Articles Tagged with “new jersey chapter 13”

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worried-30148__340-217x300In the case of In re Linear Electric Company, Inc., the Third Circuit was presented with whether construction liens filed by a supplier under New Jersey law were valid and enforceable against a contractor who filed a petition for Chapter 11 bankruptcy protection prior to when the construction liens were filed.

New Jersey’s Construction Lien Law, N.J.S.A. §2A:44A, et seq., provides contractors, subcontractors, and suppliers with the right of filing a lien for work, services, or materials provided pursuant to a written contract.   These protections are limited based on several factors including but not limited to whether the person or entity filing the construction lien is defined as a “claimant” under New Jersey’s Construction Lien law, what the unpaid portions of the contract price is, and compliance with strict time restrictions for filing the lien itself and a subsequent lawsuit based on the lien.

Under the Federal Bankruptcy Code, a debtor who files for bankruptcy is afforded the relief of an automatic stay that prevents most collection actions from continuing including acts to create, perfect, or enforce liens against property.  The protections of an automatic stay are broad and expansive but do include several expectations and limitations for certain debts.

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Our bankruptcy attorneys represent debtors and creditors in New Jersey in Chapter 7, 11, or 13 bankruptcies.   Recently, a Bankruptcy Court within the Third Circuit had the opportunity to clarify the cap placed on landlords’ bankruptcy claims under 11 U.S.C. 502(b)(6).

In the case of In re Filene’s Basement, LLC, the Bankruptcy Court reviewed the reach and application of 11 U.S.C. 502(b)(6) on a landlord’s potential claims.  The Code section provides a cap to a landlord’s claim for “rent reserved” as a result of a debtor’s termination of a lease.  The claim for “rent reserved” is capped at the greater amount of either one year of rent or fifteen percent of the remaining term of the lease – not to exceed three years.  The time to calculate this claim for damages is from the earlier date, either the date of the filing of the petition or the date on which the landlord repossesses the property and/or the tenant surrenders the property.  The landlord also retains a claim for unpaid rent prior to the earlier of those two dates.

This cap does not apply to all landlord claims as a result of a breach of a lease.  In fact, courts are typically faced with determining whether landlord claims should be subject to the cap.  The Bankruptcy Court in In re Filene’s Basement, LLC was faced with deciding whether the additional claims asserted by the landlord should be considered outside of the cap.  The claims were for: (1) the cost to remove furniture left by the tenant; and (2) the cost to remove a mechanic’s lien as a result of the tenant’s nonpayment to a contractor.  In reviewing these claims, the Court adopted the Ninth Circuit’s narrow interpretation of the 11 U.S.C. 506(b)(6) in In re El Toro Materials Co., Inc., which asked: “Assuming all other conditions remain constant, would the landlord have the same claim against the tenant if the tenant were to assume the lease rather than rejecting it?”

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stock-photo-19975411-underwater-home-mortgage-house-for-sale.jpgIf you have been served with a foreclosure complaint for failing to make payments on your mortgage, and you would like to keep your home, there are several options available to you: loan modifications, NJ HomeKeeper program, foreclosure mediation, and Chapter 13 bankruptcy. All these programs are available to New Jersey Homeowners, and our attorneys can help you pursue each.


Loan Modification

The Home Affordable Modification Program is a federal program which can lower your monthly mortgage payments and/or wrap arrearages into your loan enabling you to retain ownership of your home. It typically extends the length of your mortgage to forty year mortgage and lowers your interest rate. In order to be considered for a modification, you must submit an application to your lender accompanied by all required back up documentation. This includes a hardship affidavit, tax returns, pay stubs, bank statements, statement of expense, and a recent utility bill.

This can be a difficult process; the lender often requests the same documentation multiple times, or requests minor changes to the documents which have been submitted. Additionally, if time passes after the documents have been submitted without the lender’s review, the lender may require updated current documents be resubmitted. This can be frustrating for the homeowner who is concerned about losing their home. However, persistence can pay off.

NJ Homekeeper

The New Jersey HomeKeeper Program is a New Jersey program which provides financial assistance to homeowners who are unemployed or underemployed and are therefore at risk of losing their homes. To be eligible, you must demonstrate that you were making your mortgage payments until the time you became unemployed (or underemployed) and that the unemployment occurred not more than 36 months before the date of the Homekeeper application. If eligible, NJ Homekeepers can provide up to $48,000 over a period of 24 months which can be used to help make current payments or pay arrearages. The funds provided by NJ Homekeepers are a loan which must be paid back if the homeowner sells, refinances, transfers ownership or no longer occupies the property within 10 years.
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