Monmouth County Bankruptcy and Consumer Lawyer Blog

Filing for bankruptcy allows consumers to discharge most of their debts. In 2005 when when the bankruptcy laws changed through BAPCPA, various homeowners associations (HOA's) lobbied Congress for special protection.Due to the efforts of those lobbyists not all homeowners' association fees can be eliminated through bankruptcy.

We often meet with consumers who are seeking to strategically default (walk away from) on their homes since the real estate is underwater (principal of the loan is more than the value of the home) and therefore is not an asset worth keeping. Filing a bankruptcy can enable a homeowner to eliminate any obligation on a mortgage -- even for an eventual deficiency judgment after a foreclosure.

New Jersey, being a very densely populated state has a large number of co-ops and condominiums. When dealing with these units they usually come with HOA and/or maintenance fees. These types of residences have to be dealt with a little bit differently than those properties without such fees.

Homeowner association (HOA) dues and fees, commonly known as maintenance, CAN be discharged in a bankruptcy proceeding. However there is a caveat; only those dues and fees owed up through the date the bankruptcy petition is filed can be discharged. Any homeowner association dues and fees that accrue AFTER the petition is filed CANNOT be discharged. This provision is set forth in 11 USC § 523 - EXCEPTIONS TO DISCHARGE which states that a consumer cannot discharge a debt:

(16) for a fee or assessment that becomes due and payable after the order for relief to a membership association with respect to the debtor's interest in a unit that has condominium ownership , in a share of a cooperative corporation, or a lot in a homeowners association, for as long as the debtor or the trustee has a legal, equitable, or possessory ownership interest in such unit, such corporation, or such lot, but nothing in this paragraph shall except from discharge the debt of a debtor for a membership association fee or assessment for a period arising before entry of the order for relief in a pending or subsequent bankruptcy case.

Therefore, if the consumer continues to own the co-op or condo, after the bankruptcy petition is filed, HOA fees will continue to accrue and the consumer will be responsible for those fees. This applies to any home, condo, or other residence owner with those properties in associated communities that have homeowners' association dues.

This section of the bankruptcy code can create a sticky situation if the consumer is seeking to walk away from the home and the mortgage lender is not moving along expeditiously with the foreclosure process. Since the consumer continues to own the home, whilst the lender forecloses, even if he or she does not reside there, the consumer is responsible for the post-petition HOA fees.

What does this all mean? It boils down to the fact that the homeowners association can pursue the homeowner for these post-petition monthly charges, and sometimes that does happen. However in most cases homeowners associations wait until the unit is sold at auction, at which time they deduct all outstanding HOA fees from the proceeds.

Continue reading "What happens to Condominium Association Fees in Bankruptcy?" »

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.

Continue reading "New Jersey Consumer Fraud Act - Going from First to Worst!" »