What can happen to your house in a chapter 7

A New Jerseychapter 7 trustee will only sell a debtor’s house, if the house has substantial value. It is very unlikely that a chapter 7 trustee will surprisingly sell a debtor’s house, because prior to the filing the debtor should know the house’s value and whether the trustee is permitted to sell the house.

The trustee is required to perform a liquidation analysis to determine if he can sell the debtor’s house. In general, the trustee will obtain the fair market value of the real estate from his source. The mortgage payoff(s) is subtracted from the value. Thereafter, 10% to 13% cost of sale is deducted. Subsequently, the debtor(s) co-owner’s $21,450 exemption is deducted. If there is a negative value after the deductions, the trustee is not permitted to sell the real estate. If there is a positive amount, the trustee may attempt to sell the house. However, the debtor may prevent the sale, by paying the trustee the amount that would have been received, if the house was sold. Under that scenario, the funds paid to the trustee, must come from a third party or from the debtor’s exempt funds. Please note that if a married couple files for bankruptcy protection, both of whom own the house, each spouse can apply their $21,450.00 exemption in the liquidation process.

Under virtually all circumstances, the filing of a chapter 7 bankruptcy case, stops a mortgage foreclosure action. However, if a debtor is behind with their mortgage payments, the bankruptcy filing will not permit the debtor to save their property from foreclosure. Typically, if the debtor is behind with payments, the mortgage company will file documents with the court requesting permission to pursue or commence the foreclosure action. The court will grant the mortgage company’s request, if the debtor is behind with their payments and the trustee is not interested in selling the house. If the mortgage company pursues the foreclosure action, the debtor may reside in the property through the entire foreclosure process, through the date of the sheriff’s sale.

A debtor is permitted to pursue a loan modification at any time before or after the bankruptcy filing and discharge. The debtor may pursue a loan modification after the case is discharged, through the foreclosure process and prior to the sheriff’s sale.

A discharge in a chapter 7, discharges (eliminates) the mortgage company’s right to collect any of the mortgage debt (money) from the debtors. However, if the debtor is behind with their mortgage payments, the mortgage company can pursue the foreclosure action for the purpose of taking the real estate only.

Robert Manchel is an expert bankruptcy lawyer in New Jersey, whose practice is limited to bankruptcy law. Robert Manchel can be reached at 1 (866) 503-5655 for a free consultaion.

What Can I Accomplish with a Chapter 13 bankruptcy filing.

A chapter 13 requires monthly trustee payments. The payments must be made for at least 36 months and no more than 60 months. The amount of the payments, must be no less than the debtor’s monthly disposable income.

Why would a person file a chapter 13 and not a chapter 7.  If a person does not meet the criteria for a chapter 7 and has too much monthly disposable income, he must pay back a portion of the debt. Also, an individual may wish to save a house or auto from repossession / foreclosure, which requires a monthly payment to a trustee. Additionally, a person may wish to pay a creditor through a chapter 13 plan, that is not dischargeable in a chapter 7. Furthermore, there is certain debt that may be dischargeable in a chapter 13 that is not dischargeable in a chapter 7, such as certain type of marital debt. Similar to a chapter 7, immediately upon the filing, no creditor may pursue the debtor for the collection of any debt.

A chapter 7 does not prevent repossession of an auto or foreclosure of a house if the person is behind with their monthly payments. A chapter 13 can prevent a repossession and a foreclosure action, by paying back the payment arrears, through the monthly trustee payments, while continuing to make regular monthly payments on the auto and/or house. When the chapter 13 is completed, the pre filing arrears should be cured and the property is no longer in danger of loss.

Also, in New Jersey, a chapter 13 bankruptcy can permanently strip away a second mortgage from the debtor’s house. This is called avoiding the lien. A debtor can avoid the second mortgage if the present market value of the house is less than the mortgage payoff of the first mortgage. ANew Jerseychapter 7 case does not permit second mortgage lien avoidance.

Based on various factors, a person may be able to pay their entire auto balance, plus a fair rate of interest, through a bankruptcy plan. This can reduce your monthly auto payment by lengthening the years of the financing. Also, under certain circumstances, a person can keep their auto by paying the value of the auto, plus a fair rate of interest, through the plan. This will allow a person to keep the auto and reduce the amount that is paid.

In addition to the above, a person may be able to eliminate all or a portion of their unsecured debt (ie. credit card debt), depending on their monthly disposable income and asset values.

The Law Offices of Robert Manchel limits their practice to bankruptcy law. Please contact the New Jersey bankruptcy attorney, Robert Manchel, at 1 (866) 503-5655, for bankruptcy information.

If a person meets the chapter 7 criteria, he can discharge all debt except the following type of debt: students loans, unless undue hardship; debt incurred by fraud; certain taxes; condo. fees due after the filing and before transfer of the property, etc.

Also, after a discharge, a judgment lien cannot attach to a house purchased after the discharge. Although a discharge does not eliminate the judgment lien from the debtor’s present house, in most cases, the lien may be reduced or eliminated, by filing a separate motion with the court, requesting same.

Typically, the debt that is discharged is unsecured debt, such as credit card debt and personal loans. Discharging a debt means that the creditor may never attempt to collect the money from the debtor, personally. Secured debt (i.e. auto. financing, mortgage) may be discharged, as well. However, if the monthly payment is not made after the filing, the creditor can apply to the state court to repossess or foreclose on the property and take the collateral, such as a house or car.

In addition to the discharge and the fresh start aspect of a chapter 7 case, the law permits the debtor to keep a certain amount of personal property and real estate. In the vast majority of cases, the court or trustee will not take your property, unless the value of any property is substantial. The trustee will only take an auto or a house, if the value is substantially more than the payoff of the mortgage / financing. If a debtor is able to fully exempt the equity of any property, the trustee or court will not sell the property.

Immediately upon the filing of any bankruptcy case no creditor may commence or pursue an action to collect a debt. This means that the following actions must stop immediately: wage garnishments; law suits for collection of money; avoid utility termination; require utility restoration; bank account levy; attempt to repossess automobiles; mortgage foreclosure actions; must restore license if suspended due to state surcharges. Bankruptcy only deals with money and money related issues.

Robert Manchel is an experienced New Jersey bankruptcy lawyer, whose practice is limited to bankruptcy law. Please call Robert Manchel at 1 (866) 503-5655 to discuss your situation.

In general, bankruptcy deals with debt that was incurred prior to the filing. In a chapter 7, the bankruptcy filing, has no effect on debt that was incurred after the filing. This means that if the debtor finances a car or uses a credit card after the filing, the creditor may pursue the debtor for the collection of the debt.

A debtor has the option of converting their chapter 13 case to a chapter 7. In the event that a debtor incurs debt after the filing of a chapter 13 and prior to the conversion, the debt is treated as though it was incurred prior the chapter 13 filing. This means if the debt is typically dischargeable in a 7, than the debt will be discharged.

Any debt incurred by a chapter 13 debtor during the bankruptcy plan, has the right to wait until the completion of the case to pursue the debtor for any default or funds due to the creditor. However, certain chapter 13 creditors who lent funds to the debtor, after the filing, have the right to receive payment by the trustee, through the bankruptcy plan.

If a chapter 13 debtor incurs tax debt after the filing, the taxing entity may require the debtor to pay the debt during the balance of the trustee payment plan. Also, if the chapter 13 debtor incurs domestic support debt after the filing, the court will require that the debtor cure this debt, prior to receiving a discharge.

In a New Jersey chapter 13 bankruptcy case, if the debtor incurs a consumer debt that is necessary for the debtors performance under the plan, such as auto financing, the creditor may file a claim. The claim must be handled and paid, in compliance with the manner in which claims of that type are normally paid. Please note that if a chapter 13 debtor wishes to borrow money, she must first request approval from the trustee or court.

If a debtor incurs a debt, in a chapter 13, that is not necessary for performance of the plan, and not for an after filing tax liability, and not for a domestic support obligation, the debtor and the creditor must agree to include the creditor’s claim in the bankruptcy case, in order to be paid by the trustee.

You may wish to contact the experienced New Jersey Chapter 7 and Chapter 13 Bankruptcy Lawyer, Robert Manchel at 1.866.503.5655.