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Saving Your Home from Foreclosure with a Bankruptcy Petition

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Is It Possible? Is It in Your Best Interests?

Saving Your Home from Foreclosure with a Bankruptcy PetitionThough mortgage debt is not the most common cause of a bankruptcy filing, it’s not unusual for a bankruptcy petition to include property that is in or near foreclosure. If you are struggling to meet your financial obligations and you have a substantial mortgage, you may be wondering if you can get the protection of the bankruptcy laws and still keep your home. While it may be possible, a better question to ask may be whether it’s in your best interest to keep your home.

Using a Bankruptcy Filing to Avoid Foreclosure

It’s important to understand that a bankruptcy proceeding won’t necessarily make a foreclosure proceeding go away. Technically, it will only suspend the process. There’s an “automatic stay” that goes into effect when you file for bankruptcy, prohibiting creditors from calling, writing or taking legal action (other than through the bankruptcy proceeding) while the stay remains in effect.

It’s also important to understand that if you’re far behind on your mortgage, you cannot discharge the mortgage debt in Chapter 7 and keep your home. While you may be able to exempt your home from inclusion in the bankruptcy estate (which means it can’t be sold by the court to satisfy your creditors), the lien on the property will not be extinguished by the bankruptcy proceeding. Your lender can still execute the lien and seek to repossess the property, unless you work out new payment arrangements.

Typically, the best way to use bankruptcy to avoid foreclosure is through Chapter 13. This allows you to reorganize your finances while giving you up to five years to repay the mortgage arrears. You must, however, make all agreed payments in a timely manner or the Chapter 13 may be terminated.

Before you file a bankruptcy petition, though, ask yourself if it’s in your best interest to keep the house. Can you really afford it? How much equity do you have in the house? If you think you think a Chapter 7 or Chapter 13 is right for you, contact our office for a free consultation.

Contact Our Offices

At the Law Office of Andrew B. Finberg, LLC, we bring comprehensive bankruptcy counsel to individuals in Burlington, Camden and Gloucester counties in New Jersey. To schedule an appointment, call our office at 856-988-9055 (toll-free at 866-721-7269) or contact us online.

Fraudulent Transfers in a Bankruptcy Proceeding

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What to Do When You Have Been Accused of Wrongfully Disposing of Assets

Fraudulent Transfers in a Bankruptcy ProceedingThe bankruptcy laws were enacted to give debtors a “fresh start”, and to ensure that petitioners were not rendered destitute. Accordingly, even in a Chapter 7, where you can permanently discharge debt, you are allowed to keep a certain amount of your property. You may have a desire to minimize the impact of a bankruptcy filing by giving or transferring property to another person immediately before or even after you file your petition. It’s rarely a good idea, unless you can show that you sold the assets for fair market value. Otherwise, it will be considered a fraudulent transfer.

If the trustee or a creditor suspects that you wrongfully transferred assets for the purpose of keeping them out of your bankruptcy estate, you may face legal action within the bankruptcy, through what’s known as an adversary proceeding. If that happens, here’s what you should do:

  • Recognize that it’s a serious matter?Hire an experienced attorney to protect your rights. Gather any documents you have relating to the transaction, showing when the transfer was made, why it was made and what the fair market value of the item was when you sold it.
  • Understand that fraud requires intent, so a fraudulent transfer must have been done with knowledge (or reason to know). Look for evidence that show that you didn’t know of the transfer, that you didn’t know it was wrongful, or that you had no intent to keep assets away from your creditors.

Contact Our Offices

At the Law Office of Andrew B. Finberg, LLC, we bring comprehensive bankruptcy counsel to individuals in Burlington, Camden and Gloucester counties in New Jersey. To schedule an appointment, call our office at 856-988-9055 (toll-free at 866-721-7269) or contact us online.

Can You File Chapter 7 without Taking the Means Test?

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The Exemptions Allowed under the Bankruptcy Code

Can You File Chapter 7 without Taking the Means Test?The 2005 revisions to the American bankruptcy laws imposed a new hurdle that must be cleared before you can seek to discharge debts under Chapter 7. As a general rule, you must submit to a means test, demonstrating that you lack the resources to repay your creditors in a reorganization under chapter 13. Unbeknownst to most people, though, there are some situations where you don’t have to be subjected to the means test.

  • The reserve or national guard exemption?If you have been or are in the National Guard or have served as a reserve soldier in any branch of the armed forces and were called to active duty after September 11, 2001, you can ask for an exemption from the means test
  • The disabled veteran exemption?Under certain circumstances, you can waive the means test if you are a disabled veteran. Your disability must be at least 30% and the disability must stem from your military duty. In addition, you must have been discharged from active duty because of the disability.
  • The business debt exemption (also known as the “business debt loophole”?Under the bankruptcy laws, the means test is only required when a debtor’s arrearages are “primarily” consumer debt. There’s actually a box on the first page of the means test that asks if most of your debts are business debts. If you indicate that they are, you don’t have to complete the rest of the form.

It is important to understand, though, that Congress did not define what “primarily” means. In practice, though, most courts have simply looked at whether you have more consumer debt or more business debt. If the bulk of your debt is business debt, you don’t have to qualify for Chapter 7 by taking the means test.

There may also be questions regarding whether debt is business or personal. Some debts, such as a mortgage, will typically be seen as personal or consumer debt. A car, though, may be either a business debt or a personal debt, based on how it’s used.

Contact Our Offices

At the Law Office of Andrew B. Finberg, LLC, we bring comprehensive bankruptcy counsel to individuals in Burlington, Camden and Gloucester counties in New Jersey. To schedule an appointment, call our office at 856-988-9055 (toll-free at 866-721-7269) or contact us online.

The Income Calculation for the Chapter 7 Means Test

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What Is Included in the Determination of Income When You Want to Discharge Debt?

The Income Calculation for the Chapter 7 Means TestUnder the current bankruptcy laws, to qualify to permanently discharge debts in a Chapter 7 proceeding, you must undergo what is known as the “means test.” The purpose of the means test is to establish whether you have disposable income or other resources to repay your creditors in a reorganization under chapter 13. How is your income calculated for purposes of the means test? What’s included and how does the court determine if you qualify?

Determining “Current Monthly Income”

The initial step in the means test is to identify what is referred to as “current monthly income.” To make this calculation, the bankruptcy court will gather information on all forms of income over a six month period, including:

  • Earned income?wages, salary, commissions and bonuses
  • Investment income?dividends and interest payments
  • Self-employment or business income
  • Income from retirement plans?IRAs, 401 (k)s, annuities, deferred compensation, and pension plans
  • Some types of Disability income

As a general rule, the court will total all income for the six month period and divide it by six. The court will then look at the median income in your state (for a household with a similar size). If your current monthly income falls below the median, you will qualify to seek the discharge of debts under Chapter 7.

Just because your income exceeds the median, though, does not necessarily mean you cannot file under Chapter 7. The court will then need to establish how much “disposable income” you have, a far more complex process.

Contact Our Offices

At the Law Office of Andrew B. Finberg, LLC, we bring comprehensive bankruptcy counsel to individuals in Burlington, Camden and Gloucester counties in New Jersey. To schedule an appointment, call our office at 856-988-9055 (toll-free at 866-721-7269) or contact us online.

Your Best Bankruptcy Option When You Have Unmanageable Student Loan Debt

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When Can You Get Relief in Bankruptcy from Student Loan Debt?

Unmanageable Student Loan DebtHave you racked up a substantial amount of student loan debt, only to find a really tough job market when you graduated? Even if you’ve been able to find some work, chances are good that your student loan obligations take a significant portion of your disposable income, making it difficult to meet your other needs. You may have considered filing bankruptcy, just so that you can get a fresh start, only to hear that student loans cannot be discharged in bankruptcy. Don’t dismay?you may still have options.

The Discharge of Student Loan Payments in Bankruptcy

As a general principle, student loan debt cannot be permanently discharged through a Chapter 7 bankruptcy filing. There is, however, no prohibition on seeking to restructure or reorganize your debt in Chapter 13. If you choose this option, your student loan arrearages will be treated as “non-priority, unsecured debt,” much like a credit card bill. When you create a reorganization plan in Chapter 13, your student loan creditors will be on equal footing with all other unsecured creditors. It’s important to understand, though, that Chapter 13 reorganization will not wipe out your student loan debt. If there’s any balance still due at the end of the bankruptcy period, you will still be responsible for it.

The Availability of the Hardship Exception

There is an exception to the general rule banning discharge of a student loan obligation. If you can demonstrate that making the payments will cause an undue hardship on you and your family, you may be able to extinguish some or all of the debt. Typically, that requires that you show:

  • You cannot maintain a minimum standard of living for you and your dependents if required to pay your student loans
  • Your current financial condition is expected to last through all or most of the repayment period, and
  • You have made a good faith effort to repay your loans

Contact Our Offices

At the Law Office of Andrew B. Finberg, LLC, we bring comprehensive bankruptcy counsel to individuals in Burlington, Camden and Gloucester counties in New Jersey. To schedule an appointment, call our office at 856-988-9055 (toll-free at 866-721-7269) or contact us online.

Legal Actions That Are Unaffected by a Bankruptcy Filing

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The Automatic Stay Does Not Suspend All Legal Proceedings

Unaffected by a Bankruptcy FilingWhen you seek protection against creditors by filing a personal bankruptcy petition, you immediately receive the protections afforded by the automatic stay. That prohibits your creditors from calling, writing or taking legal action against you in an effort to collect the debt (other than through the bankruptcy proceeding). Any lawsuits will be suspended and no new legal action can be initiated.

The automatic stay, however, does not apply to all types of legal action. Among the legal matters not affected by the automatic stay are:

  • Criminal proceedings?If you have been charged with embezzlement, theft or other crimes, those prosecutions will not be suspended by a bankruptcy filing. In addition, you typically cannot seek to discharge a restitution order or any debt incurred through illegal activity.
  • Most family law matters?Child support and alimony obligations cannot be discharged in a bankruptcy proceeding, though can use Chapter 13 to reorganize or restructure a property settlement.

It’s also important to understand that the automatic stay may be lifted with respect to certain creditors, if the court determines that doing so is in the interests of justice. For example, a creditor who stands to lose a lot of money if a property foreclosure is suspended may successfully petition the court to remove the stay before completion of the bankruptcy process. Additionally, if a creditor has initiated an eviction before a bankruptcy petition was filed, the court may allow the eviction proceeding to continue, if doing so is in the interests of justice. A government agency may also petition the bankruptcy court for removal of the stay to recover losses.

Contact Our Offices

At the Law Office of Andrew B. Finberg, LLC, we bring comprehensive bankruptcy counsel to individuals in Burlington, Camden and Gloucester counties in New Jersey. To schedule an appointment, call our office at 856-988-9055 (toll-free at 866-721-7269) or contact us online.

Discharging Credit Card Debt in Bankruptcy

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Avoiding Concerns about the Fraudulent Use of Credit before a Bankruptcy Filing

Debt in BankruptcyUnmanageable credit card debt commonly contributes to a decision to seek protection under the bankruptcy laws. Because credit card debt is an unsecured obligation, you can permanently discharge credit card bills under Chapter 7. You must be careful, though, that you don’t engage in activity prior to your bankruptcy filing that may be construed as fraud. If there’s evidence that you incurred credit card debt knowing that you planned to discharge the debt in bankruptcy, that can be considered fraud. At a minimum, your bankruptcy petition may be disallowed. There could, however, be more serious consequences.

As a practical matter, it’s extremely difficult for a credit card company to show that you engaged in fraud. There would need to be some evidence that you were planning or considering filing for bankruptcy when you charged items. There are, though, actions that the bankruptcy court will carefully examine when assessing whether you engaged in bankruptcy/credit card fraud:

  • Luxury purchases within 90 days of your bankruptcy petition ? So-called luxury purchases in excess of $600 within three months prior to your petition will be subject to greater scrutiny. This includes any item not “reasonably necessary” to support you and your dependents. Food, shelter and utilities, for example, would generally not be considered luxury items. Jewelry, electronics, vacations, vehicles and designer clothes generally would be luxury items.
  • Cash advances taken within 70 days of filing ? Such advances over $925 will be presumed not to be dischargeable. Accordingly, you must provide evidence that you intend to repay the cash advance.

Contact Our Offices

At the Law Office of Andrew B. Finberg, LLC, we bring comprehensive bankruptcy counsel to individuals in Burlington, Camden and Gloucester counties in New Jersey. To schedule an appointment, call our office at 856-988-9055 (toll-free at 866-721-7269) or contact us online.

Can You File for Bankruptcy More than Once?

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Bankruptcy

The U.S. bankruptcy laws were enacted to help people get a fresh financial start, granting debtors some relief from the incessant phone calls, letters and legal action that typically accompany efforts to collect a debt. As a part of the bankruptcy process, debtors are required to undergo financial counseling, a process that often prevents further financial difficulties. But what if the unexpected happens again? What if you suffer an injury that keeps you from working or you develop medical problems that require significant treatment? Can you file for bankruptcy a second time? If so, are there restrictions on when you can file?

You Have the Right to File Multiple Bankruptcy Petitions

First, the good news?there’s no limit to the number of times you can file for bankruptcy protection. Each subsequent filing will, however, require that you submit to a “means test” to determine whether you qualify to discharge debts in Chapter 7 or must opt to restructure your debt in Chapter 13.

There are, however, time restrictions related to the filing of a subsequent bankruptcy petition. They are essentially “waiting periods,” prohibiting you from file two bankruptcies too closely together. If you fail to wait the required amount of time, you may be prevented from discharging debts, which can make the filing ineffective.

The waiting period is contingent on the type of bankruptcy you previously filed and the type you seek to file in your subsequent petition. If your first filing was in Chapter 7 and you want to file another Chapter 7 petition, you must wait 8 years from the date of the first filing. If, instead, you filed a Chapter 7, but now want to file a Chapter 13, you need only wait four years.

However, if your first petition was in Chapter 13 and you want to seek protection again under Chapter 13, there’s only a two year waiting period. A Chapter 13 followed by a Chapter 7 carries a 6 year waiting period.

Contact Our Offices

At the Law Office of Andrew B. Finberg, LLC, we bring comprehensive bankruptcy counsel to individuals in Burlington, Camden and Gloucester counties in New Jersey. To schedule an appointment, call our office at 856-988-9055 (toll-free at 866-721-7269) or contact us online.

The Benefit of Filing Bankruptcy Quickly if Your Income Has Increased or Is About To

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To qualify for Chapter 7 “straight bankruptcy” you must pass the means test. Otherwise you would likely end up in the much more time-consuming and expensive Chapter 13 “adjustment of debts.” Chapter 13 is great if you need its benefits, but not if you are forced into it and would prefer the much simpler fresh financial start of Chapter 7.

Taking Advantage of the Odd Means Test Definition of “Income”

The key to the means test for our purposes here is the odd and very precise way it defines “income.” Understanding this definition enables us to use it to your benefit for passing the means test. As stated in a very recent blog post, “income” is calculated by combining all income and funds that you received from virtually any sources (except through Social Security) during the last 6 FULL calendar months before the date you file bankruptcy, then doubling that amount.
So the means test does not count as “income” the money you received during the partial month that your bankruptcy case is filed?for example, if your case is filed on October 26, whatever money you receive from October 1 through 26 is not counted. Also, any future anticipated money is also not counted?in the above example, any money received after October 26 is not counted.

These limitations on the definition of “income” can benefit you in the following scenarios.

Lump Sum Just Received or About to Be Received

If in the last few days you have received an unusual sum of money, or expect to do so shortly, you should consider seeing an attorney about filing bankruptcy right away. That lump sum payment may push your “income” above the published median income for your state and family size, but only if that lump sum is counted. It would not be counted if you filed bankruptcy either during the same calendar month that you received that lump sum, or even before you received it.

Anticipated Increase in Income

Your income of the last 6 months may have been below median income for your state and family size?for example if you were unemployed during parts of that 6 months?but you may expect an increase in income soon?if you are about to start a new job or one that pays more. If this applies to you, you should consider seeing an attorney about filing bankruptcy right away, before the increased income starts being counted for the means test.

Recent Increase in Income

Even if you have already started a new job or one with higher income, it may not be too late to pass the means test. Because “income” is measured based on the last six full calendar months?essentially an averaging of the money you received during that period?a higher “income” during the last few months may well be sufficiently offset by the lower income of the first few months.

Conclusion

If you live in New Jersey, the Law Office of Andrew B. Finberg can apply the means test to your unique situation and advise you about the best way to pass it. At a free, no-obligation initial consultation meeting we will review your options with you. Acting quickly can be crucial, so please call us at (856) 208-4152 to schedule it. Or use this contact form instead.

Thank you for visiting our website. We look forward to serving you.

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