However, a whole life insurance policy is a different matter. This type of insurance has a cash surrender value, meaning that you may turn in the policy to the insurance company at any time in exchange for payment of the cash surrender value.
Whether a whole life insurance policy is an exempt asset for bankruptcy purposes depends in large part on the amount of cash surrender value associated with the policy. You are permitted to exempt up to $12,625.00 cash value in your whole life insurance policy under the Bankruptcy Code. This exemption must be specifically claimed in the preparation of your bankruptcy petition. You may also, depending on your other assets, have a wildcard exemption of $13,100.00 to apply to the cash surrender value as well.
Filing a no asset Chapter 7 bankruptcy petition can provide some relief. A Chapter 7 debtor is entitled to discharge all motor vehicle surcharges. It is necessary to forward a copy of your bankruptcy petition to the Surcharge Administration Office in Trenton. Once you receive a Chapter 7 discharge, the Surcharge Administration will write off the surcharges from your record.
If your surcharge has been reduced to judgment, then you will need to file a motion with the court to vacate the judgment after one year has expired from discharge. That is an extra expense and cost. Whether there is a judgment against you can be checked by your bankruptcy attorney on line using the New Jersey Judiciary website.
Unfortunately, NJMVC restoration fees and municipal court fines are not dischargeable in bankruptcy. There is a special exception to discharge in the Bankruptcy Code for debts owed to governmental units. Motor vehicle surcharges are an exclusion from that rule.
Our client was happy to get this advice from us. Call us today to see if filing Chapter 7 is right for you!
If you are expecting to receive a tax refund in the near future, you need to understand how filing bankruptcy can affect that. When you call me for your free initial consultation, please be sure to mention this, so that we can work together to protect your tax refund in your bankruptcy case.
First, a tax refund is an asset of your bankruptcy estate and subject to the jurisdiction of the bankruptcy courts like any other assets. You may be able to claim exemptions allowing you to keep your refund. In New Jersey, we use the federal exemptions. Individuals may exempt up to $13,100 in any property. This amount is doubled if both spouses file. This should be enough to exempt your tax refund completely. Then the bankruptcy trustee will not make any claim to your tax refund and you can enjoy that money.
It is crucial that you review the details of your tax refund with a competent New Jersey bankruptcy attorney to avoid any pitfalls and to maximize your exemption.
If you receive your tax refund shortly before you file for bankruptcy, then it is not an asset of your bankruptcy estate and not the concern of the trustee or court. The exception is if you use the refund to pay one creditor to the exclusion of your other creditors. Specifically, you cannot prefer one creditor over another. So you should not use your tax refund to repay a loan you received from your parents. That would be subject to investigation by the trustee, and possibly your parents would have to give that payment to the trustee to distribute to all of your creditors. On the other hand, you are entitled for example to use the tax refund to pay your regular living expenses in the normal course.
The legal fee can vary depending on the complexity of your circumstances. An individual living alone with no assets and limited income may file a “plain vanilla” Chapter 7 petition which is different from a situation which the filer owns a business and a home and has a wage earning spouse. A Chapter 13 filing is more involved because of the need to prepare not only the petition but also the plan, and to appear in court to have the plan confirmed. Thus the legal fee for Chapter 13 bankruptcy is more than for a Chapter 7 filing. Our first consultation will go over your situation in detail so that we can determine which bankruptcy chapter is right for you, and what it will cost.
Every bankruptcy filer is required to take a credit counseling course before filing. In order to receive a discharge, you must also complete the debtor education course. The cost of these courses is small and it may be possible to get a discount by registering for both courses with the same provider.
We normally take payment of the filing fee and legal fee in installments prior to filing the bankruptcy. In the event that you are discharging unsecured consumer debt, you may be able to cease periodic payments on those debts and use those savings to pay your bankruptcy fees.
Legal fees can vary from attorney to attorney. It is important to select a bankruptcy lawyer who is personally handling your case from start to finish, and who appears in court with you rather than sending a substitute whom you have never met. As in most things in life, it is the personal attention and concern that makes the difference.
Give me a call today to discuss whether bankruptcy is right for you.
If the life insurance policy is an unmatured term policy, then it would not be affected by the filing of a bankruptcy petition. Any periodic life insurance premium which is a reasonable expense is includable in your Schedule J budget on your petition.
Whole life insurance policies are treated differently. They have cash surrender value. This means that you can terminate the policy at any time and receive a check. In Chapter 7 and Chapter 13 bankruptcies, the cash surrender value of a whole life insurance policy is considered to be an asset of the debtor’s estate which may be available for distribution to creditors.
A debtor can exempt up to $12,625.00 in cash surrender value of a whole life insurance policy under Federal exemptions. S/he may also be able to use all or part of the “wildcard” exemption to protect additional cash surrender value, depending upon what other assets the debtor owns.
If a Chapter 7 debtor has unexempted cash surrender value in a whole life insurance policy, it is possible if not likely that the trustee will require the debtor to liquidate that policy and transfer the proceeds to the trustee for distribution to creditors.
In Chapter 13, the trustee would require that an amount equal to the unexempted cash surrender value of a whole life insurance policy be included in the debtor’s plan payment for distribution to the debtor’s unsecured creditors.
If someone has co-signed a debt of yours and you file for bankruptcy, your co-signer may be affected. That could be a parent, a sibling or friend whom you do not want to hurt.
We need to consider the different impacts of the two main consumer bankruptcy chapters upon the co-signer. If you file in Chapter 13, the automatic stay will immediately prohibit collectors from using collection efforts against you. If you have any co-signer on your debt, a co-debtor stay will also be in force by virtue of your bankruptcy filing, and therefore your co-signer cannot be pursued by collectors. In order for your co-signer to qualify for the co-debtor stay, the co-signer must be an individual and not a business entity and the debt in question must be for personal purposes and not business purposes.
It is important to keep in mind that the co-debtor stay will be lifted after the Chapter 13 bankruptcy is completed. If the debt was not discharged or paid in full during the chapter 13 repayment plan, collectors are able to collect the unpaid portion of the debt from co-signers.
Unfortunately, unlike chapter 13 bankruptcy, there is no co-debtor stay in Chapter 7. In a chapter 7 bankruptcy, you will be discharged from all debts, but your co-signer will remain liable for the debt, unless your co-signer has also filed for bankruptcy with you. You may want to consider reaffirming a co-signed debt to protect your co-signer. That requires execution and filing of a written reaffirmation agreement with the court to make that debt an exception to discharge. That means that you would remain liable on that debt after receiving your discharge. Keep in mind that the judge has the power to disapprove a particular reaffirmation agreement if s/he considers it to be unfair to you or other creditors in your case.
Alternatively you can continue making voluntary payments on the debt to to take the pressure off your co-signer.
Consultation with experienced legal counsel is key when evaluating how your bankruptcy filing may affect your co-signer. Call me today for a free initial consultation.
In Chapter 13 cases, a confirmation hearing is a court hearing required by the Bankruptcy Code. Confirmation hearings are not held in Chapter 7 cases. The purpose of the confirmation hearing is to resolve any objection of the trustee, creditors and other parties to the debtor’s proposed Chapter 13 plan. If everyone is in agreement, the case is confirmed. If there is an unresolved objection to the plan by any party, a confirmation hearing will be held in order for the judge to address and rule on the party’s concerns.
In most Chapter 13 cases, the confirmation hearing does not actually occur. This is because the confirmation hearing is usually set far enough in advance (a month or so after the 341 meeting of creditors) that any objections can be addressed and resolved well in advance of the scheduled confirmation hearing. If there are no open objections to the confirmation of the Chapter 13 plan, the plan will be confirmed before the hearing date and thus the hearing will not be held since it is then unnecessary at that time.
In other cases, there may be many issues to work out prior to the confirmation hearing, and additional time may be requested to resolve the issues. Often in such cases, the parties and the court will allow the confirmation hearing to be continued to a later date in order to allow additional time for the debtor’s attorney to resolve the outstanding issues.
If a confirmation hearing is held, the parties in interest, usually the debtor, the trustee, and the objecting creditor, will appear before the bankruptcy judge and present their arguments. Witnesses may be called and testimony taken. Depending on the nature of the issue, the judge may decide the issue at that time, or request additional briefing from the parties, or may defer her ruling and set another hearing to resolve threshold questions before ruling on the issues addressed at the confirmation hearing.
I receive many calls from people facing the foreclosure of their home. They want to know whether they will remain liable after the foreclosure to their mortgage lender for any part of the mortgage debt. For a period of 90 days after the sheriffs sale, the mortgage lender has the option of filing a lawsuit against the borrower, if the amount received at the sale is insufficient to pay the mortgage in full. Generally, the smaller the amount owed, the less likely it is that the lender will sue. However, if the lender does decide to write off its loss, it may issue the borrower a Federal Form 1099C for the amount of the loss, which then would be considered as taxable income to the borrower. Congress has been exempting owner occupied home foreclosures from taxation on a year by year basis, generally at the end of the applicable year. So there is no guarantee that this practice will continue. Also, if you move out of the house substantially prior to the sale and the lender learns of that, it will consider the property to be non-owner occupied and issue the 1099C.
So how does the borrower protect herself from the sudden imposition of a high income tax bill? Filing Chapter 7 bankruptcy prior to the sheriffs sale will allow the discharge of the mortgage debt. Bankruptcy is one of the few ways to protect against the addition of forgiven debt to your income.
Another option is to attempt to sell the house in a short sale prior to the sheriffs sale. To the extent that the mortgage lender agrees to take less than the full amount due in a short sale, it will not report the difference as forgiven debt to the IRS. That is considered a sale for tax purposes, not a forgiven debt. It is critical that you request and receive a release from your short sale lender from any liability for the difference between the full loan balance and the amount that the lender receives from the sale.
You need an experienced bankruptcy attorney to explain your options. Contact me today to find out how I can help you get a fresh start.
Along with a college education often comes the debt that paid for it. It is not uncommon for graduates to find themselves in six figure debt, and sometimes with no employment opportunities, or in low paying jobs. It would then be logical that bankruptcy could be used to discharge student loans.
WRONG! While bankruptcy is the means to achieve a fresh start in your financial life, not all debt is dischargeable. Student loans are generally protected in bankruptcy proceedings except where the borrower can prove to the Court that the loan is creating an “undue hardship” (under Section 523(a)(8) of the United States Bankruptcy Code), an extremely difficult task.
Debtors seeking to discharge student loan debt must satisfy the Brunner test, which has three parts:
- Based upon your current income and expenses, you cannot maintain a minimal standard of living for yourself and your dependents if you are forced to repay your loans.
- Your current financial situation is likely to continue for a big part of the repayment period.
- You have made a good faith effort to repay your student loans.
Fulfilling all three parts is very difficult. A debtor who is 50 years of age or more, who is living in poverty and who has made a number of payments might be successful, but generally, bankruptcy judges are reluctant to discharge student loans.
You can consider alternatives such as requesting a reduction in payment amount or an extension in the repayment period, applying for a deferment (forbearance) or consolidating loans to get a lower interest rate.
Beware if an attorney leads you to believe that discharging a student loan is a slam dunk – it’s just the opposite! Contact me today for a consultation.