Monmouth County Bankruptcy and Consumer Lawyer Blog

The average professional athlete in the U.S. will make more in one season than most of us earn in our entire lives, however despite those staggering salaries, 78% of NFL players, 60% of NBA players and a very large percentage of MLB players (4x that of the average U.S. citizen) file bankruptcy within just years of retirement. These numbers were published in Sports Illustrated in an article on how and why a high percentage of pro athletes end up financially ruined.

Recently, former NFL star Warren Sapp filed for Chapter 7 bankruptcy (A copy can be seen here). When reviewing his Chapter 7 bankruptcy petition it is no great mystery on how he went bankrupt Sapp lists assets of nearly $6.5 million and liabilities of $6.7 million. Bankrupt.

In Sapp's 59-page Chapter 7 filing, there was no question that he's not a good money manager. He's become yet another example of highly paid athletes and entertainers who go bust after earning more money than most people will ever see in their lifetimes. Sapp, who now earns money as a sports broadcaster for the NFL Network, listed an average salary of nearly $116,000 a month. Clearly Warren Sapp makes more than the typical individual in whatever state he lives in. So how is he in a chapter 7? The answer lies in the nature of his debt. Most of Sapp's liabilities can be classified as "non-consumer" debt--that is, related to business expenses. A big part of the retired pro's financial problems are traceable to a string of failed businesses; this put him in a better position than someone who merely ran up a collection of maxed-out credit cards. Persons with non-consumer debt can be exempt from the means test.
What's interesting about Sapp's filing is he wouldn't be broke if not for his business debt. He has considerable retirement money that can't be touched by creditors and is safe in the chapter 7 bankruptcy.

Every bankruptcy case is unique, and you need an experienced and qualified attorney who will file your bankruptcy correctly. The Monmouth County bankruptcy attorneys at Riviere Cresci & Singer LLC, have experience in the field call today for a free consultation.

Continue reading "What you can learn from a professional athletes Chapter 7 bankruptcy. " »

A New Jersey resident, Dionne Warwick, is bankrupt. The singer and actress who was a regular at the top of the Billboard chart for four decades, has filed bankruptcy. She owes more than $10 million in back taxes and has only $10 left at the end of each month after paying expenses, according to her Chapter 7 bankruptcy petition filed in U.S. Bankruptcy Court in New Jersey on March 21, 2013.

Warwick, 72, is a five-time Grammy winner. Warwick took her first in 1968 for "Do You Know the Way to San Jose?" and her second two years later for the album "I'll Never Fall in Love Again."

Warwick's chapter 7 bankruptcy petition shows the Internal Revenue Service has many claims against Warwick. Its first claim (of nine) goes back to 1991 and the last is from 2007; in total, the petition shows that Warwick owes the IRS nearly $7 million. The state of California also has tax claims against Warwick totaling $3.2 million.

Warwick's chapter 7 bankruptcy petition list her assets at $25,50 including two fur coats, two pairs of diamond earrings, "various gowns and everyday clothing" valued at $5,000, artwork, furniture and a two-year-old laptop. Her debts listed are far greater and approach $11 million.

Warwick's current income in her chapter 7 bankruptcy petition was listed at $20,950.

The meat of Warwick's liabilities are years of back taxes, totaling $7 million, to the federal government and $3 million to the state of California, according to the bankruptcy petition.

Statements made by Warwick's representative stated that she tried to work out payment plans to the Internal Revenue Service and the California Franchise Tax Board for taxes owed. However, they were rejected.

Warwick's petition is no different than the hundreds of petitions that the Monmouth County Bankruptcy Attorneys Riviere Cresci & Singer LLC prepares for its clients each year. Meaning all petitions are in the same format and only are unique in to the debtor as per their finances. So lets take a look under the hood of a celebrities chapter 7 bankruptcy petition:

Personal Property Value

Artwork $5,000.00
Cash $1,000.00
Furniture, lap top $1,500.00
Two fur coats, two pair of diamond earings $13,000.00
Various gowns and everyday clothing $5,000.00
Total $25,500.00

Monthly Income

Performances, after taxes $3,750.00
Royalties $1,000.00
SAG/AFTRA Pension $14,000.00
Social Security $2,200.00
Total $20,950.00

Monthly Expenditures

Garbage $90.00
Gardener $300.00
Home Maintenence $1,000.00
Housekeeping/sitting $5,000.00
Insurance $1,100.00
Laundry/Dry Cleaning $750.00
Personal Assistant $4,000.00
Rent/Mortgage $5,000.00
Telephone $500.00
Transportation $1,000.00
Water/Sewer $500.00
Total $20,940.00

Creditors

1991 taxes $395,957.88
1992 taxes $915,628.70
1993 taxes $215,646.84
1994 taxes $1,184,994.30
1995 taxes $718,288.42
1997 taxes $1,646,225.95
1998 taxes $1,744,240.36
1999 taxes $96,457.29
2007 taxes $37,752.29
Business taxes 1990-1998 $3,246,500.46
Credit card purchases $20,000.00
Levy $268,224.97
Service fees to prior manager $237,512.97

The actual petition can be seen here.

After looking at Warwick's petition her large amount of tax debt stands out. I would bet that this was what caused her to file chapter 7 bankruptcy. The good new for Warwick is that personal income taxes are dischargeable in a chapter 7 bankruptcy. As long as she meets the bankruptcy codes statutory requirements she won't be singing the blues in the future. You can see our previous blog post about discharging personal income taxes here.

Continue reading "Chapter 7 Bankruptcy: It can happen to anyone!" »

Boat Insurance Attorney explains why your boat insurance claim may be denied:

During a storm many were obligated to evacuate as per government mandate. With super-storm Sandy it would be tough to argue that anyone wasn't under advance notice of the storm. Even with advance notice many boat owners may have failed to take any, or reasonable precautions to secure their vessels.

Where boat owners may have failed to take any, or reasonable precautions to secure their vessels courts have ruled that they were liable for damages caused by their vessels despite storms like Sandy. With that said a boat owner who decides to abandon his boat to his insurance company just to get rid of it risks a possible denial of his insurance claim, as well as, a law suit for any damages his/her vessel may have caused.

Here is a hypothetical: A homeowner rents out his dock to an out-of-state boat owner. The homeowner sees that no action is being taken to secure the boat with super-storm Sandy on its way. The homeowner calls the boat owner to advise him of the storms approach. The homeowner gets no response on several attempted phone calls.

The boat owner does nothing to secure the boat and the homeowner was elderly and was not able to do it. Sandy hits and the boat wrecks the swimming pool and patio before ending up in yard. The boat owner files a claim for the storm damages to both the boat and the property damage to the homeowner. However, the claim is complicated by the homeowner's allegation that the boat owner failed to secure his boat and now the boat owners insurance is on notice of the boat owners failure to secure the boat.

The result is the insurance company denies the hull claim based on breach of contract because the insured failed to protect his property; this also leaves him without liability coverage for the damage to patio and swimming pool. The boat owner sues the insurer and the homeowner sues the boat owner. Without an experienced litigation attorney the boat owner might lose lost both lawsuits and wind up with a totally uncompensated loss on the boat, as well, on the hook to pay the cost of repairs for the homeowners pool and patio .

This type of situation can also arise if a boat breaks loose and plows into a dozen other boats for want of taking action in the face of a storm, that boat owner may be also held liable.

A boat owner is legally required to take "reasonable and prudent" actions to prevent his property from damaging others. Reasonable and prudent means such actions as any experienced boater would take.

If an you are faced with an insurance claims dispute with your boat insurance company call our firm today. We will help you build a case so you don't wind up with a total loss on your hands like our hypothetical boat owner.

Continue reading "Why your boat insurance claim might be denied. " »

"I have insurance with Liberty Mutual. After Sandy, we lost power for 5 days. During that time our sump pumps failed and water began to flow up from the ground. We had several inches of standing water. Many items of personal property in our basement were lost. The insurance company is denying our claim, claiming we needed a special endorsement for sump pump failure. We had never been told we needed a special endorsement, nor had this coverage ever been offered to us. In fact we had been reimbursed for other water damage and we had never been told we would not be covered for loss due to a failure of the sump pumps."
Hurricane Sandy Victim

We lost our entire first floor. Furnace, hot water heater, washer/dryer, fireplace, central vac all will need to be replaced. We had flood and homeowners, but no contents for flood. We elected not to get it because never did we imagine the water to come this high and it was expensive. The adjuster wants a letter from a HVAC guy/plumber/appliance repair tech stating that each of those items needs to be replaced. The homeowners adjuster said he would be putting in for a new roof and new storm doors. We have yet to hear any numbers yet. I called in the claims on the 24 hour hotline as soon as the flood waters entered the house. It took the adjusters one week to get out here. By that time we had the whole first floor gutted. We took pics and saved everything. If we didnt have money in the bank and the muscles to start knocking walls down and tearing everything else, we would be in big trouble. No thanks to our insurance company.
Hurricane Sandy Victim

"I have several friends who's boats were badly damaged and are starting to get a bit annoyed that no one has reached out to them. My area was hit pretty hard but I know other were much worse I consider myself lucky. My friends boat was just in front of mine and likely a total loss the boat to my port is a total loss all the boats around me floated off their stands and sustained significant damage. My boat was blocked higher due to it's draft so I didn't float however other boats and even docks hit into my boat so I do have damage that will need to be repaired. I just happy to still have a boat and I know I can make repairs and still be in this spring."
Boat damaged in Sandy.

Feel free to leave your comments, in the comments section, below about your experiences with your insurance carrier after the storm. Remember knowledge is power. The more you know about other people's experiences and the more they about yours helps the collective bunch in getting treated fairly.

Continue reading "How are you being treated by your insurance company? Hurricane Sandy Victims speak out. " »

From New Jersey's Department of Banking and Insurance these are the rules for policy cancellation.

Can Your Policy be Cancelled?

Terminations, Denials and Cancellations

New Insurance Policies - When policies are first issued, the insurer has a right to cancel that policy any time within the first 60 days for any reason not otherwise prohibited by law. The cancellation is not effective until at least 10 days after the insurance company mails or delivers to you a written notice of cancellation.

Renewal on Altered Terms - Sometimes an insurer will renew a policy, but will raise the rates or make the terms less favorable. An insurer is not allowed to change the terms of coverage unless it gives written notice of the changes to the insured, along with the renewal offer. To be effective, the notice must be mailed no less than 30 days before the renewal date.

Non-renewal - Non-renewal of a policy refers to the termination of a policy at its expiration date. If the insurance company decides that it does not want to renew your policy, it must mail or deliver to you a written notice at least 30 days before the expiration date. The non-renewal or cancellation notice must include the specific reason for the non-renewal or cancellation as well as the facts that make that reason applicable to your policy. Refer to your insurance policy for a list of the reasons your company may non-renew your policy.

Termination for Non-Payment of Premium - Any insurance company will terminate coverage if the premium is not paid on time. There is no grace period for premium payments for homeowners insurance. Always be sure to pay your premiums promptly." If you are facing a coverage issue and the insurance carrier did not give your proper notice call on of or Howe Owners insurance attorneys today.

Continue reading "How and when can my Homeowners' Policy be cancelled?" »

Boat Damage Lawyer

Hurricane Damage Attorneys in Monmouth County, Serving all of New Jersey.

Many boats and personal watercraft were destroyed or damaged by Hurricane Sandy which devastated the coastal communities in New Jersey. Your insurance policy should cover the damages caused by super-storm Sandy. However, when you turn to your insurance company for assistance, you may find that they won't cover the full extent of the damage.

The Attorneys at Riviere Cresci & Singer LLC knows that boat owners frequently encounter grossly undervalued or denied insurance claims, and must fight with insurance companies to get the coverage they paid for. Insurance companies will make every attempt to pay you the least amount possible for the damage to your boat.

Our Ocean County insurance claim attorneys will review your policy and see to it that you receive all the benefits it contains. Whether your boat is totaled or if the damage is reparable, he will work to get you the maximum benefits that you deserve.
We can help you when you our boat has experienced damage due to a hurricane, tornado, hail, flood or other "acts of God" and you have not had the damage appraised. You have had the damage appraised and have a dispute with your insurance company over what damages are covered under your insurance policy. Your claim for boat damage has been denied by your insurance company. Your insurance company has paid only a portion of your claim

Seek representation before appraisal or you may find that you will be facing an undervalued payout on your claim. Adjuster's are trained to make sure their insurance company pays out the least amount possible. Therefore, it is in your best interest to hire an attorney experienced with boat damage claims before the damage appraisal. Our firm will represent you during the appraisal, ensuring that your appraisal is fair and that all damage is properly accounted for.

Continue reading "Boat Damage Lawyers: Don't sink your insurance claim!" »

Many Monmouth and Ocean County Property owners whose houses were damaged by Hurricane Sandy's storm surge may be unpleasantly surprised to find their standard homeowner's insurance doesn't cover flooding.

Basic home owners' insurance policies don't cover rising water, storm surge, mudflow or similar damage. If you don't have flood insurance, your homeowner's insurance isn't going to pick up the tab for the costs repairs, replacement and so forth.
Most victims of flood damage along the coast or in flood-prone areas were generally required to have flood insurance if there was a mortgage on the property. A standard flood insurance policy is 20 pages of legalese written by the insurance companies' attorneys and within that 20 pages there lots of exclusions.

When purchasing food insurance you may have had the option to take personal property coverage with your flood insurance. Even with personal property coverage, it will only pay the actual value and not the replacement value. For example: Three years ago, you bought an appliance for $3,000. Today, your policy says it's worth about $1,500 - that's how much flood insurance will pay you, even though going out and buying appliance today will cost you more

The maximum Federal Emergency Management Administration coverage for flood insurance is $250,000, so some property owners may still come up short if their home is badly damaged.

If you are a flood victim and did not have flood insurance the most frequent question that our flood damage attorneys field is this:

Q: My home/business was wrecked by flooding. Why haven't I received any FEMA money or other federal aid?

A: To be eligible, the area needs to be declared a federal disaster area by President Barack Obama. President Obama made his Major Disaster Declaration on October 30, 2012 under New Jersey Hurricane Sandy (DR-4086). The following counties under PA-B include direct federal assistance: Atlantic County, Cape May County, Essex County, Hudson County, Middlesex County, Monmouth County, Ocean County and Union County

FEMA sssistance can include grants for temporary housing and home repairs, low-cost loans to cover uninsured property losses, and other programs to help individuals and business owners recover from the effects of Hurricane Sandy. To find out more about if you are eligible for FEMA assistance click here.

Continue reading "Flood Damage Lawyer answers: What does my flood insurance cover? " »

According to fanniemae.com the website says, ""Our thoughts and prayers are with all of those who have been affected by the storm," says Leslie Peeler, senior vice president of Fannie Mae's National Servicing Organization. "We understand the disruption that a storm such as Sandy can have on people's lives, and we've made it easy for our mortgage servicers to offer relief to those who need it."

Homeowners with Fannie Mae loans whose homes were damaged by Hurricane Sandy and who will have difficulty paying their mortgage should reach out to their mortgage servicer (the company listed on their monthly mortgage statement) to see if they qualify for a 90-day mortgage forbearance. Forbearance temporarily suspends or reduces mortgage payments, and can be extended by mortgage servicers beyond 90 days on an as-needed basis. In addition, homeowners with Fannie Mae loans are eligible for free information and assistance at a Fannie Mae Mortgage Help Center.

To find out if your loan is owned by Fannie Mae, use this link or call 1-800-7FANNIE (1-800-732-6643). If your loan is not owned by Fannie Mae, use this link to see if Freddie Mac owns your loan."

Continue reading "Mortgage Assistance for Homes impacted by Hurricane Sandy " »

Now that Hurricane Sandy as passed; New Jersey residents face the after-storm of getting insurance monies to help them get back on their feet This means a lot of time spent on the phone with insurance adjusters, lots of paperwork and frustration! In a time when those impacted by the storm are all already coping with large amounts of stress they will also have to negotiate with their insurers to get the cash they need to repair wind, water and other storm damage.

Homeowners' insurance companies have implemented measures to minimize what they have to payout as weather has increased in severity. Insurance companies have raised rates, written exceptions from coverage and tucked in new wind and hurricane exclusions and deductibles. Luckily for New Jersey residents Hurricane Sandy was not actually a hurricane when it made landfall and Governor Chris Christie signed Executive Order 107, prohibiting insurance companies from imposing costly hurricane deductibles on New Jersey homeowners.

Homeowners still need to act cautiously and be mindful when speaking with the insurance companies if they want to get their claims paid timely and fairly. When in doubt call one of our experienced hurricane property damage attorneys her at Riviere Cresci & Singer LLC. Early planning and strategy are the keys to your success. Here are some words to help guide you.

GET TO KNOW YOUR POLICY

Now is the time to find a copy of your homeowner's insurance policy and see what kind of coverage you actually have. One of our experienced storm damage attorneys can help you determine your coverage. Keep in mind that many insurers have "anti-concurrent causation clauses" in policies now that say if you have damage from multiple causes, say wind and flooding, where wind is covered but flooding is not - they won't cover anything at all. New flood insurance law passed this summer requires insurers to use federal data to allocate the costs in cases where a home is totally destroyed by flooding and wind damage.

Homeowners living near the shoreline most likely have federal flood insurance; their mortgage lenders require it. However, flood coverage, may be disappointing to holder of the policy. It does not cover everything! You're protected for structural damage and the cost of replacing basement utilities like electrical panels and heating units, but all of those things that you have collected over a lifetime and stored downstairs probably are not.

What about your car? If the water rises so high in your neighborhood it floods your car, you're probably covered by your comprehensive auto policy.

DOCUMENT YOUR DAMAGES

If your home was affected by the Sandy, document it carefully before you move anything and get images as soon as possible. Take video and pictures liberally. The more evidence you have of your damages the better. It may instinctual to start cleaning up but, if possible, leave the damage as it is until an insurance adjuster arrives on the scene. At a minimum try to retain all damaged items until the adjuster has had a chance to look at them.

Lots of people had fridges full of frozen food product. Homeowners' policies typically do cover the cost of food that spoils when the power goes down. It may not make financial sense to put in such a claim as this type of claim will be subject to your policy's deductible of $250, $500 or more. That means that unless you have a large freezer full of high priced foods, you may not find it worth filing for.

FILE CLAIMS PROMPTLY

You may get faster attention if you submit a claim quickly. Just like New Jersey residents had to wait in line for gas after super storm Sandy they will have to do the same with insurance claims. So get your claims in early and be first in line. This gives claimants the best opportunity for a timely and fair recovery. Those who wait longer will find that the insurance companies learn as they handle more claims. In the process they get wiser and learn of new ways to deny claims or minimize its payouts. It is also important to keep in mind that Federal flood insurance typically carries a 60-day deadline (Typically extensions are granted after extreme events). Always keep deadlines calendared; missing them could leave you without coverage.

BE CAREFUL WHAT YOU SAY

Before making repairs call your insurer and let them know that you need to spend money to make immediate repairs. However, don't speak about the cause of the damage! The insurance company can use your account of the cause the damages to deny your claim. You can tell them what is damaged but not how it got damaged. For example don't say, "that my home was damaged by flooding." Instead just say that my home has been damaged.

GET DRY

Get in touch with a water removal company to dry everything out. These companies will bring in special equipment including commercial fans, to get things dry. Getting your stuff dry is really important because mold is a very real result of flooding. Your policy may not cover mold!

Check with your insurer before laying out large amounts of money for repairs, though. It may refuse to pay. They typically will pay small amounts for immediate fixes, such as a tarp to cover that gaping hole in the roof. Of course, keep all of your receipts.

GET READY TO NEGOTIATE

Once insurance adjusters look over the damage, they will determine the size of your payout. If that figure seems too low, ask the adjuster to show you the contract language and justify the proposed amount.

If you're still dissatisfied, get a second or even third opinion on the cost of repairs from independent contractors. Get an attorney on board! One of our experienced attorneys here at Riviere Cresci & Singer LLC can help you get maximum insurance proceeds.

Continue reading "Tips from Hurricane Sandy Damage Lawyers" »

A Cram-down, commonly referred to as a "strip-off," is when a debtor strips off and avoids the secured status of the second mortgage because there is insufficient value in the property to secure any part of it. This is a great way for an underwater homeowner to dry out their property as will be explained further in this post.

Debtors have the ability to cram down second mortgages in Chapter 13 bankruptcy cases pursuant to Bankruptcy Code § 1322(b)(2). Unfortunately the New Jersey District court has joined a majority of courts, when it ruled in Cook v. IndyMac Bank, that the debtor, Cook, could not use section 506(d) of the Bankruptcy Code (the "Code") to "strip off" a wholly unsecured junior lien.

It is the Chapter 13 plan which will "strip-off " the second mortgage. In New Jersey it is not required to file an adversary proceeding to do so. A debtor may modify a secured creditor's claim and cancel its lien to the extent permitted under 11 U.S.C.S. §§ 506(a),1325 by so providing in a chapter 13 plan without an adversary proceeding, objection to claim, or motion under Fed. R. Bankr. P. 3012. Lee Servicing Co. v. Wolf (In re Wolf), 162 B.R. 98 (Bankr. D.N.J. 1993)

In order to cram down a second mortgage, the house must be underwater to the extent that there is no equity whatsoever covering the second mortgage. In other words, the value of the house must be less than the balance due on the first mortgage.

The debtor provides evidence of the homes value by supplying the Court with documentation supporting the valuation of the home. When a mortgagee (lender) challenges the appraisal, which is not common, then the Bankruptcy Court will schedule an evidentiary hearing. At this hearing the Court decides what the value of the property is. The defense of the second mortgagee will most likely be that the debtor's appraisal is inaccurate, and that the house is actually worth at least a dollar more than the balance due on the first mortgage.

Here is a real example of Lien Stripping in New Jersey*:

A single person was living in her home. Her home had a market value of $200,000. Her first mortgage has a principal amount of $180,000 and her second mortgage had a principal amount of $80,000. The first mortgage was secured by the property value. Initially it appears that the second mortgage does have value in the home that secured its lien.

However, the second mortgage was completely unsecured because even though there was equity of $20,000 remaining after the first mortgage, in New Jersey the debtor can use his/her homestead exemption which protects $21,625 above the first mortgage (for a married couple filing jointly this amount would be doubled). In this case the debtor was protected for a home value up to $201,625.

So in this Chapter 13, we filed a plan stripping the second mortgage. The second lien was subsequently treated as an unsecured creditor. In this case the 2nd mortgage will received pennies on the dollar. The plan proposed was a 5% plan, the 2nd mortgage holder was to receive $4,000 (5% of $80,000) over a 5 year period and then nothing more. After this bankruptcy is discharged, meaning they stick to and complete the Chapter 13 bankruptcy plan the homeowner/debtor will get to keep her house. At the end of her plan her home would have dried out the second mortgage.

*Numbers, percentages and parties changed for simplicity.

Continue reading "Strip-Off that second mortgage in a Chapter 13" »

A common telephone call is one from a debtor expressing their concern that they forgot to list a creditor in their bankruptcy petition. Furthermore, they are concerned that they will still owe the debt as a result of their mistake.

Depending on whether the case is a Chapter 13, or Chapter 7, provides for differing results when a debtor forgets to list a creditor. We seek to avoid this mistake by having our debtors pull copies of their recent credit reports to make a forensic check of all of their reported debts. This generally provides us with the most up-to-date debt information.

However, the situation does arise where a creditor is simply omitted. This is nothing to worry about if it is an honest mistake. In cases where a debtor lacks good faith i.e. the debtor had known about the debt for years, but neglected to amend their petition earlier. Or where the debtor's omission was the result of fraud, recklessness or intentional design, this can result in the debt not being discharged because it would it would prejudice the creditor's rights.

So, if you see a debt missing in bankruptcy paperwork bring it to your attorney's attention. He/she will amend the petition if necessary. In most Chapter 7, cases it will not be necessary. This is because generally most Chapter 7, cases have no assets and the Trustee will furnish a report that he/she made a diligent inquiry into the financial affairs of the debtor(s) and into the location of the property belonging to the estate; and that there is no property available for distribution from the estate over and above that exempted by law, which is available to the listed creditors. In New Jersey there is long standing case law, Judd v. Wolf, that makes it very clear that in a no asset chapter 7 case a debt to an omitted creditor is discharged and the debtor is not obligated to specifically notify the creditor.

That said, the suggestion of sending the omitted creditor a letter letting them know that you filed for bankruptcy, with a copy of your Discharge Order enclosed, is a good idea. This way they will know not to attempt to collect the debt.

Finally, the question arises at what to do if your Bankruptcy case is already closed i.e. you have received your discharge and final decree. In the case of a no asset case the above still applies. In the case of a of Chapter 7, case with assets you should contact Riviere Cresci & Singer LLC to see about reopening your Bankruptcy case to have the forgotten debt included in your original Bankruptcy case and ultimately discharged.

Continue reading "What Happens When a Debtor Forgets to list a debt?" »

Can I Discharge my Taxes in Bankruptcy?

The answer to this question is time sensitive. Most often debtors come into our offices seeking advice on their back income taxes. As you will read below, they can be discharged if you meet the criteria outlined. Most other types of taxes cannot be eliminated in bankruptcy.

What Taxes Are Dischargeable In Chapter 7 Bankruptcy?

There is a series of inquires that must be made about taxes in order to determine whether income taxes can be eliminated in a personal bankruptcy filing. Finding the answer can be quite confusing and you should consult an attorney to find if and when your taxes might be dischargeable. If you made a fraudulent return or willfully attempted in any manner to evade or defeat a tax this would subject your taxes to the exceptions to a discharge provided in 11 USC § 523. An exception from the discharge simply means that it is not discharged (eliminated). The IRS can object to efforts to discharge tax debts if they feel that the taxpayer filed fraudulent returns, willfully attempted to evade taxes, or engaged in a pattern of tax evasion.

First Inquiry: More than three years must have elapsed from the date that the tax return was "last due". The 3-year period commences from the most recent date the tax return was due, including any extensions to file. For example, if the taxpayer filed an extension to August 15, the 3-year period starts on that date. Otherwise, if no extension was filed the date to use to calculate the 3-year period would be April 15, of the year proceeding the tax year being considered.

Second Inquiry: Second Inquiry: In order to qualify for dischargeability the taxpayer must have filed his/her tax return more than 2 years before filing the bankruptcy, pursuant to §523(a) (1)(B). If the IRS has filed on behalf of the taxpayer, because the taxpayer failed to file, this does
not qualify as a "return."

Third Inquiry: Third Inquiry: More than 240 days must have elapsed since the date that the IRS "assessed" the tax obligation. Tax assessments can be confusing! Obtain a copy of your tax transcripts and review them with your attorney to determine tax assessment dates

If you answered yes to all three of the above inquires your taxes are dischargeable.

Liens may still be in place after taxes are discharged: Even if you are able to discharge federal tax obligations that you owe to the Internal Revenue Service, they may still have a lien on your assets if the IRS obtained a federal tax lien.


What about Discharging New Jersey Income Taxes?

The same bankruptcy rules that apply to the IRS also apply to state tax obligations.

What Taxes Cannot Be Eliminated in Bankruptcy Filings?

Most other types of taxes cannot be discharged in a bankruptcy proceeding. These include withholding taxes, fiduciary taxes, excise taxes, and sales taxes.
On a final note the burden is on the IRS to object to the discharge of a debtor's income taxes. However, if the income taxes are in fact non-dischargeable based on the basic rules, the failure of the IRS to object does not make the taxes dischargeable.

Continue reading "Can I Discharge my Taxes in Bankruptcy?" »

Military service presents a unique opportunity to serve our country. However, sometimes while performing those duties which call during times of service, difficult financial stresses may appear on the home front. Our Country's representatives have enacted laws to help those in the military who are overwhelmed by debt in the United States. Here in New Jersey we have many military bases including McGuire Air Force Base, Fort Dix, Fort Monmouth, Picatinny Arsenal, Loran Support Unit, Training Center Cape May, Naval Air Engineering Station and Naval Weapons Stations Earle.
Generally speaking if you have more income those households the same size in the same county in New Jersey, there is a presumption that you cannot file a Chapter 7 bankruptcy. As a bankruptcy lawyers in New Jersey we have filed numerous Chapter 7 bankruptcies for individuals and families alike who were beyond the income limits of the means test by working the test's numbers downward to get our debtors under the presumption. Those same debtors went on to receive a discharge of their debts.
Veterans and Active duty military have unique set of exemptions to help them with the means test. The means test (income test) does not apply to certain Disabled veterans. If your disability is rated at least 30% and more than half of your debt was incurred while you were on active duty or performing a homeland defense activity, you don't have to take the means test. This means you get to file for Chapter 7 bankruptcy regardless of how much income you make.
For our reservists and national guardsmen, Congress has made a special exemption from the bankruptcy means test. For members of the Reserves or National Guard, who file bankruptcy while on active duty, or within 540 days after release from active duty, they are excluded from all forms of means testing.
Active duty servicemen and servicewomen are not excluded from the means test. However, active duty personnel serving in a combat zone are also excused from completing pre-bankruptcy credit counseling. Furthermore, active duty personnel receive protection under the Servicemembers Civil Relief Act (SCRA). The SCRA protects active duty military personnel from default judgments and evictions, and can even reduce the service member's interest rates.

Continue reading "Military Service and Bankruptcy in New Jersey " »

How can I pay my Bankruptcy Attorney?

Here a question that is probably on your mind, "If I'm going bankrupt, how can I afford to pay an attorney?" Here is an answer you will be happy to hear: Here at Riviere Cresci & Singer LLC we flexible and easy payment plans. We will set up a plan that allows you to pay what you can afford, over a period of time which is convenient for you. Still wondering how you will make any kind of payment plan? Keep in mind, once you have made the decision to file bankruptcy, you may be able to stop making payments on most of your unsecured debt like credit cards, medical bills, personal loans, etc. Eliminating these payments from your budget will free up some of your income, which can then be used to help pay for your bankruptcy fees.

When filing a Chapter 7, the Bankruptcy Code requires that your attorney fees be paid in full before your bankruptcy petition is filed, otherwise the lawyers' fees are discharged along with the rest of your dischargeable debt. This is set up this way to ensure that you truly have a fresh start and the your attorneys don't take money out of the bankruptcy estate to the detriment of the creditors.

When filing a Chapter 13, the courts will allow the attorneys to collect only a portion of the fees and have the remainder of the attorneys fees paid in the Chapter 13 bankruptcy plan. This makes it financially easier to get your Chapter 13filed and pay the attorneys over a 3 to 5 year period.

Everyone's financial circumstances are different and you may be facing deadlines. You may be facing circumstances that prevent you from taking your time to pay (and file). You may have a pending foreclosure, repossession, and/or judgment/writ of execution. These types of creditor actions make timing an issue. With such a timing issue you may have no choice but to get your bankruptcy filed before a specific deadline, and in that case, you will have to pay in full when filing a Chapter 7, in order to get your bankruptcy filed so it protects you and your assets. Otherwise a Chapter 13, can still be paid a reduced and paid through a plan.

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Can I file Bankruptcy Again? How many times can I file Bankruptcy?
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Can you file twice? Can you file a third time? The simple answer is yes. But repeat filers or what are sometimes referred to as "serial filers." Sometimes those who filed bankruptcy in the past may find it in their in future. There are important dates and time considerations that must be reviewed by your Bankruptcy attorney before deciding if you can file again and then furthermore, when you can file again.
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"Can I File Bankruptcy Again?"

This question is the starting point to your inquiry. As mentioned above the simple answer is yes. But your inquiry does not end there! There are waiting periods that are in the Bankruptcy Code so it raises the question: how long you have to wait?

What the Bankruptcy Code says about filing a second Bankruptcy Case

The waiting period begins on the date you filed your first bankruptcy petition and ends on the date you filed your second bankruptcy petition. So for example if you filed your first Chapter 7, bankruptcy on July 1, 2006 and you received a discharge on October 30, 2006. In order for you to qualify for another discharge in your second CH 7, bankruptcy, you must wait until after July 2, 2014 to file your second CH 7 bankruptcy to get a discharge. This date filed to date filed formula works the same for filing various chapter to chapter (1st filing = 7,11,12,132nd filing = 7,11,12,13). The thing that does change is the time that you must have in between those dates from filing to filing (1st filing = 7,11,12,13(time ????) 2nd filing = 7,11,12,13).

The Code also tells us that you only have to wait if you received a discharge in your prior case. If you did not receive a discharge, you can file immediately. For example, if you filed a Chapter 13 bankruptcy case, and it was dismissed because the plan was not feasible, you do not have to wait to file a second case (provided you meet all other code requirements).

The Code also tells us that if your prior case was a Chapter 13, bankruptcy case and you were in a plan that paid back your unsecured creditors at least 70%, you do not have to wait (provided you meet all other code requirements).

The final important note is that the waiting period does not prevent you from filing again; it just prevents you from getting a discharge. You can still file without waiting -- you just do not get the benefit of the discharge. Why would you do this? If the sole purpose of re-filing is to stop foreclosure, you probably do not need to wait several years, as you still get the benefit of the bankruptcy stay in a Chapter 13 case as well as the ability to cure arrears with a payment plan.

8 Years Before debtor files for bankruptcy

Prior bankruptcy prevents Chapter 7 discharge

A debtor cannot receiving a discharge under Chapter 7 if he or she received a discharge in a Chapter 7 or Chapter 11 bankruptcy which was filed within 8 years before the present case is filed. [11 U.S.C. § 727(a)(8)]. So you must wait 8 years when (1st filing = 7,11 (waiting period 8 years) 2nd filing = 7,11).

6 Years Before debtor files for bankruptcy

Prior bankruptcy prevents Chapter 7 discharge

A debtor cannot receive a discharge under Chapter 7 if he or she received a discharge in a Chapter 12 or Chapter 13 bankruptcy which was filed within 6 years before the present case is filed. [11 U.S.C. § 727(a)(9)] So you must wait 6 years when (1st filing = 12,13 (waiting period 6 years) 2nd filing = 7). There is an exception here. An individual can file a Chapter 7 less than six years after filing a Chapter 13 in which a discharge was granted, the individual will not receive a discharge in the Chapter 7 unless the court in the Chapter 7 determines that in the Chapter 13 the individual: (a) Paid 100% of the unsecured debts, or (b) Paid 70% of the unsecured debts, the plan was in good faith and the plan was the individual's best effort.

4 Years Before debtor files for bankruptcy

Prior bankruptcy prevents Chapter 13 discharge

A debtor cannot receive a discharge under Chapter 13 if he or she received a discharge in a Chapter 7, Chapter 11 or Chapter 12 bankruptcy which was filed within 4 years before the present case is filed. [11 U.S.C. § 1328(f)(1)] So you must wait 8 years when (1st filing = 7,11,12 (waiting period 4 years) 2nd filing = 13).

2 Years Before debtor files for bankruptcy

Prior bankruptcy prevents Chapter 13 discharge

A debtor cannot receive a discharge under Chapter 13 if he or she received a discharge in a Chapter 13 bankruptcy which was filed within 2 years before the present case is filed. [11 U.S.C. § 1328(f)(1)] So you must wait 2 years when (1st filing = 13 (waiting period 2 years) 2nd filing = 13).

An individual may have a good reason to file a Chapter 13 even though the individual is not eligible for a discharge because of a previous bankruptcy. The individual may use Chapter 13 to stop a foreclosure of a house or a repossession of a car or garnishment of wages, by catching up the house or car payments or paying creditors in full without discharging any debt. Some judges allow such a Chapter 13 to strip-off a second mortgage that could not be stripped-off in a previous Chapter 7. A Chapter 7 followed by a Chapter 13 is nicknamed "Chapter 20."

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