with loans from private vendors like banks and Sallie Mae. Unfortunately, federal student loan debt is not covered in either bill.According to the NACBA, not only are students assuming more debt because of their student loans, but parents borrowing money to cover their children's student loans has also skyrocketed by 75 percent in the last few years. Allowing student loans to be discharged in bankruptcy proceedings, specifically Chapter 7 filings, would give graduates the opportunity to start with a clean slate once they finally secure gainful employment in the improving economy.
Source: Reuters, "Should student loans be discharged in bankruptcy?" Andrew Chow, Feb. 27, 2012
]]>The case, US Bank National Association v. Guillaume, is of interest to anyone concerned about how to stop foreclosure in New Jersey.
The court held that a bank seeking to foreclose on a residential mortgage has to give the name of the lender before the bank can take the property.
]]> The case arose out of the foreclosure of a home in East Orange. In May 2008, Emilio and Maryse Guillaume received a notice of intention to foreclose on their home. The notice gave the name of the mortgage servicer, but it did not contain the name of the lender that owned the loan.The original lender, Credit Suisse, assigned its interest in the loan to US Bank. US Bank later began foreclosure proceedings against the Guillaumes.
The court found, however, that the notice sent by the bank failed to comply with New Jersey's Fair Foreclosure Act. That Act clearly specifies that the actual lender's name and address must be included in order for the notice to the homeowner to be valid.
The court's reasoning was based on the importance of the Act in protecting homeowners. Without clarity about the identity of the lender, a homeowner could make an important mistake when trying to prevent foreclosure.
When facing foreclosure, the automatic stay in bankruptcy is one of the principal ways that people in need of debt relief can try to keep their house. Mortgage modification may be another option.
The court's ruling means struggling homeowners will be better able to consider these options.
Source: Bloomberg, "Lenders Must Be Named in Foreclosures, New Jersey Court Rules," David Voreacos and David McLaughlin, Feb. 27, 2012.
]]>State and federal governments went up against the mortgage companies for these abuses and, earlier this month, they reached a record $25 billion settlement with five of the nation's largest banks. $837 million of that settlement is earmarked for New Jersey, the bulk of which is designed to offer debt relief to struggling homeowners.
]]> Most of the settlement money will be used to lower the principal on underwater mortgages. It is estimated that around 300,000 New Jersey residents owe more on their mortgages than their homes are worth. The refinancing will result in lower monthly payments that would allow some homeowners to be able to afford to keep their homes.The settlement will also provide $2,000 to homeowners who were hurt by improper bank behavior during the so-called "robo-signing" scandal.
Some Say Settlement Doesn't Go Far Enough
Although the settlement certainly has its champions, it is drawing ire from consumer advocates who say it does not go far enough.
For example, they say that the penalties for robo-signing, forging foreclosure documents and other bad deeds by the banks are not nearly high enough. They argue that $2,000 is paltry compensation for having been the victim of improper foreclosure. Many think that the bad actors should have been given jail time for their fraudulent behavior.
Further, although refinancing will be a boon for those homeowners who can get it, not everyone will qualify. By some estimates, more than 90 percent of underwater homeowners won't be eligible to have their principal reduced. Some, however, will be eligible to refinance at a lower interest rate.
The general consensus seems to be that the settlement is a step in the right direction, albeit one that is not quite large enough.
Source: NorthJersey.com, "NJ Homeowners Due $837M in Foreclosure Settlement Between Feds, Big Banks," Kathleen Lynn, Feb. 9, 2012.
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