Dubiln Packard

Bankruptcy FAQ

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Trump Was Smart to File Bankruptcy

bankruptcy
Raise Your Hand If You’ve Filed For Bankruptcy

Bankruptcy Will Reshape Your Idea of Success

If I posed you the question, “Who do you imagine when you think of people who have filed for bankruptcy?,” do you picture a failed business owner, someone who is overall terrible at money management? Or, would our future president run through your head? It may come as a shock, but the latter has filed bankruptcy a whopping six times! Trump was smart to file bankruptcy and has utilized it as a financial tool to become successful.

It has been engrained in our way of thinking from very early on in our lives that bankruptcy is bad. Certain archetypal ideas never fade. These ideas have shaped the way in which we’ve lived our lives up until this point. But, some of those notions may not be entirely correct.

Bankruptcy Is A Financial Tool

Bankruptcy has gotten a bad rap over the years. It has become synonymous with failure and giving up. When, in fact, it lends the exact opposite effect; it acts as a solution to your problem and allows you to start with a fresh slate.

Admitting your loses and then finding a path to recovery is necessary for moving on. A path to recovery is exactly what bankruptcy provides. Contrary to the stigma attached to bankruptcy, it can be the best financial tool that the law provides.

Donald Trump Has Filed For Bankruptcy Six Times And Counting

“I have used the laws of this country … the [bankruptcy] chapter laws, to do a great job for my company, for myself, for my employees, for my family,” Donald Trump stated August 6th, 2016 at the first Republican presidential debate. Our very own president-elect has taken advantage of bankruptcy six times and counting; Trump realizes its power and has employed it as a business tool. Trump was smart to file bankruptcy.

Our new president’s bankruptcies allowed his companies to stay afloat while eradicating debts to banks, employees and suppliers. Personal bankruptcy allows you to do the same thing: stay afloat and get back on your feet while getting rid of debts.

Here is a quick look at each of our president-elect’s bankruptcy filings over the past few decades.

1.  Trump Taj Mahal, 1991

This business’ creation was funded by $1 billion in junk bonds. Later, it could not afford the high interest (just like if you took out a 2 year ARM in 2006 that reset to 11% in 2008 or 2009, your payments would become unaffordable, yet you would be stuck because you can’t refinance without having equity). The business was failing, and had $3 billion in debt. Additionally, Trump had over $900 million in personal debt. He filed for a Chapter 11 bankruptcy in 1991. His business continued to do well, even after filing for bankruptcy. It stayed in business for 25 more years after filing for bankruptcy, then closed down in October 2016, in the midst of the financial mogul for president.

2. Trump Castle (1992)

This casino opened in 1985 and performed very well in its infancy. It became the home of the game shows, Trump Card, and Yahtzee. However, business took a downturn in the 1990s and it could not pay out  $338 million in bonds owed. In March 1992, the business filed for bankruptcy. Over the following years, business was on the upswing. It underwent a few changes, although mainly just in name (it was known as Trump Marina from 1997-2011),  until it was finally sold to Landry’s in 2011.

3. Trump Plaza and Casino (1992)

The plaza and casino opened in 1984. By 1992, business was on the decline. It faced an 80% drop in revenue and acquired over $250 million in debt (comparable to what happened during the Great Recession, when many families’ incomes were slashed due to job loss, and then these families racked up credit card debt to pay for household bills). In 1992, Trump Plaza and Casino filed bankruptcy at the same time as Trump Castle.

4. Trump Plaza Hotel (1992)

Trump purchased the Plaza Hotel in Manhattan in 1988. In 1992, the business accumulated over $550 million in debt. It filed for bankruptcy that year.

5. Trump Hotel And Casino Resorts (2004)

In 1995, the Trump Taj Mahal, Trump Castle, and Trump Plaza were combined with other properties under one entity. In 2004, this conglomerate had over $1.8 billion in debt and consequently filed for bankruptcy to eliminate these debts.

6. Trump Entertainment Resorts (2009)

After the above-mentioned bankruptcy of Trump Hotel and Casino Resorts, the corporation was renamed Trump Entertainment Resorts. It took a blow when the economy failed in 2008. In December 2008 it skipped a $53.1 million bond interest payment. The business filed for bankruptcy in 2009 after it accrued over $1.2 billion in debt.

Bankruptcy Makes You Smart

As seen in these telling examples from our very own president-elect, bankruptcy does not equate to failure. Filing for bankruptcy has not affected him negatively at all in the long term.

It is a law for a reason. It is there to protect you when things don’t go according to plan.

Filing for bankruptcy does not make you a loser; on the contrary, it makes you financially smart.

 

Find out more about how bankruptcy works and how you can stop your debt collectors from taking your money, click here to read, What Is Bankruptcy?

 

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When Is A Chapter 7 Bankruptcy Useful?

Chapter 7 bankruptcy new jersey foreclosure lawyerThere are 3 scenarios when a chapter 7 bankruptcy can be a great tool:

1. You mean I can still save my home, EVEN if I don’t qualify for a loan modification or a chapter 13 bankruptcy??

It is still possible to save your home from foreclosure even if you don’t qualify for a loan modification or a chapter 13 bankruptcy. It is possible that consumer debts were holding you back from qualifying for these strategies, but a chapter 7 bankruptcy can solve that problem.

A chapter 7 bankruptcy can eliminate burdensome debts, like credit card debts, medical debts, motor vehicle surcharges, loans, certain tax debts and personal loan debts.

Once your debts are wiped out, you can then apply for a loan modification or file for a chapter 13 bankruptcy, with much better odds of being approved. Using a chapter 7 to make yourself qualify for a chapter 13 bankruptcy is referred to as a “chapter 20 bankruptcy” and can be a useful tool if you want to save your home from foreclosure.

To find out more about whether or not a chapter 7 bankruptcy could be right for you, and whether or not you will qualify, read our post: About Chapter 7 Bankruptcy.

 

2. I don’t want to save my home, but I want to buy time, eliminate debts, live for free, avoid tax liabilities and rebuild my credit (Yes, it’s really possible!!!)

If it’s still early on in the foreclosure process and there is no impending sheriff sale, you may have already decided that you don’t want to save your home for a number of reasons; maybe it’s just not feasible to get a loan modification or enter into a chapter 13 bankruptcy, maybe you don’t want to be locked into your home for a number of years and it makes more sense to move out, whatever the reason, there are still benefits to a chapter 7 bankruptcy.

If you have racked up a large amount of debt over the years, a chapter 7 bankruptcy can eliminate these debts, while also buying you time in your home. Filing for a chapter 7 bankruptcy can buy you months in your home that you otherwise wouldn’t have had.

During the time that you are living in your home for free, you can also be saving money that would otherwise be spent on your mortgage or rent.

Also, during your prolonged stay in your home while living for free, you can rebuild your credit before you must move out. This can help you qualify again to buy another home in the future or secure an apartment to rent.

It can also help you avoid huge tax liabilities; if you allow your home to be sold at a sheriff sale, the difference in the amount of what the house is sold for and what you owe on the home is treated by the IRS as taxable income. If you don’t file for a chapter 7 bankruptcy prior to the sheriff sale, you could face owing the IRS thousands of dollars in taxes on that “income” that you never saw a dime of.

Moreover, if your financial situation changes for the better, and you change your mind and decide that you want to save your home, you can still apply for a loan modification, or chapter 13 bankruptcy, even after filing for a chapter 7 bankruptcy.

 

3. My sheriff sale is tomorrow but I’m not prepared and still need more time…

If your sheriff sale is scheduled, a chapter 7 bankruptcy can still help you eliminate debts and buy you time you otherwise wouldn’t have had in your home. Once you get your adjournment (postponement) of your sheriff sale, giving you 30 more days,  filing for a chapter 7 bankruptcy next can buy you an additional 90 days in your home. This can be highly valuable if you are still ironing out details of your move. Also, like in the previous scenario, it can assist you in avoiding tax liabilities.

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Can I Defeat A Foreclosure Case Past The Statute of Limitations in New Jersey

statute of limitations for foreclosure complaint in new jerseyA Recent New Jersey Bankruptcy Court Case May Allow You To Defeat a Foreclosure Case If Your Complaint Was Filed More Than Six Years After Your Loan Balance Was Accelerated.

People Have Asked: “Can I Defeat A Foreclosure Case Past The Statute of Limitations?

THIS ARTICLE HAS NOW BEEN UPDATED WITH THE PASSING OF ASSEMBLY BILL 5001 as of February 2019.  See the updated article here: https://toddmurphylaw.com/new-jersey-revises-statute-of-limitations-on-foreclosures/

The New York Times posted an article in November of 2014 reporting on an interesting case in the New Jersey bankruptcy court where a judge – reluctantly – barred a foreclosure action because the complaint was filed beyond the statute of limitations under New Jersey’s Fair Foreclosure Act.  See NY Times Article Here.

Judge Kaplan in In Re Washington held that, “by application of N.J.S.A. § 2A:50-56.1(a) and (c), Specialized Loan Servicing was time-barred under New Jersey state law from enforcing either the note or the accelerated mortgage. As a result, Specialized Loan Servicing’s proof of claim was subject to disallowance under 11 U.S.C. § 502(b)(1) and deemed unenforceable against the debtor or the debtor’s property under applicable state law. As a result, the lender’s claim was unsecured, and the underlying lien was deemed void pursuant to 11 U.S.C. § 506(a)(1) and (d).”

What Does the New Jersey Fair Foreclosure Act Say About Statutes of Limitations?

The statute reads:

“1. An action to foreclose a residential mortgage shall not be commenced following the earliest of:

a. Six years from the date fixed for the making of the last payment or the maturity date set forth in the mortgage or the note, bond or other obligations secured by the mortgage, whether the date is itself set forth or may be calculated from information contained in the mortgage or note, bond, or other obligation, except that if the date fixed for the making of the last payment of the maturity date has been extended by a written instrument the action to foreclose shall not be commenced after six years from the extended date under the terms of the written instrument.  N.J.S.A. § 2A:50-56.1(a) (emphasis added).

What Happened in the Bankruptcy Court Case?

In a Bankruptcy Court Case title In Re Washington, The home owner purchase a three-family house in February 2007 with a 30-year adjustable rate Mortgage and Note. In July 2007 the borrower defaulted on the Note and the foreclosure action was filed by the Lender in December 2007. The foreclosure Complaint accelerated the due date for all amounts owed on the loan as a result of the payment default. In July 2013 the foreclosure action was dismissed for lack of prosecution due to the Lender’s failure to produce certain documents to the Court. The Lender did not appeal the decision or commence another foreclosure action against the homeowner. Then, on March 12, 2014 the borrower filed for Bankruptcy and commenced an Adversary Proceeding against the Lender to render the loan wholly unenforceable.

Citing the New Jersey Statute of Limitations, the borrower argued that the six-year statute of limitations applicable to loans as per the Fair Foreclosure Act (see N.J.S.A. § 2A:50-56.1) barred the Lender from commencing an action due to the borrower’s default on the note taking the position that the six-year statute of limitation period had expired due to the default and acceleration of the maturity date that occurred when the foreclosure complaint was filed in 2007. Judge Kaplan held that the six-year statute of limitation period applied to the foreclosure action and the Lender failed to commence a foreclosure action within the six year period following the accelerated maturity date that occurred back in June 2007. Therefore, the Lender’s lien was void and no longer enforceable against the Debtor. As a result, the Lender’s proof of claim in the Bankruptcy case was also barred due to the underlying lien being unenforceable as a result of the decision.

Acceleration Was The Key Here.

Because the loan was accelerated, the date of the last payment became the date of acceleration.  That date, in this case was December 2007.  Even though the lender filed a case within the time frame originally, the case was dismissed for lack of prosecution causing the lender to have to start from the beginning and in so doing, the Complaint was then filed outside the six year date.

How will this case hold up in New Jersey State Court?

Its worth a try.  This is still a recent case and the concept is only just beginning to be litigated in New Jersey State Court.  So, more will be know as those cases come down.  The NJ State Court is not required to follow the Bankuptcy Court case but can use it for guidance.  This particular set of facts doesn’t come up often since most lenders don’t wait so long to file a foreclosure action, but if your complaint has come more than 6 years after the lender declared you in default, then it is worth a try to raise this as a defense when you answer your complaint.

What You Should Do If You Are Served With a Foreclosure Complaint in New Jersey?

Don’t just ignore the Complaint.  You only have 35 days to file an answer.  As soon as you receive the Complaint, contact an experienced New Jersey foreclosure attorney who can review your situation and advise of the next steps.  If the date on the Complaint is six years after your loan balance was accelerated, look at this possibility carefully, review the latest State Court case law and determine whether or not this is a valid defense for you.

Can I Defeat A Foreclosure Case Past The Statute of Limitations in New Jersey?  Well, maybe!

 

*Update: The bankruptcy court case In Re Washington was overturned on appeal in August of 2015. The United States District Court for the district of New Jersey reversed its decision and now, the debtor does not get a free home, the mortgage must be paid by the mortgager.

If you want to learn more about saving your home from foreclosure, click on the button below to get your Free Consumer Guide To Foreclosure. 

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Supreme Court Rules Borrowers Cannot Strip Second Mortgage In Chapter 7 Case

supreme court bankruptcyA Tough Case For Home Owners In New Jersey Facing Foreclosure.

The Supreme Court of the United States decided in a unanimous decision recently that a homeowner in a Chapter 7 bankruptcy case can not void a second mortgage lien when the debt owed on a first mortgage lien exceeds the current value of the home.  The practice, while not allowed in New Jersey, known by bankruptcy lawyers and foreclosure lawyers as “stripping” a lien is very helpful to homeowners. When a lien is “stripped” it is converted from a secured loan to an unsecured loan which means little or no payment will go to that creditor and – more importantly – the lien will be removed from the property which provides much more flexibility in managing the first mortgage on the property.

New Jersey bankruptcy and foreclosure lawyers were watching this case closely in the hopes the practice would become allowed in New Jersey Bankruptcy Court.  Homeowners in a chapter 13 bankruptcy case do currently enjoy the ability to “strip” a second mortgage.

The ruling, which will benefit commercial lenders, says that bankruptcy courts may not “strip off” a second mortgage lien on property if the value of the property is less than the amount the homeowner owes to the first mortgage lienholder — in other words, the second mortgage lien is “completely underwater.”

In the case of Bank of America v. Caulkett, Bank of America asserted that junior liens should not be treated as unsecured loans, because the bankruptcy code only “strips off” claims from property that are disallowed and because the Supreme Court’s ruling in Dewsnup v. Timm, disallowing “stripping down” of primary liens to the value of the underlying property, should extend to this case. The defendants argued that second liens should be treated as unsecured, and hence disallowed.

The Court’s unanimous ruling impacts the right of junior lienholders to collect on loans in the event of a debtor’s declaration of bankruptcy and the treatment of previously secured, but subordinate, debt in bankruptcy proceedings.

From the ruling:

Held: A debtor in a Chapter 7 bankruptcy proceeding may not void a junior mortgage lien under §506(d) when the debt owed on a senior mortgage lien exceeds the current value of the collateral if the creditor’s claim is both secured by a lien and allowed under §502 of the Bankruptcy Code. Pp. 2–7.

The debtors here prevail only if the bank’s claims are “not . . . allowed secured claim[s].” The parties do not dispute that the bank’s claims are “allowed” under the Code. Instead, the debtors argue that the bank’s claims are not “secured” because §506(a)(1) provides that “[a]n allowed claim . . . is a secured claim to the extent of the value of such creditor’s interest in . . . such property” and “an unsecured claim to the extent that the value of such creditor’s interest . . . is less than the amount of such allowed claim.” Because the value of the bank’s interest here is zero, a straightforward reading of the statute would seem to favor the debtors.

This Court’s construction of §506(d)’s term “secured claim” in Dewsnup v. Timm, 502 U. S. 410, however, forecloses that reading and resolves the question presented here. In declining to permit a Chapter 7 debtor to “strip down” a partially underwater lien under §506(d) to the value of the collateral, the Court in Dewsnup concluded that an allowed claim “secured by a lien with recourse to the underlying collateral . . . does not come within the scope of §506(d).” Id., at 415. Thus, under Dewsnup, a “secured claim” is a claim supported by a security interest in property, regardless of whether the value of that property would be sufficient to cover the claim. Pp. 2–4.

(b) This Court declines to limit Dewsnup to partially underwater liens. Dewsnup’s definition did not depend on such a distinction. Nor is this distinction supported by Nobelman v. American Savings Bank, 508 U. S. 324, which addressed the interaction between the meaning of the term “secured claim” in §506(a)—a definition that Dewsnup declined to use for purposes of §506(d)—and an entirely separate provision, §1322(b)(2). See 508 U. S., at 327–332. Finally, the debtors’ suggestion that the historical and policy concerns that motivated the Court in Dewsnup do not apply in the context of wholly underwater liens is an insufficient justification for giving the term “secured claim” a different definition depending on the value of the collateral.

If you are struggling with a foreclosure, we may be able to help.  Start by downloading our free consumer guide at the right.

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Resources to help after bankruptcy

jumping-for-joyWhat you do after bankruptcy is as, or possibly more, important than the bankruptcy itself.  Bankruptcy may have gotten you out of debt or resolved a foreclosure but there are other things you should do after bankruptcy to get back on your feet like rebuilding your credit and perhaps resolve other issues in your life that may have gotten you into a tough financial situation.  Below are some resource sites you might find helpful.

 

Debt

Money Matters

The Federal Trade Commission’s Money Matters site contains advice and resources for those facing credit card debt.

www.ftc.gov/bcp/edu/microsites/moneymatters/dealing-with-debt.shtml

MyMoney.gov

MyMoney.gov is the U.S. government’s website dedicated to teaching all Americans the basics about financial education. MyMoney.gov provides links and resources regarding a wide range of financial issues, including managing debt and credit.

www.mymoney.gov

Federal Trade Commission

The FTC is the federal agency responsible for administering consumer protection laws. The FTC site offers consumers information about their rights with regard to debt collection and how to avoid scams related to debt and credit.

www.ftc.gov/bcp/menus/consumer/credit.shtm

Consumer Financial Protection Bureau

The Consumer Financial Protection Bureau was founded to improve financial products and services for consumers. Their site provides easy-to-understand information about credit cards, home loans, student loans and banking.

www.consumerfinance.gov

Federal Student Aid on the Web

Federal Student Aid is an office of the U.S. Department of Education. This site provides information about repayment options for federal student loan borrowers, including Income Based Repayment, forbearance and deferment.

studentaid.ed.gov

Internal Revenue Service

If you owe back taxes, it is a good idea to contact the IRS in order to discuss your options. The following links can help you locate your local IRS office or contact a Taxpayer Advocate. The Taxpayer Advocate Service (TAS) is an independent organization within the IRS. It helps taxpayers who are experiencing economic hardship; taxpayers who are seeking help in resolving problems with the IRS; and those who believe an IRS system or procedure is not working as it should.

www.irs.gov/localcontacts/index.html

U.S. Department of Housing and Urban Development

This U.S. Department of Housing and Urban Development site provides information about renter/homebuyer rights, housing assistance programs, and assistance with home improvements.

www.hud.gov

Federal Trade Commission Mortgage Publications

The Federal Trade Commission has published two resources that are available for free online with advice to homeowners:

Defaulting on Your Mortgage Has Costly Consequences and Mortgage Servicing:
Making Sure Your Payments Count:
http://www.ftc.gov/bcp/edu/pubs/consumer/homes/rea17.pdf
Mortgage Servicing: Making Sure Your Payments Count:
http://www.ftc.gov/bcp/edu/pubs/consumer/homes/rea10.pdf

Making Home Affordable

The Making Home Affordable program assists homeowners in financial distress.

www.makinghomeaffordable.gov

Consumer Financial Protection Bureau

If you need to discuss your mortgage payment options, the Consumer Financial Protection Bureau can help you connect with a HUD-certified housing counselor.

www.consumerfinance.gov/mortgagehelp

Federal Trade Commission Money Matters

The Money Matters site contains useful information about the options available to homeowners facing foreclosure.

www.ftc.gov/bcp/edu/microsites/moneymatters/your-home.shtml

Health

Insure Kids Now

InsureKidsNow.gov provides information about Medicaid and CHIP services for families who need health insurance coverage.

www.insurekidsnow.gov

U.S. Department of Health and Human Services

The U.S. Department of Health and Human Services maintains HealthCare.gov, where you can learn about insurance, government health programs, prevention and wellness, and how health care reforms affect you.

www.healthcare.gov

Medicare

Learn more about Medicare, the federal health insurance program for people 65 and over, and people of any age who are permanently disabled and cannot work.

www.medicare.gov

Medicaid

Medicaid is health coverage available to certain people and families who have limited income and resources, such as pregnant women, children under the age of 19, people 65 and over, people who are blind, people who are disabled, and people who need nursing home care.

www.medicaid.gov

Utilities

Energy Star

The Environmental Protection Agency’s Energy Star site provides information about how to save money by making energy-efficient choices.

www.energystar.gov

U.S. Department of Energy

The Energy Saver site provides information about how to cut electricity, gas and water costs at your home.

www.energysavers.gov

Transportation

U.S. Department of Energy

The U.S. Department of Energy’s Fuel Economy site offers advice about how to cut down on gas costs, find a fuel-efficient car, and calculate your MPG.

www.fueleconomy.gov

GasBuddy.com

This website provides up-to-date information about where to find the cheapest gas prices in your neighborhood.

www.gasbuddy.com

Shopping

Federal Trade Commission

The FTC site provides tips and hints about smart shopping and how to avoid fraud and scams.

www.ftc.gov

Consumer Action Handbook

This handbook, published by the Federal Citizen Information Center, can be ordered for free and provides advice about how to make the best purchases when shopping for a car, home accessory, etc. In addition, it provides information about where to file a consumer complaint.

www.consumeraction.gov

Consumer Reports Magazine

Consumers Union, an independent, non-profit organization that tests consumer products and reports on their characteristics to consumers, publishes Consumer Reports Magazine and maintains the consumerreports.org website. This magazine and website provide useful product information to potential buyers, including product prices, usability ratings, safety ratings, and product characteristics. Consumer Reports covers practically all products, from cars to sewing machines.

www.consumerreports.org

USA.gov

This site consolidates useful consumer information from a wide range of federal agencies. Find their tips for saving money here.

http://www.usa.gov/topics/consumer/smart-shopping.shtml

Child Care

Childcare.gov

This site provides useful information for parents about finding child care in your area, choosing the right child care, and dealing with the cost of child care.

www.childcare.gov

U.S. Department of Education

The Department of Education’s site can guide parents to educational and child care resources in their state.

www2.ed.gov/about/contacts/state/index.html

Internal Revenue Service

The following link provides useful information about the Child and Dependent Care Credit, which can help to defray the cost of child care for working parents.

www.irs.gov/newsroom/article/0,,id=106189,00.html

Smoking/Gambling/Drinking

National Institutes of Health

Cutting back on activities like smoking, drinking and gambling can save a great deal of money over time. NIH offers advice and resources regarding alcohol use, nicotine use, and excessive gambling.

http://www.nlm.nih.gov/medlineplus/alcoholism.html

http://www.nlm.nih.gov/medlineplus/smoking.html

http://www.nlm.nih.gov/medlineplus/compulsivegambling.html

12-Step Programs

12-Step Programs like Nicotine Anonymous, Alcoholics Anonymous, and Gamblers Anonymous provide support and guidance for those who wish to control these habits.

www.aa.org

www.nicotine-anonymous.org

www.gamblersanonymous.org