Articles Tagged with bankruptcy

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debt-1157824__340In a Chapter 7 bankruptcy, a trustee will be appointed to liquidate the assets of a debtor’s estate to satisfy the creditors of the debtor.  Therefore, it is important to understand that if you file a Chapter 7 bankruptcy, all of your assets including your house may sold to satisfy your creditors.  However, the Federal Bankruptcy Code, U.S. Code Title 11, provides ways for debtors to protect their most important and essential assets through a variety of exemptions.  Our New Jersey bankruptcy attorneys use these exemptions to the full extent of the law to protect your assets while helping you lift the crushing burden of debt.

The Federal Bankruptcy exemptions are referenced in 11 U.S.C. 522(d)(1)-(11).  These exemptions cover a variety of assets which you may own and want to protect from being sold by the trustee, ranging from your home to life insurance payments.  However, these exemptions do not provide an absolute protection to your assets and are limited in their use.

Probably the most important asset and the one that people are most concerned with is their home.  The Federal Bankruptcy Code provides for an exemption for your primary residence under 11 U.S.C. 522(d)(1), (5).  The exemption provides protection up to $23,675 in New Jersey.  This amount is doubled if you are filing jointly with your spouse for a total of $47,350.  This exemption can be used to exempt a portion of the equity in your home.

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The health, stability, and strength of a nation’s economy is directly linked to its banking system. The health, stability, and strength of a nation’s banking system is directly related to a fair and accurate credit reporting system. Congress realized how damaging inaccurate credit reports can directly impair the efficiency of the banking system and therefore passed the Fair Credit Reporting Act (“FCRA”) in 1970. This provides strong protection for New Jersey residents in financial difficulty.

The Fair Credit Reporting Act was enacted to eliminate abusive debt collection practices that contributed to personal bankruptcies, martial instability, loss of jobs, and invasions of an individual’s privacy. The Act’s purpose is to ensure fair debt collection.

The Fair Credit Reporting Act prohibits debt collectors from communicating with a debtor, in connection with a debt, if the debt collector knows the consumer is represented by an attorney. The FDCPA specifically prohibits debt collectors from engaging in any harassing, oppressive, or abuse conduct in connection with debt collection. For example, repeatedly calling a person with the intent to annoy, abuse, or harass that person has been found to violate the act.

The act also prohibits debt collectors from using any false, deceptive, or misleading representation to collect a debt. For example, a misrepresentation of the legal status of the debt or use of any false representation to collect the debt is a violation of the FDCPA.
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cramdownNew Jersey homeowners who file for chapter 13 bankruptcy protection may be able to cease paying their second mortgages if their homes are “underwater.”

When the amount that a homeowner owes on her mortgages is more than the home is worth it is considered “underwater.” Relief is available to New Jersey “underwater” homeowners through a Chapter 13 bankruptcy “cram-down” or “strip-off.” New Jersey homeowners can petition the United States Bankruptcy Court and request that their mortgages be cram-downed to the equity in the homes and the remainder of the loans stripped-off.

This means that homeowners who have multiple mortgages on their primary residence can take their mortgages and make them unsecured debt, thereby stripping-off all junior liens. This process applies to all subsequent mortgages as well. Therefore, second and third mortgages, and so on, would no longer operate as a lien on homes. Since it is then unsecured debt only a fraction will be repaid, and the remainder will be eliminated altogether.