Dubiln Packard

What does a Bankruptcy lawyer do?

Your Bankruptcy lawyer gets your case filed with the Bankruptcy court.

He represents your interest at the 341 Meeting of Creditors, and before the court-appointed Trustee overseeing your case.

He's your representative and advocate before the court.

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Making Chapter 13 Plan Payments

Chapter 13 Plan Payments Are Due

It’s the first of the month immediately following the day your chapter 13 case was filed and it’s time to start making chapter 13 plan payments. Your chapter 13 plan payments are due to the trustee AND your monthly mortgage payment is due to your mortgage servicer. It is very important to make both the mortgage payment and the chapter 13 plan payments on time every month for the life of your chapter 13 bankruptcy case.

If for some reason, and it happens from time-to-time, you are unable to make either or both payments this month, please call me to discuss before you make any decisions. There are certain things to consider if you find yourself in a situation where you have a temporary loss of, or reduction in, income or if you had an unexpected expense recently.

Missing payments can have serious long-term effects on your chapter 13 plan so please avoid this if at all possible. Again, call me to discuss if this comes up for you.

The difference between missing payments before your case is confirmed and after your case is confirmed.

When your case is first filed, the chapter 13 plan that we submit is a “proposed” plan and will be reviewed by your creditors and the trustee before it is accepted and confirmed. During that process, there may be some back and forth between we as your lawyers and the trustee and creditors before the plan is in its final form for confirmation. This back and forth is usually done at confirmation hearings in court. There may be a number of confirmation hearings before the case is confirmed which can take place over a period of three to six months or sometimes more.

Before the case is confirmed and a few days prior to each confirmation hearing, the trustee checks to see that you are up-to-date on your chapter 13 plan payments. If you have not made one or more payments as of the day of the confirmation hearing, the trustee will move to dismiss your case right then and there. There is no separate motion – the case will just be dismissed. This differs significantly from the procedure for a missed payment after confirmation.

What Happens If You Have To Miss A Chapter 13 Plan Payment or a Mortgage Payment Once Your Case is Confirmed?

A missed payment to either the mortgage company or the chapter 13 trustee can have significant negative impacts. If a trustee payment is missed, the trustee may file a motion to dismiss the case. If a mortgage payment is missed, the lender’s counsel may file a motion to lift the automatic stay (which prevents the lender from proceeding with foreclosure) and could lead to a sheriff sale of your home,

In both cases, a formal written response must be filed by us on your behalf and a court appearance is required (lawyers only). The matter is usually resolved at the court appearance where an arrangement is agreed to by the trustee or lender to catch up on payments. Such an arrangement can take many forms but always involves you coming up with some lump sum of money to bring the default current. Adding missed payments to the remaining chapter 13 plan payments is sometimes possible at the discretion of the trustee or lender (or both) and sometimes requires updated documentation on your income and expenses.

Resolution of missed payments often, if not always, includes a 30-day default clause which gives the trustee or lender a great deal of power the next time you miss a payment.

Also, you will be required to pay attorney fees for the lender’s counsel as well as fees to us to file the written response and appear in court on your behalf so this tends to be an expensive event.

Links to Chapter 13 Trustee Websites

Below are links to the bankruptcy trustee website. Each website contains instructions and information for setting up and making monthly trustee payments as well as other important information.

Newark – Marie-Ann Greenberg

Trenton – Albert Russo

Camden – Isabel Balboa

Making Chapter 13 Plan Payments and Mortgage Payments is the Single Most Important Thing During the Chapter 13 Bankruptcy Case.

Both the trustee and the mortgage lender monitor your payments every month and are quick to take action if payments are missed. Sometimes the trustee or counsel for the lender will reach out to me before filing a formal motion, and sometimes they will not. Sometimes, they will overlook one missed payment and sometimes, they will not.

The best strategy for you, of course, is to avoid missing payments but sometimes, we know, it just isn’t possible.

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Beneficial Changes in the Bankruptcy Code under the CARES Act

Small Businesses and Consumers will benefit from the changes in the bankruptcy code under the CARES Act

A number of changes in the bankruptcy code will benefit Businesses and consumers under the CARES Act making it easier and more beneficial for some to avoid or reorganize debts. See the SBA website here.

How the changes in the bankruptcy code under the CARES Act will benefit consumers.

The CARES Act amends certain provisions under Chapters 7 and 13 of the U.S. Bankruptcy Code to help consumers who will be or have been financially harmed by the COVID-19 pandemic.

The key changes that consumers should be aware of are as follows:

  • Chapter 13 filers with existing confirmed plans who have suffered a “material financial hardship” due to COVID-19 will be allowed to seek plan modifications, including extending their payments for up to seven years after their first plan payment was due, thereby reducing their monthly payment obligation.
  • Payments received from the federal government will not be included in the definition of “income” when determining eligibility.
  • Payments will not be included in the calculation of “disposable income” for confirmation. This change is designed to permit consumers to receive the full benefit of stimulus payments.

The key changes that small businesses should be aware of are as follows:

The CARES Act amends the Small Business Reorganization Act of 2019 (the “SBRA”), which became effective February 19, 2020, to temporarily increase the debt threshold under the new Subchapter V of Chapter 11 of the Bankruptcy Code from $2,725,625 of debt to $7,500,000.

The SBRA is designed to enable small businesses to reorganize their financial affairs in a more efficient and cost-effective manner while also maintaining more control over their businesses. For small businesses, Chapter 11 reorganization has not been a viable option due to the length and high cost of the process.

Some of the key features of the SBRA are as follows:

  • Businesses or individuals with at least 50% of their debts being commercial debt totaling not more than $7.5 million are eligible.
  • The bankruptcy process will be quicker with shortened timelines. For example: the deadline for filing a plan is just 90 days shortened from 120 days.
  • Filers are not required to pay quarterly U.S. Trustee’s fees (often costly)
  • Creditors committees will not be appointed minimizing disputes and distractions.
  • A standing trustee will be appointed who will: (i) help to formulate a plan; (ii) report fraud or misconduct, and (iii) monitor plan distributions.
  • Unlike a trustee that might be appointed in a Chapter 11 case, a SBRA trustee does not take part in operating business. The trustee’s goal is to help resolve issues with creditors and move the case along.
  • Only the small business filing bankruptcy can file a plan of reorganization. This eliminates risk of competing plans filed by creditors.
  • A disclosure statement is not required, unless the Court orders otherwise.
  • The plan may be confirmed even if all impaired classes vote to reject the plan.
  • Payments of administrative expense claims may be stretched out over the term of the plan.
  • Equity holders may be able to keep their equity interests in the business without the need to contribute new value because there is no “absolute priority rule”. This means that business owners can keep their interests in the company even if unsecured creditors will not be paid in full under the plan.

See other important updates and resources on our Coronavirus Resource Page here.

For full text of the CARES Act go here.

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Can I File Bankruptcy In New Jersey During The Coronavirus Quarantine If I Can’t Leave My House?

Can I File Bankruptcy From Home?

Find out how to file bankruptcy in New Jersey during the Coronavirus quarantine while observing quarantine and social distancing rules during the COVID-19 outbreak.

Dealing with the uncertainty of the COVID-19 pandemic is especially challenging for those who need to file for bankruptcy during the coronavirus quarantine. Fortunately, courts in New Jersey have loosened rules temporarily, making it easier for bankruptcy lawyers to represent quarantined clients.

Our office can serve you virtually while we work from home so you can stay safe and still file bankruptcy. So, if you’re in isolation due to the coronavirus, we are ready to help you get out of debt.

Here are the temporary changes to bankruptcy procedures designed to curb the spread of COVID-19.

Representing yourself during the coronavirus outbreak will likely be difficult, especially if you have ongoing health problems, so your first challenge will be hiring a bankruptcy attorney.

Because conducting in-person interviews won’t be an option, you’ll want to consider asking friends, family, and other attorneys for referrals.

When contacting candidates, verify that the office can represent you while you’re in isolation, and provide necessary accommodations, such as:

  • phone or video conferencing for attorney/client meetings and document review
  • secure document portal for submitting and signing documents
  • the availability of a telephonic or video appearance at the 341 hearing (the one hearing all filers must attend).

Also, ask whether the office offers free initial phone consultations.

Todd Murphy Law Has All Virtual Options

Of course at Todd Murphy Law, we can do everything without a visit to the office and now that the trustee’s are conducting the 341 hearings by video conference, you’ll never have to leave your home.

Filing for Bankruptcy During the Coronavirus Outbreak

While in quarantine, you’ll rely on technology to communicate with your lawyer and paralegal as well as the court. You will need access to a computer, a printer, and a scanner or use one of the many scanner apps on your phone such as CamScanner.

Filing for bankruptcy is form-intensive work. We will ask you to complete a number of financial questionnaires. You’ll also need to gather together certain important financial documents that support your questionnaire answers (see a list here).

We have been working online without the need for an office visit for over five years so this isn’t new to us at all. We have developed secure systems that protect your private information and spend extra time on the phone with you so you know exactly what to do every step of the way.

For instance, we start the process by providing you with a link to a special page on our website where you can complete our proprietary questionnaires online and upload paycheck stubs, bank statements, and other documents needed when filing for bankruptcy.

Completing Required Bankruptcy Courses

You will also be required, as a prerequisite to filing bankruptcy, complete the two required courses online – one before you file for bankruptcy and one afterward. You can access the courses on the same web page where you will find our questionnaires

Meeting With the Bankruptcy Lawyer Virtually Due to COVID-19

You can easily consult with your lawyer and paralegal several times before we file your case. The office can set up meetings by phone or through video conferencing.

On our initial consultation, you’ll ask questions, listen to the attorney’s assessment, and determine whether you want to file bankruptcy and we will advise you of your options. \

Reviewing the final petition. Once the bankruptcy petition is complete, the lawyer will go over it with you for accuracy. After agreeing that all of the information contained in the petition is true and correct, you must sign it under penalty of perjury – before it can be filed.

“Wet Signatures” Waived by the Courts Due to Coronavirus Concerns

New Jersey Bankruptcy courts have temporarily relaxed a rule requiring a bankruptcy attorney to obtain an original or “wet signature” on the bankruptcy petition before filing it online with the court. The relaxing of this rule is very beneficial to lawyers and clients alike during the coronavirus pandemic. It limits the amount of contact required before filing a case.

Telephonic/Video Conference 341 Meeting of Creditors During the Coronavirus Outbreak

After filing the case, every bankruptcy filer must appear at a hearing called the 341 meeting of creditors. The bankruptcy trustee checks your identification and asks questions about the petition under oath.

Trustees have already been ordered to stop conducting in-person meetings during the coronavirus (COVID-19) pandemic, so the meeting requirement won’t be problematic for you. Hearings now take place by video conference.

We will give you the information you need to call into the meeting from home.


Court Closures During the COVID-19 Outbreak

Although courts in New Jersey, have closed physical locations as of the writing of this article, all have made provisions to continue operations.

See our other important notices on our CoronaVirus Resources page here.

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New Rules on Payday Loans – Lenders Must Determine Borrower Ability To Repay

cfpb time for changeLenders Must Determine If Consumers Have the Ability to Repay Payday Loans That Require All or Most of the Debt to be Paid Back at Once

“The CFPB’s new rule puts a stop to the payday loans debt traps that have plagued communities across the country,” said CFPB Director Richard Cordray. “Too often, borrowers who need quick cash end up trapped in loans they can’t afford. The rule’s common sense ability-to-repay protections prevent lenders from succeeding by setting up borrowers to fail.”

Payday loans are typically for small-dollar amounts and are due in full by the borrower’s next paycheck, usually two or four weeks. They are expensive, with annual percentage rates of over 300 percent or even higher. As a condition of the loan, the borrower writes a post-dated check for the full balance, including fees, or allows the lender to electronically debit funds from their checking account. Single-payment auto title loans also have expensive charges and short terms usually of 30 days or less. But for these loans, borrowers are required to put up their car or truck title for collateral. Some lenders also offer longer-term loans of more than 45 days where the borrower makes a series of smaller payments before the remaining balance comes due. These longer-term loans – often referred to as balloon-payment loans – often require access to the borrower’s bank account or auto title.

These loans are heavily marketed to financially vulnerable consumers who often cannot afford to pay back the full balance when it is due. Faced with unaffordable payments, cash-strapped consumers must choose between defaulting, re-borrowing, or skipping other financial obligations like rent or basic living expenses such as buying food or obtaining medical care. Many borrowers end up repeatedly rolling over or refinancing their loans, each time racking up expensive new charges. More than four out of five payday loans are re-borrowed within a month, usually right when the loan is due or shortly thereafter. And nearly one-in-four initial payday loans are re-borrowed nine times or more, with the borrower paying far more in fees than they received in credit. As with payday loans, the CFPB found that the vast majority of auto title loans are re-borrowed on their due date or shortly thereafter.

The cycle of taking on new debt to pay back old debt can turn a single, unaffordable loan into a long-term debt trap. The consequences of a debt trap can be severe. Even when the loan is repeatedly re-borrowed, many borrowers wind up in default and getting chased by a debt collector or having their car or truck seized by their lender. Lenders’ repeated attempts to debit payments can add significant penalties, as overdue borrowers get hit with insufficient funds fees and may even have their bank account closed.

Rule to Stop Debt Traps

The CFPB rule aims to stop debt traps by putting in place strong ability-to-repay protections. These protections apply to loans that require consumers to repay all or most of the debt at once. Under the new rule, lenders must conduct a “full-payment test” to determine upfront that borrowers can afford to repay their loans without re-borrowing. For certain short-term loans, lenders can skip the full-payment test if they offer a “principal-payoff option” that allows borrowers to pay off the debt more gradually. The rule requires lenders to use credit reporting systems registered by the Bureau to report and obtain information on certain loans covered by the proposal. The rule allows less risky loan options, including certain loans typically offered by community banks and credit unions, to forgo the full-payment test. The new rule also includes a “debit attempt cutoff” for any short-term loan, balloon-payment loan, or longer-term loan with an annual percentage rate higher than 36 percent that includes authorization for the lender to access the borrower’s checking or prepaid account. The specific protections under the rule include:

  • Full-payment test: Lenders are required to determine whether the borrower can afford the loan payments and still meet basic living expenses and major financial obligations. For payday and auto title loans that are due in one lump sum, full payment means being able to afford to pay the total loan amount, plus fees and finance charges within two weeks or a month. For longer-term loans with a balloon payment, full payment means being able to afford the payments in the month with the highest total payments on the loan. The rule also caps the number of loans that can be made in quick succession at three.
  • Principal-payoff option for certain short-term loans: Consumers may take out a short-term loan of up to $500 without the full-payment test if it is structured to allow the borrower to get out of debt more gradually. Under this option, consumers may take out one loan that meets the restrictions and pay it off in full. For those needing more time to repay, lenders may offer up to two extensions, but only if the borrower pays off at least one-third of the original principal each time. To prevent debt traps, these loans cannot be offered to borrowers with recent or outstanding short-term or balloon-payment loans. Further, lenders cannot make more than three such loans in quick succession, and they cannot make loans under this option if the consumer has already had more than six short-term loans or been in debt on short-term loans for more than 90 days over a rolling 12-month period. The principal-payoff option is not available for loans for which the lender takes an auto title as collateral.
  • Less risky loan options: Loans that pose less risk to consumers do not require the full-payment test or the principal-payoff option. This includes loans made by a lender who makes 2,500 or fewer covered short-term or balloon-payment loans per year and derives no more than 10 percent of its revenue from such loans. These are usually small personal loans made by community banks or credit unions to existing customers or members. In addition, the rule does not cover loans that generally meet the parameters of “payday alternative loans” authorized by the National Credit Union Administration. These are low-cost loans which cannot have a balloon payment with strict limitations on the number of loans that can be made over six months. The rule also excludes from coverage certain no-cost advances and advances of earned wages made under wage-advance programs offered by employers or their business partners.
  • Debit attempt cutoff: The rule also includes a debit attempt cutoff that applies to short-term loans, balloon-payment loans, and longer-term loans with an annual percentage rate over 36 percent that includes authorization for the lender to access the borrower’s checking or prepaid account. After two straight unsuccessful attempts, the lender cannot debit the account again unless the lender gets a new authorization from the borrower. The lender must give consumers written notice before making a debit attempt at an irregular interval or amount. These protections will give consumers a chance to dispute any unauthorized or erroneous debit attempts, and to arrange to cover unanticipated payments that are due. This should mean fewer consumers being debited for payments they did not authorize or anticipate, or charged multiplying fees for returned payments and insufficient funds.

The CFPB developed the payday rule over five years of research, outreach, and a review of more than one million comments on the proposed rule from payday borrowers, consumer advocates, faith leaders,  payday and auto title lenders, tribal leaders, state regulators and attorneys general, and others. The final rule does not apply ability-to-repay protections to all of the longer-term loans that would have been covered under the proposal. The CFPB is conducting further study to consider how the market for longer-term loans is evolving and the best ways to address concerns about existing and potential practices. The CFPB also made other changes in the rule in response to the comments received. These changes include adding the new provisions for the less risky options. The Bureau also streamlined components of the full-payment test and refined the approach to the principal-payoff option.

The rule takes effect 21 months after it is published in the Federal Register, although the provisions that allow for registration of information systems take effect earlier. All lenders who regularly extend credit are subject to the CFPB’s requirements for any loan they make that is covered by the rule. This includes banks, credit unions, nonbanks, and their service providers. Lenders are required to comply regardless of whether they operate online or out of storefronts and regardless of the types of state licenses they may hold. These protections are in addition to existing requirements under state or tribal law.

For more info on Payday loans see: https://toddmurphylaw.com/payday-loans-the-most-despicable-loans/

 

A factsheet summarizing the CFPB rule on payday loans is available at: http://files.consumerfinance.gov/f/documents/201710_cfpb_fact-sheet_payday-loans.pdf

 

Text of the CFPB rule on payday loans is available at:  http://files.consumerfinance.gov/f/documents/201710_cfpb_final-rule_payday-loans-rule.pdf

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5 Tips to Choosing the Best Bankruptcy Lawyer in NJ

New Jersey Has Many Good Bankruptcy Lawyers.  How do you choose the Best Bankruptcy Lawyer?  Here are 5 tips.

Best Bankruptcy Lawyer NJ

  • Be sure your bankruptcy lawyer practices bankruptcy law primary if not exclusively. Bankruptcy law can be complex with many nuances. A good bankruptcy lawyer might handle 10 or 20 cases each month. Over five years, that can be about 1000 cases. A lawyer who dedicates most or all of his or her practice to bankruptcy cases will naturally know how to get your case prepared and filed correctly and get you the result you want.
  • Make sure your lawyer spends time with you interviewing you and asking specific and detailed questions about your financial situation and explains the law and process in detail before he or she recommends bankruptcy and specifically the type of bankruptcy that is right for your situation.
  • Beware of low-priced bankruptcy lawyers. Bankruptcy, when done correctly, requires a very careful analysis of a vast amount of detailed financial information. Therefore, it is very time consuming. A low-priced lawyer may be a sign your lawyer is going to cut corners on your case.
  • Ask for a written fee agreement and be sure there are no hidden charges. Also, be sure your lawyer is handling your entire case for the quoted fee not just preparing the petition then charging you extra for parts of the case that other lawyers include in their fee.
  • Your lawyer’s experience can make all of the difference. Be sure your lawyer has at least 5 years of experience primarily practicing bankruptcy law.

Todd Murphy is a foreclosure, collection defense, and bankruptcy lawyer with offices in Bedminster (near Somerville) NJ.