CHAPTER 7
1. STOP GARNISHMENT AND RECEIVE THAT FRESH START:
SITUATION:
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.
RESULTS:
We filed a Chapter 7 Bankruptcy for her. The garnishment was stopped and her debts were discharged. She got her Fresh Start!
2. DISCHARGE OF PERSONAL, CREDIT CARD, AND TAX DEBTS:
SITUATION:
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.
RESULTS:
We filed a Chapter 7 Bankruptcy for them. All of their debts were discharged, including their tax debt. They got their Fresh Start!
3. DISCHARGE OF TAX DEBT:
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.
RESULTS:
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!
4. DISCHARGE OF STUDENT LOAN DEBT:
SITUATION:
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.
RESULTS:
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!
5. INHERITED IRA IS NOT PROPERTY OF THE ESTATE UNDER STATE LAW:
SITUATION:
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.
RESULTS: 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.
6. DISCHARGE UNSECURED NONPRIORITY DEBTS AND GET THAT FRESH START:
SITUATION: Single dad of an 11-year-old dependent fell on hard times after his business failed. The Debtor’s income dropped approximately $30,000 from the year before and he had to sell his home. The Debtor was being sued and simply could not keep up with the bills.
RESULTS: The Debtor discharged about $100,000 in unsecured, nonpriority debt and was no longer hounded by lawsuit creditors. This Debtor earned his Fresh Start and could breathe again.
7. DISCHARGE OF MEDICAL DEBT, CREDIT CAR DEBT, AND CLUB ASSOCIATION DUES:
SITUATION: Joint Chapter 7 Debtors had a mortgage, one car loan, and no dependents. They had approximately $30,000 in credit card debt, medical debt, and club association dues. The club association dues collector was very aggressive and sued the Debtors prior to the filing of their case. Even after I filed the case, the creditor tried to collect from the Debtors. Such action blatantly violated the automatic stay. I sent the creditor a letter, immediately demanding they stop collection or litigation would ensue. The creditor promptly removed charges from their records. The Debtors continued to pay their mortgage and kept their home.
RESULTS: The Debtors successfully discharged all $30,000 in unsecured nonpriority debts, thus freeing up extra funds to give them a fighting chance to keep their home!
8. WHEN YOU CANNOT WORK, DISCHARGE STRESSFUL CREDIT CARD DEBT:
SITUATION:
The Debtor, a 44-year-old man, suffered a stroke and had heart bypass surgery before coming to see me. The Debtor owned neither a car, nor a home. His only income was social security. The Debtor’s primary debts were credit cards.
RESULTS:
While the Debtor did not have exceptional credit card debt, the Debtor could not tolerate the creditor phone calls. We successfully discharged that debt and the Debtor was given an opportunity to heal in peace.
9. STOP GARNISHMENTS AND DISCHARGE UNSECURED DEBT:
SITUATION:
This Debtor had approximately $65,000 in credit card debt. While the Debtor owned a judgment in the sum of $500,000, it was unfortunately, uncollectible. Numerous creditors sued this Debtor and judgment was entered in two of the lawsuits against the Debtor. The Debtor’s wages were being garnished. This is what prompted him to come see me.
RESULTS:
While, the filing of the bankruptcy stopped all pending proceedings against the Debtor, one of the garnishing creditors continued to garnish this Debtor’s wages. I immediately demanded that the creditor desist and promptly return any wrongly-attained funds. The creditor timely complied. The Debtor successfully obtained a discharge of his unsecured debts and was no longer harassed by his creditors.
10. DISCHARGE DEBTS INCURRED FOLLOWING JOB LOSS:
SITUATION: Prior to losing her job, the Debtor worked full-time. After losing her job, the Debtor was unemployed for nearly a year. When she ultimately gained employment, it was only on a part-time basis. In addition to her part-time income, the Debtor was also taking home social security. Unfortunately, the income and social security were not enough to pay back her $50,000 in credit card debt and $11,000 in tax debt. Adding to her financial difficulties, the Debtor’s 43-year-old son lived in her home, but did not contribute monetarily to the household. The Debtor was also being sued by several creditors; all of which obtained judgments against her.
RESULTS: The Debtor received her discharge and could finally start fresh!
REMEMBER: If your only source of income is social security and you have no significant assets, you are likely “judgment proof.” In other words, creditors cannot collect from you even if they have judgments against you. That being said, the stress of creditors calling and hounding you is an understandable reason to seek relief.
CHAPTER 13
1. MORTGAGE MODIFICATION, STRIPOFF OF SECOND MORTGAGE, AND CREDIT CARD RELIEF:
SITUATION:
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!
2. MORTGAGE MODIFICATION AND STRIPOFF OF SECOND MORTGAGE:
SITUATION:
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.
RESULTS:
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.
3. CONVERSION OF CHAPTER 13 TO CHAPTER 7 RESULTS IN SUCCESSFUL DISCHARGE OF MOST UNSECURED DEBTS:
SITUATION: I filed an individual Chapter 13 case for a married woman. While four car loans were in the husband’s name, all loans were current and almost paid in full. The debts were largely in the wife’s name and included $70,000 in credit card debt, a half interest in the family home, and $212,000 in student loans. The student loans were in her name, but were incurred for her son. At the time I filed the Chapter 13 petition, the son was 22 years old, was living with the Debtor and her husband, and was looking for work. The Debtor could not file a Chapter 7 case because her income, when combined with her husband’s income, was too high.
RESULTS: Due to an accident suffered by the Debtor’s husband, the household income drastically dropped. I converted the case to a Chapter 7 and the Debtor received her discharge. $70,000 in unsecured debt gone!
CAUTION: I strongly caution parents who are considering incurring student loan debt for their children. This Debtor was 50 years old when she first came to see me. There is no chance that the entire $212,000 will ever be paid in full. While there are circumstances in which student loan debt may be discharged, it is difficult. Even here, where the Debtor’s husband was injured, he expected to work in a similar capacity in the future. It is therefore unlikely that this Debtor would succeed in discharging the astronomical student loan debt.
CHAPTER 11
1. MORTGAGE MODIFICATION AND CREDIT CARD RELIEF:
SITUATION:
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.
RESULTS:
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.
OTHER EXAMPLES
1. LOAN WORKOUT:
SITUATION:
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.
2. CREATING EQUITY IN HOME BY NEGOTIATION AND LIEN REMOVAL AFTER CHAPTER 7 CASE:
SITUATION:
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.
RESULTS:
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!
3. DEBT SETTLEMENT:
SITUATION:
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.
RESULTS:
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.
CAUTION:
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.