1. CHAPTER 7
Single mom. Not receiving any child support. Makes about $3,000.00 per month. Has virtually no assets other than personal possessions and an old car. Her debts consist mostly of credit cards and unpaid rent to her former landlord. The landlord has a judgment against her and has just started to garnish her wages. She simply cannot afford to have her wages garnished.
We filed a Chapter 7 Bankruptcy for her. The garnishment was stopped and her debts were discharged. She got her Fresh Start!
2. CHAPTER 7
Husband and wife recently retired. Their retirement income totals about $50,000.00 per year. They had a home worth about $575,000.00, but they had 3 mortgages totaling over $588,000.00. Their monthly mortgage payments and property taxes totaled about $4,000.00 and they defaulted on their payments. The home was sold at Sheriff’s Sale about one month before our appointment. The first mortgagee now owns the property. The other mortgages which total about $100,000.00 remain unpaid and the debts are in collection. Other debts include over $75,000.00 in credit cards and personal debts and an old IRS Income Tax debt of about $35,000.00.
We filed a Chapter 7 Bankruptcy for them. All of their debts were discharged, including their tax debt. They got their Fresh Start!
3. CHAPTER 13 WITH MORTGAGE MODIFICATION, STRIPOFF OF SECOND MORTGAGE AND CREDIT CARD RELIEF
Husband and wife and 3 kids. They own a home and have 2 mortgages. They have arrears on their first mortgage. The value of the home is less than the amount due on the first mortgage. They owe over $46,000.00 on the second mortgage. They also have over $70,000.00 in credit card and medical bills. He is working, she is disabled.
RESULTS:We filed a Chapter 13 for them. The first mortgage was modified. The arrears were included in the payment and the interest rate was reduced. The second mortgage was “stripped off” (meaning it was no longer a lien on the house) and it was made a part of the other unsecured debts. They will pay only $165.00 a month for 3 years. After that, the balance of their debt (over $130,000.00) is wiped out and they’ll only have their first mortgage to pay!
4. LOAN WORKOUT:
Husband and wife owned and operated a farm. The clients had several mortgage loans. They have arrears on their first mortgage. The bank was owed over $1,500,000.00 and the property taxes were a year behind. Regular monthly mortgage payments on the loans were about $11,000.00 and one of the mortgages had come due and the bank was threatening to foreclose.
RESULTS:We were able to renegotiate the entire loan package and reduce the payments by almost $2,000.00 per month and extend the loans’ maturity dates. We also got the bank to lend enough money to catch up with the back taxes. The clients still have their farm.
5. CHAPTER 13 WITH MORTGAGE MODIFICATION AND STRIPOFF OF SECOND MORTGAGE:
Single woman. Works hard and wants to keep her home. She doesn’t have much credit card debt but she has 2 mortgages. The value of her home is less than the amount due on the first mortgage. Her second mortgage totals $78,000.00, with monthly payments of $750.00 and a rate of 11.25%. The payment on her first mortgage is $3,000.00 per month. Her income is not enough to pay both mortgages and still eat.
We filed a Chapter 13 and we “stripped off” her second mortgage (removed the lien against the house). She is only paying $235.00 per month for 4 years. After which, the balance due to the second mortgage will be discharged (wiped out). Additionally, her mortgage was modified and her new payment is $1,500.00 per month for the next 5 years (1/2 of the original amount), after which, it will gradually increase for 2 years until the payment becomes fixed at about $1,800.00. The loan was extended to be a 40 year loan!
6. DISCHARGE OF TAX DEBT WITH CHAPTER 7: SITUATION:
Divorced woman in her 50’s with very limited income, owed the IRS and the State of New Jersey approximately $50,000.00 for income taxes, penalties and interest for 10 prior years. She filed her tax returns more than 3 years ago.
We were able to discharge all of the tax debt except for the last couple of years. She finally has the IRS and State off her back!
7. CREATING EQUITY IN HOME BY NEGOTIATION AND LIEN REMOVAL AFTER CHAPTER 7 CASE:
Couple in their 60’s filed a Chapter 7 and got their fresh start. They were able to keep their home because their equity was less than their exemption. They had a $50,000.00 second mortgage and a $10,000.00 judgment lien on their home. Now they wanted to sell their home.
I was able to negotiate a reduction of $30,000.00 with their 2nd mortgage lender. Then I filed a motion to avoid and cancel the judgment lien, so the lien was removed and no longer had to be paid at closing. My client will walk away from the closing $40,000.00 richer!
8. DISCHARGE OF STUDENT LOAN DEBT WITH CHAPTER 7:
Single man in his 30’s. He is an attorney, but he is on permanent Social Security/Disability and cannot retain employment due to his disability. His student loans exceeded $250,000.00.
I filed a Complaint to Discharge his student loans. We showed that these loans should be discharged as an undue hardship. All of his Student Loan debt was Discharged!
NOTE:While Student Loans are difficult to discharge, it can be done under certain circumstances. It is not impossible!
9. CHAPTER 11 WITH MORTGAGE MODIFICATION AND CREDIT CARD RELIEF:
Single, middle aged man owns a 2 family home. The property is worth significantly less than the amount owed on his mortgage. The mortgage is in foreclosure. He wants to keep the property. He also has significant credit card debt.
Because it is a 2 family property, we have the right to modify the mortgage. In this case, we reduced the amount of the mortgage down to the value of the property (this is called a strip down). Then we reduced the interest rate down to current mortgage rates. Then we amortized that debt over 10 years. We then added the balance due on the mortgage (the unsecured part) to the other unsecured claims and paid only about 5% of that entire debt via quarterly payments over 5 years.
NOTE: We used Chapter 11 in this case because it allows us to extend plan payments over a longer time period than Chapter 13, which limits amortization of modified loans to 5 years unless the lender agrees to a longer term.
10. INHERITED IRA:
In 2014, The United States Supreme Court held that an Inherited IRA was not an exempt asset and the funds in the IRA were subject to seizure by a Chapter 7 Trustee.
I represented a single man whose mother had passed away leaving him over $100,000.00 in her IRA. I took the position that under New Jersey Law, this Inherited IRA was not property of his bankruptcy estate and therefore those funds could not be seized by the Trustee. The Bankruptcy Court agreed with my position.
This was the first case of its kind in New Jersey. Given the aging population, and the amount of money now being held in IRA’s,I believe that this case will become extremely important in the coming years.
11. DEBT SETTLEMENT:
My client was a widow in her 60’s. Her husband had recently passed away and she had over $78,000.00 in credit card debt in her name. Her income was quite low, but she had investment accounts totaling over $400,000.00 in addition to IRA accounts.
Her minimum monthly credit card payments totaled more than her monthly income and she needed help.
She was not a good candidate for bankruptcy because of her large investment portfolio. However, she was an excellent candidate for debt settlement.
I was able to reduce the amount she was required to pay from $78,730.00 to $21,405.00. She saved $57,325.00, and has no monthly credit card payments.
Debt settlement may result in “phantom income”. In some cases, the amount of debt forgiven by the creditors will constitute taxable income. The advice of a tax professional should be obtained before negotiation is undertaken.
These results are typical, but since every situation is different, the results will vary.