Monmouth County Bankruptcy and Consumer Lawyer Blog

In most cases a bankruptcy should have no impact on eligibility for federal student aid.
Title IV grant or loan aid (including the Perkins loan program) will not be denied an applying student who has filed bankruptcy exclusively on the record of their past Bankruptcy. Financial aid administrators are not permitted to use a former bankruptcy to substantiate an unwillingness to repay student loans. Schools will however continue to consider the student's post-bankruptcy credit history in assessing an applicant's willingness to repay the loan.

If the applicant's have been fiscally responsible post-bankruptcy and there are no delinquencies or defaults on student loans currently in repayment, the student should be eligible for additional federal student loans. If the student federal student loans are in default and were not included in a bankruptcy, the student will not be able to get further federal student aid until he/ she resolves the problem. If the loan was discharged in bankruptcy after the borrower defaulted on the loan, it is no longer considered to be in default. Getting a student loan discharged in bankruptcy is no easy task. The party filing bankruptcy would have to meet the very high threshold of Bankruptcy law which only allows a discharge of a student loan if having to pay it will create an undue hardship. Unfortunately, that's a pretty tough standard to overcome. Courts have considered this to mean showing that you can't provide a minimum standard of living for yourself and your dependents if you have to repay the loan.

What about the Parents who apply for a PLUS loan (or graduate students applying for a Grad PLUS loan)? Here the rules are different. Parents can be denied a PLUS loan if they have an adverse credit history; adverse credit history includes having had debts discharged in bankruptcy within the past five years. If this is the case, the parents may still be eligible for a PLUS loan if they have a cosigner without an adverse credit history. All hope is not lost however, because if the parents are turned down for a PLUS loan because of an adverse credit history, the student may be eligible for an increased unsubsidized Stafford loan.

The anti-discrimination rules appear in 11 USC 525(c):

1. A governmental unit that operates a student grant or loan program and a person engaged in a business that includes the making of loans guaranteed or insured under a student loan program may not deny a student grant, loan, loan guarantee, or loan insurance to a person that is or has been a debtor under this title or a bankrupt or debtor under the Bankruptcy Act, or another person with whom the debtor or bankrupt has been associated, because the debtor or bankrupt is or has been a debtor under this title or a bankrupt or debtor under the Bankruptcy Act, has been insolvent before the commencement of a case under this title or during the pendency of the case but before the debtor is granted or denied a discharge, or has not paid a debt that is dischargeable in the case under this title or that was discharged under the Bankruptcy Act.
2. In this section, "student loan program" means any program operated under title IV of the Higher Education Act of 1965 or a similar program operated under State or local law.

Private loans are not governed by the same set of rules. Most bankruptcies will have an impact on eligibility for private loan programs. Many private loan programs, including school loan programs, have credit criterion that disqualify people with a bankruptcy within the past 7 or 10 years from borrowing without a cosigner with better credit. If a parent went through bankruptcy, it generally will have zero no impact on their children's eligibility for private loans, unless of course the child needs the parents to cosign the loans. Remember bankruptcy, when used for the right purposes, is not about punishment it is about forgiveness.

Continue reading "Bankruptcy: Borrowing for College Tuition 101 " »

You owe thousands of dollars to various creditors, including credit card companies and healthcare providers. However, you have a decent stash of cash that cannot be protected via an exemption and you are afraid that the court will take your cash and distribute it to your creditors. Sound familiar? We all want to hold onto our ex presidents!

Obviously, you would rather benefit from this cash reserve than have the trustee take it from you and get nothing in return. The problem, however, is that generally you cannot make large purchases prior to filing your petition. Any such payments will be considered to be a preferential payment, fraudulent conveyance and/or attempting to hide your assets from your creditors. These large purchases can be rescinded by the trustee, forcing you to give back the goods or services purchased and your estate getting back the cash for the trustee to distribute to your existing creditors. So how can you benefit from this cash reserve before the trustee gets to it and leaves you with nothing?

There are some loopholes that enable to benefit from the cash before the trustee can get to it. Some things you can do with your cash, which will give you some benefits, are:

 Setting up an Individual Retirement Account or IRA and depositing the maximum amount allowed by law (see discussion below)
 Making prepayments on car or home insurance
 Bringing your auto and mortgage payments current--and then filing your bankruptcy petition after waiting 90 days
 Paying your bankruptcy case filing-fees and attorney fees
 Obtaining needed dental or medical treatment
 Paying for needed home and car repairs
 Catching up on delinquent child support or alimony payment
 Reducing income tax and student loans
 Purchasing household supplies, groceries and other non-"luxury" needed goods
 Fund a college savings plan N.J.S.A. 18A:71B-41.1.gives NJBEST cccounts protection; 11 USC 541(b)(5) of bankruptcy code protects college saving plan money if it has been in the plan for more two years.

Hopefully, by doing these things, your cash balance will be low enough to find an exemption for it and protect it from seizure by the trustee.
Some things that you cannot do with your cash are:
 Give the money to friends or family members as gifts
 Repay personal loans to family members, friends, or personal business associates if the repayment would bring the amount repaid to that creditor for that debt to $600 or more for the year prior to the filing of your bankruptcy petition
 Repay commercial debts if the repayment would bring the amount repaid to that creditor for that debt to $600 or more for the 90-day period prior to the filing of your bankruptcy petition
 Fraudulently transferring the money to someone else's bank account without accounting for it on your own bankruptcy petition

In order to for your money to be protected when funding an IRA, there are several conditions that must be met. First, you must have been making regular contributions to your retirement account prior to declaring bankruptcy. This means you cannot put all your cash into your IRA right before bankruptcy and expect it to be protected. IRA protection only extends insofar as you weren't intentionally trying to hide money from debtors.

Secondly, your IRA assets cannot total more than one million dollars. However, any amount that was rolled over from another account, like a 401(k), received unlimited protection. Thus, you still receive the benefit of up to $1,000,000 in protection in your IRA account plus unlimited protection for rollover funds.

As with any aspect of Bankruptcy knowledge, just like your beloved cash, is KING. Lawyer up when deciding whether Bankruptcy is right for you. Your wallet and those that depend on it will thank you.

Continue reading "Cash is King: Can I still spend it going bankrupt?" »

Inherited assets which arise during bankruptcy can present issues because they are not exempt under New Jersey bankruptcy law and are subject to liquidation as part of the bankruptcy estate that is created when a bankruptcy is filed. However, there are estate-planning devices that can help to protect potential assets that may be inherited during a bankruptcy. These are called spendthrift trusts.

A well drafted spendthrift trust, along with certain built in discretionary powers to the Trustee of the Trust can fully protect assets which may be inherited during bankruptcy. This type of asset shelter can be a good idea if a loved one is in poor health, financially turbulent or facing a divorce proceedings. Also, it is a good way to leave an inheritance to family members facing bankruptcy and will provide the greatest benefit to their successors, while also protecting the money from their family member's creditors.
The law is proscribed in , which provides that an "a restriction on the transfer of a beneficial interest of the debtor in a trust that is enforceable under applicable nonbankruptcy law is enforceable in a case under this title." This language preserves restrictions placed on the transfer of the debtor's interest in a trust commonly referred to as "spendthrift trusts." Section 541(c)(2) is written in such a way that a spendthrift trust does not become part of the bankruptcy estate when a beneficiary of such a trust files for bankruptcy. When an asset is not part of the bankruptcy estate (in this case a "spendthrift trust"), it is not subject to liquidation by the bankruptcy trustee, and is therefore sheltered from potential creditors.

The issue then becomes what qualifies as a "Spendthrift Trust" under New Jersey Law. A Spendthrift Trust is a trust that is structured so that it is non-transferrable by the beneficiary. This means that the beneficiary has no control over the contents (assets) of the trust, and will only receive whatever benefits the trust provides. As previously stated certain "discretionary" language may be drafted into a trust and anything that gives the trustee less than complete discretion to distribute or not, income and/or principal to any beneficiary of the trust, will effectively reduce the ability of a trustee to shield the trust assets from a beneficiary's creditors

Therefore, a spendthrift trust that qualifies under New Jersey law with complete trustee discretion is safe in bankruptcy. A spendthrift trust (without complete discretion given to the trustee) will still be safe in bankruptcy however; the protection would only apply to the corpus of the trust and not to distributions that may be made in the 180 following the filing of a bankruptcy case. Those distributions would be part of the estate, would not be exempt and would therefore be subject to liquidation by the bankruptcy trustee.

Because of the intricacies of Bankruptcy law and their interplay with Trust and Estate law, any pre-bankruptcy estate planning of this sort is best done with the advice of a qualified Bankruptcy Attorney, as well as, a Trusts and Estates attorney.If you are thinking of filing Bankruptcy our FAQ's section answers many of the questions filers might have.

Continue reading "Is My Trust Safe in Bankruptcy?" »

IRAs started appearing in Americans' Investment portfolios in the 1970's when Congress enacted far-reaching pension and retirement reform measures in the Employee Retirement Income Security Act of 1974 (ERISA) . When preparing a consumer Bankruptcy petition an attorney will generally include traditional IRAs on Schedule B of the bankruptcy petition and protect them by way of exemption on Schedule C of the petition. The circumstance is becoming more common whereby the individual who originated an IRA is not the one filing the bankruptcy. Instead, the filing person is one of the designated beneficiaries who are to receive the balance of IRA account upon the IRA account(s) originator(s) death. Because IRAs have been around since the 1970s it is commonplace that individuals with IRAs die and their IRAs pass to beneficiaries. Inherited IRAs are IRAs that are received by individuals from someone other than their spouses. The good news is that IRA's are exempt in the IRA inheritor's bankruptcy. In the Tabor case the bankruptcy court for the Middle District of Pennsylvania ruled that inherited IRAs are exempt under section 522(b)(3)(C). See, Bierbach v. Tabor (In re Tabor), 2010 Bankr. LEXIS 2051 (Bankr. M.D. Pa. 2010).

In Tabor the IRA in dispute was originated and funded by the Debtor's (person filing bankruptcy) mother, Bernice Simpson. At her death on June 27, 2004, at the age of 79, Mrs. Simpson was the owner of four IRA accounts. Each account named the Debtor and her brother as co-beneficiaries. Following her death, the four accounts were divided between the surviving beneficiaries. The funds being held for Debtor's benefit were transferred by the custodian to an inherited IRA account that listed Debtor as the beneficiary. Between September 15, 2004 and May 3, 2007, Debtor took eleven distributions totaling $132,300 from the account. On the date of the petition, her inherited IRA was valued at $105,102.15. Id.

The Tabor court went on to acknowledge that the Internal Revenue Code treats inherited IRAs differently than it does accounts funded by an individual's own employment earnings in certain respects .Id. at 8. It then noted that BAPCPA expanded the exemption status of IRAs to include any retirement funds held in an account exempt from taxation under specific Internal Revenue Code sections, without reference to whether such funds were necessary for the support of the debtor or the debtor's dependents. Id. at 12. And it further emphasized that as a result of section 522(b)(4)(C): "[t]his increased protection is afforded not only to an IRA account created by the debtor, but also extends to accounts that are transferred directly between trustees (e.g., inherited accounts) and to roll over distributions." Id. at 13. The Tabor court held that the language of section 522(b)(3)(C) unambiguously applies to inherited IRAs, although it also acknowledged that it was unclear whether Congress realized that inherited IRAs were "trustee to trustee" accounts. Id. The Tabor court ultimately held that the funds in an inherited IRA are retirement funds, that an inherited IRA is tax exempt under IRC section 408, and that, as a result, an inherited IRA is exempt under section 522(b)(3)(C). Id. at 17. This means that as long as the IRA is disclosed on schedule B and simultaneously listed on schedule C an inherited IRA may be claimed as exempt under Bankruptcy Code Sec. 522(b)(3).

This decision by the Court enforces the importance of keeping money in a safe place when it comes time to make a decision on the proverbial question: "Where am I going to get the money to pay my bills." It is of note the debtor in the Tabor took over $132,000 out of her protected asset before filing her bankruptcy. It is unknown why she may have taken out these funds or what she spent the money on. What is known is that too many clients that we consult have depleted their protected assets in order to pay down dischargeable debts, before having come in for a free consultation. For example, is she used that $132, 000 to pay down credit card debt and then filed bankruptcy; she loses the ultimate benefit of bankruptcy. She would have been much better off if she had left the money in the inherited IRA account and filed bankruptcy, simply discharging the credit card debt and keeping the $132,000 safe in the IRA (this hypothetical assumes that she would have qualified to file a chapter 7). Ultimately bankruptcy can be planned properly with assistance of experienced counsel here at Riviere Cresci & Singer LLC. Preserve your assets that are protectable in bankruptcy! Your future will thank you.

Continue reading "Bankruptcy with a Future in Mind: Inherited IRAs are Protected in Personal Bankruptcy" »

The Great Recession has led to property foreclosures in numbers that were never expected by home owners. Expected or not, it is an issue that many homeowners are dealing with. Many homeowners hear about Loan modification on the news, through friends or through a potential scammer. In reality loan modifications are more myth than reality despite Federal efforts to endorse the practice. Many borrowers cannot withstand the underwriting of mortgage loans that should never have been made in the first place. The good news is that now there are legitimate forums to deal with mortgage modifications and other workouts with lenders. Both the New Jersey State Courts and New Jersey Bankruptcy Courts have procedures in place to deal with the foreclosure epidemic.

In fact State Court statistics show mortgage foreclosure filings rose from 20,253 in 2005 to a peak of 66,717 in 2009, dropping to 58,445 in 2010. The number fell dramatically since a moratorium last December to foreclosures by the six largest lenders because of abuses, with only 4,722 filings for the first six months of 2011. This number is sure to rise again now that lender have lifted moratorium on foreclosures. Since the inception of the state foreclosure mediation program in 2009, it is reported that 2,612 cases in the program have settled. Although the Bankruptcy Courts Loss Mitigation Program (LMP) is fairly new and there are no statistics to report as of yet, it sounds like a promising program.

All too often foreclosure scams and surplus scams are being carried out on New Jersey homeowners in this distressed housing economy. So what can you do to protect yourself from such scams? One way is to take part in the either the previously mentioned Court administered programs to ensure that there is judicial oversight for fairness. The Department of Banking and Insurance has issued warnings to put New Jersey homeowners on notice of potential scams involving "loss mitigation consulting," "foreclosure prevention," "mortgage loan modification," and similar services.

In fact in New Jersey only certain licensed entities can actually modify mortgages which are licensed by the Department under the Debt Adjuster Act. Other entities, which are typically attorneys, are exempt from Debt Adjuster licensure, as set forth at N.J.S.A. 17:16G-1c(2).

Falling victim to a scam can harm you in many ways, i.e. the payment of exorbitant upfront fees for services available from a proper source for free or at minimal cost; loss of fees paid, with no services rendered, and/or no protection from financial loss under a surety bond (Debt Adjuster licensees are required to be bonded in the minimum amount of $50,000.);loss of precious time in the midst of a default or foreclosure process; loss of title to the home without any real benefit, under certain scams; and further damage to your credit profile. So it is important that you ask to see the license or deal with a licensed New Jersey attorney. When in doubt call the Department of Banking and Insurance or a local attorney!

Although, I previously mentioned the State Court's Mortgage Mediation program this article will focus on the Bankruptcy Court's newly formed Loss Mitigation Program. The Loss Mitigation Program ("LMP") is as a forum for debtors and lenders to work on a resolution when a debtor's residential property is at risk of foreclosure. The LMP facilitates resolutions by opening and maintaining the lines of communication between the debtors' and lenders' decision makers. The LMP encourages the parties to finalize a feasible and beneficial agreement with the assistance and supervision of the Bankruptcy Court.

According to the Bankruptcy order adopting the program, "The term 'loss mitigation' includes solutions that may prevent either the loss of a debtor's property to foreclosure, increased costs to the lender, or both. Loss mitigation includes, but is not limited to, loan modification, loan refinance, forbearance, short sale, or surrender of the property in full satisfaction."

Will I qualify?

If you are a "debtor" meaning that you filed Bankruptcy under Chapter 7, 11, 12 or 13 of the Bankruptcy Code and have a "loan" which means any mortgage, lien or extension of money or credit secured by eligible property, regardless of whether the loan: (1) is considered to be "subprime" or "non-traditional," (2) was in foreclosure prior to the bankruptcy filing, (3) is the first or junior mortgage or lien on the property, or (4) has been "pooled," "securitized," or assigned to a servicer or to a trustee, you will have the opportunity to take part in the LMP.

After filing Bankruptcy the debtor must simply file a Notice of Request for Loss Mitigation, at any time after the commencement of the case up until three (3) days before the first date scheduled for the First Meeting of Creditors. The debtor must also file a certificate of service. Of course the mitigation must be in good faith. In fact the debtor will most likely be required to provide a "adequate protection payments" during the loss mitigation period.

Once I'm in the Program what should I expect?

Upon filing a Request for Loss Mitigation, the debtor must make adequate protection payments to the creditor in an amount that is at least 60% of the monthly principal and interest payment that is contractually due, plus 100% of any required monthly escrow payment (taxes).

After the Loss Mitigation Order is entered; within seven (7) days contact persons by both the debtor and the lender will be designated. The purpose of the initial contact is to create a framework for the discussion at the loss mitigation session and to ensure that each of the Loss Mitigation Parties will be prepared to participate meaningfully in the loss mitigation program. This will eliminate the days when borrowers made calls to the lenders loss mitigation department only to find themselves lost in an abyss of unresponsive bank employees and lost documents that borrowers submitted repeatedly. Hopefully, this will result in some real success stories and help to stem the foreclosure epidemic along with the State Court program.

Continue reading "Bankruptcy Court: The Road to Meaningful Mortgage Mediation " »

Have you taken cash advances or markers in order to obtain funds for gambling? The odds are not in your favor that you actually were able to win with the money borrowed and repay the lines of credit. In the past, bankruptcy courts regularly found gambling debts to be non-dischargeable. In recent times, however, the courts are allowing a discharge of this type of debt. Nonetheless, the legal test administered by the courts and the elements that a creditor must prove, leave an air of uncertainty about the dischargeability of a gambling debt.

Legalized gambling debt may be incurred when credit is extended by casinos directly to patrons. More commonly, gambling debt may be realized as cash advances from credit cards. Debtors seek to discharge this gambling debt under 11 U.S.C. 727. Creditors, in turn, seek its non-dischargeability, typically under § 523(a)(2)(A), which excepts from discharge a debt "for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor's or an insider's financial condition ....".

In order to establish that a debt is non-dischargeable under § 523(a)(2)(A), as a debt for money, property, services, or credit obtained by false pretenses, a plaintiff must prove by a preponderance of the evidence that: "(1) the [defendant] made an omission or implied misrepresentation; (2) promoted knowingly and willingly by the defendant[ ]; (3) creating a contrived and misleading understanding of the transaction on the part of the plaintiff [ ]; (4) which wrongfully induced the plaintiff[ ] to advance money, property, or credit to the defendant." In re Khafaga, 419 B.R. 539, 546 (Bankr. E.D.N.Y. 2009) (quoting In re Hambley, 329 B.R. 382, 396 (Bankr. E.D.N.Y. 2005)).

For a plaintiff to prevail under the false representation provision of section 523(a)(2)(A), it must demonstrate that: (1) the debtor made the representations knowing they were false; (2) the debtor made the representations with the intent and purpose of deceiving the plaintiff; (3) the creditor justifiably relied on the debtor's false representations; and (4) the creditor suffered a loss or damage as a proximate consequence of the representation having been made. See, e.g., Field v. Mans, 516 U.S. 59, 61, 116 S. Ct. 437, 133 (1995).

Fraud in this context means common law fraud: creditors must rely to their detriment on a material misrepresentation that was intentionally made. See, Field v. Mans, 516 U.S. 59, 116 S.Ct. 437, 133 (1995). Creditors must prove each element of the fraud by a preponderance of the evidence. Grogan v. Garner, 498 U.S. 279, 286, 111 S.Ct. 654, 659, 112 (1991).

Depending on the facts of the case, gambling debt may also be found non-dischargeable under other subsections of § 523(a)(2). At least one court has found gambling debt incurred on the eve of bankruptcy non-dischargeable as "luxury goods or services" under § 523(a)(2)(C). Trump Plaza Assoc. v. Poskanzer, 143 B.R. 991 (Bankr. D. N.J. 1992). In addition, if there is a written statement, such as credit markers signed by a patron of a casino, the debt may be non-dischargeable under § 523(a)(2)(B). Id. at 1000.

In Tropicana Casino & Resort v. August (In re August), 448 B.R. 331, 2011 (Bankr. E.D. Pa. 2011), the judge made a detailed assessment of the debtors history with the casino including: the debtors extensive gambling and credit history with the casino, the repayment by the debtor over the years of a substantial amount of funds, the debtors substantial, if not, consistent gambling winnings, as well as the debtor's credible testimony to find that the debtor believed she would be able to repay the casino the $66,000 she borrowed, and intended to do so, presumably from her gambling winnings. Furthermore, although such a belief may have defied the odds, particularly when gambling on a slot machine; such a belief did not support the casino's conclusion that the debtor never intended to repay the marker and obtained her loans under false pretenses. See In re Hall, 228 B.R. 483, 490 (Bankr. M.D. Ga. 1998) ("So long as the debtor has an honest, even if unreasonable, belief that he will get lucky at gambling and pay off his debts then this Court is satisfied that the debtor has the requisite intent to repay."); In re Scocozzo, 220 B.R. 850 (Bankr. M.D. Pa. 1998); In re Murphy, 190 B.R. 327, 334 (Bankr. N.D. Ill. 1995) ("In this case, considering all the circumstances, the Court finds that at the time the Debtor incurred the debts at issue he intended to repay them and believed (however unreasonably) that he would have the means to do so from his gambling and investments. The Debtor had for years successfully relied on such 'income' to pay off his credit card debt."); see, also, In re Pusateri, 432 B.R. 181, 201 (Bankr. W.D.N.C. 2010) ("twelve year exemplary borrowing history" with the credit union was evidence of the debtor's intent to repay the debt).

In sum, the dischargeablity of a gambling debt will rely upon whether the party objecting to the discharge can prove the factors enumerated as set forth in the case law above. Furthermore, as also discussed within those factors there is an element of fraud which must be proven by the party objecting to the discharge whereby a Judge can find, as he did in the Tropicana case discussed above, that a debtors actions can speak louder than words to disprove the fraud alleged by the objecting party.

Continue reading "A Gambler's Bankruptcy: Knowing When to Fold 'Em" »

Activists rejoice! The United States Bankruptcy Court supports same-sex marriage. In an unprecedented decision, on June 13, 2011, the U.S. Bankruptcy Court for the Central District of California, called the Defense of Marriage Act, 1 U.S.C. § 7 and 28 U.S.C. § 1738C ("DOMA"), unconstitutional. The case, In re Balas and Morales, Case No. 2:11-bk-17831 TD, involved two partnered gay men who attempted to file jointly on a bankruptcy petition. The ability to file jointly had been reserved only for opposite-sex married couples. The U.S. Trustee sought to have the case dismissed based on the grounds that DOMA prevented the government from recognizing same-sex marriage. However, in the 24-page decision, signed by 20 of the 25 judges in the District, the Court stated that DOMA violates equal protection rights secured under the Fifth Amendment of the United States Constitution and that "there is no valid governmental basis for DOMA."

Under DOMA, "[n]o state, territory, or possession of the United States, or Indian tribe" has to recognize same-sex marriage that is recognized or effectuated in another state. And, amongst other things, DOMA prevents the federal government from recognizing the validity of same-sex marriages.

In its ruling, the Court stated:

Although individual members of Congress have every right to express their views and the views of their constituents with respect to their religious beliefs and principles and their personal standards of who may marry whom, this court cannot conclude that Congress is entitled to solemnize such views in the laws of this nation in disregard of the views, legal status and living arrangements of a significant segment of our citizenry that includes the Debtors in this case. To do so violates the Debtors' right to equal protection of those laws embodied in the due process clause of the Fifth Amendment. This court cannot conclude from the evidence or the record in this case that any valid governmental interest is advanced by DOMA as applied to the Debtors.

So, what are the implications of this decision in New Jersey and to New Jersians?

First off, New Jersey, although not recognizing same-sex marriage, does recognize same-sex civil unions. Same-sex couples who enter into a civil union are provided almost all of the rights granted to married couples under New Jersey state law. However, under DOMA, same-sex couples in marriages, civil unions, or domestic partnerships do not have any right or entitlement to the 1,138 rights that a married couple has under federal law. Unfortunately for our gay and lesbian New Jerseyite brethren, bankruptcy is governed by federal law, not state law, making the ability for same-sex couples to file bankruptcy jointly in New Jersey unavailable, even if New Jersey allowed for same-sex marriage. However, the Balas decision gives a precedent for the US Bankruptcy Court, District of New Jersey to follow. Although not binding on the District of New Jersey court, the Balas decision is persuasive, and can give the Judges here something to consider when a like case is presented in New Jersey and can also serve as blueprint upon which the New Jersey Judges can follow.

Secondly, the decision, if adopted or followed by the US Bankruptcy Court, District of New Jersey, will make it easier for same-sex couples to file for bankruptcy. Basically, you will have a couple, with two incomes, joint assets, a mortgage, some credit card debt, some medical bills and some loans. Some of these debts will be in one person's name, while some will be in another's. However, both individuals want to restructure their debt, and the creditors want to make a deal. It can be cumbersome and complicated to attempt to unravel the tangled finances of a committed couple. As well, it requires both of them to pay separate filing fees, separate legal fees, and to calculate exactly how to split their debts and assets for the purposes of bankruptcy. On the other hand, a joint filing is a routine procedure and can be done quite easily, without the necessity of figuring out exactly who owns what.

Finally, the decision lends support to New Jersey passing a law allowing same-sex marriage within the State, which in these trying economic times, can be quite beneficial to the State coffers. . If New Jersey were to allow the marriage, not to be confused with civil unions, of same-sex couples, the State would likely experience a significant escalation in expenditures on weddings by same-sex couples who currently reside in New Jersey, as well as a surge in wedding and tourist spending by same-sex couples from other states. It is projected that sales by New Jersey's wedding and tourism-related businesses would increase by $102.5 million in each of the first three years when marriage for same-sex couples is legal. As a result, the State's gross receipt tax revenues would rise by $7.2 million per year. More money spent in the State will directly result in more jobs and less bankruptcy filings by residents.

Continue reading "The Bankruptcy Court and the Defense of Marriage Act: Not Good Bed Fellows...Even in New Jersey?" »

New Jersey is a state that is home to many fitness gurus and at some point you may find yourself joining a health club a/k/a gym. One of the hang-ups of joining a gym is the contract that many of health clubs require the health conscious consumer to sign. Many times people are very excited to join but then just days after signing the contract find that they will not utilize health club as much as they first thought they would, need to relocate or find that the health club isn't all that it was promised be by the membership sales representative. If you fall under one of these situations you will be happy to hear to you may have a way out of your contract. First, as per the Consumer Fraud Act section 56:8-42, a contract for new or increased health club services may be cancelled by the buyer for any reason at any time before midnight of the third operating day after the buyer receives a copy of the contract. In order to cancel, you must follow the following procedure to make the cancellation binding: you must notify the health club of cancellation in writing, by registered or certified mail, return receipt requested, or personal delivery, to the address specified in the contract (If no address is specified the contract is void). After cancellation all moneys paid pursuant to the cancelled contract shall be fully refunded within 30 days of receipt of the notice of cancellation. If you have executed any credit or loan agreement through the health club to pay all or part of health club services, the negotiable instrument executed must be returned to you within 30 days.

Another one of the previously mentioned reasons consumers need to cancel their contract is relocation. A health club services contract must provide that it is subject to cancellation by the consumer, by notice, sent by registered or certified mail, return receipt requested, or personally delivered, to the address of the health club specified in the contract upon the buyer's change of permanent residence to a location more than 25 miles from the health club or an affiliated health club offering the same or similar services and facilities at no additional expense to the buyer.

Continue reading "Stuck in a Gym contract in New Jersey? Here's your escape." »

Aside from being from the state in which "Jersey Shore" was filmed, New Jerseyites (or New Jerseyians) were also lucky enough to be protected by one of the most aggressive consumer protection laws in the country, the Consumer Fraud Act, N.J.S.A. §56:8-1 et seq. ("CFA"). The CFA has protected consumers from deception and fraud, even when the merchant acts in good faith. Under the CFA, "the act, use or employment by any person of any unconscionable commercial practice, deception or fraud, false pretense, false promise or misrepresentation, or the knowing concealment, suppression or omission of any material fact with the intent that others rely upon such concealment, suppression or omission, in connection with the sale or advertisement of any merchandise or real estate...is declared to be an unlawful practice . . . ." As well, the CFA provides that "[a]ny person who suffers any ascertainable loss of moneys or property, real or personal, as a result of the use or employment by another person of any method, act or practice declared unlawful under this act . . . may bring an action . . . . In any action under this section the court shall, in addition to any other appropriate legal or equitable relief, award threefold the damages sustained by any person in interest . . . the court shall also award reasonable attorneys' fees, filing fees and reasonable costs of suit." N.J.S.A. §56:8-19 (emphasis added).

However, our happy existence is in danger. The State legislature is seeking to pass bill A-3333. This bill is aimed at limiting the scope of the CFA, which in turn will hurt consumers. First off, the bill limits the class of plaintiffs to individuals, whereas the current CFA allows both individuals and businesses to file suit under this cause of action. Secondly, the bill now makes it a requirement that the individual must have relied on the fraud "to his detriment" to have a cause of action. Under the CFA, this is not a requirement - the plaintiff only had to show that the ascertainable loss was a result of the fraud. The CFA provides a much lower burden for the plaintiff to overcome. Thirdly, the bill now allows the judge discretion in awarding treble (triple) damages, as the proposed bill states that the court "may . . . award up to threefold the actual damages . . . ." The CFA required the court to award treble damages by using the language "shall" instead of "may," as the proposed bill postulates. As well, under the bill, in terms of attorneys fees, the court is still required to award them, but only for those costs" reasonably attributable to the prosecution of the claim brought under [the CFA] that results in the judgment . . . ." The bill further limits the award of attorney's fees and costs to the greater of $150,000 or one-third of the judgment. Finally, the bill adds a new section to the current CFA. This new section makes it so that the CFA will "apply to only to transactions that take place in the State; and not apply to actions or transactions otherwise permitted or regulated by the Federal Trade Commission or any other regulatory body or officer acting under statutory authority of this State or the United States." The CFA, as it stands does make these conditions requirements.

A-3333 benefits only companies which defraud consumers. This will protect car dealerships from consumer fraud lawsuits, allow dishonest businesses to rip off customers and then, if they were caught, simply pay back what they stole and return to their fraudulent "business as usual, " ensure that victims cannot hire a lawyer to protect themselves, as A-3333 limits attorneys' fees that the consumer side (only) may recoup in trying to right the wrong that was done to them, and result in a redistribution of wealth. If A.3333 is enacted, New Jersey's Consumer Fraud Act, currently ranked as the best in the nation, will sink to the worst. This will result in a redistribution of wealth and encourage corrupt businesses to come to New Jersey, protect car dealerships from consumer fraud lawsuits and force honest businesses to change their businesses practices.

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