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Essex County Bankruptcy Law Blog

Qualifying for a loan modification could increase debt problems

As many New Jersey homeowners continue to struggle to keep their homes, some are hanging their hopes on a loan modification. However, qualifying for this type of mortgage debt relief could actually make a homeowner's financial situation worse. This is because many loan modifications are not offered to borrowers until the situation is dire.

In many cases, lenders require a homeowner to be behind in their payments by at least 90 days before a loan modification will even be considered. This means that the individual's credit score will dramatically fall, which would most likely effect his or her ability to obtain credit in the future. It has been estimated that a mortgage loan that is 90 days past due reduces a person's credit score by as much as 100 points.

JPMorgan settlement may not keep some from Chapter 7

JPMorgan recently came to a settlement regarding its credit card debt collection practices. Even though some consumers may receive restitution as a result, it could be too late for some New Jersey residents whose credit has been ruined by illegal debt collection practices. For them, filing for Chapter 7 bankruptcy could put a stop to any further damage and provide a fresh start financially.

Despite the protestations of many consumers, JPMorgan continued to attempt to collect debts that did not even belong to the parties being harassed. Even if the company had the right party, the amount was often incorrect or not collectible. During the course of such debt collection efforts, adverse reports were sent to the credit bureaus. In some cases, court judgments were obtained with false or bad information.

Bill aims to stop foreclosure for Sandy victims for 3 years

The effects of Hurricane Sandy continue to plague New Jersey homeowners. Many are still not back in their homes and constantly face the threat of foreclosure. A new bill making its way through the state legislature aims to stop foreclosure proceedings for Sandy victims for three years while people work to rebuild their homes.

This bill only affects homeowners who qualify for the Low-to-Moderate Income Homeowners Rebuilding grant program. Due to significant delays, homeowners waiting for funds from that program and the Reconstruction, Rehabilitation, Elevation and Mitigation (RREM) grant program are unable to move forward. As a result, many are struggling to remit rental and mortgage loan payments. Both programs added rental payment assistance in March in recognition of the delays homeowners are facing.

Changes in medical billing may not prevent bankruptcy for some

Any New Jersey resident who has been to a doctor understands how confusing, complicated and frustrating the medical billing process can be. Even though changes are on the horizon regarding how medical bills are reported to the credit bureaus, it may not be enough for some people. Filing for bankruptcy could help many patients clear the slate and give them a fresh financial start.

What seemed like a simple rash turned into a credit nightmare for one out-of-state woman. Her medical problem was resolved, but her medical billing problem was only beginning. Even though she started a payment plan, her account was turned over to collections, and her credit score took a significant hit that even forced her to quit school because she was unable to keep her student loans. A woman in another state also had her account sent to collections even though she was on a payment plan.

Music producer says bad choices led to Chapter 7 filing

New Jersey hip-hop fans may recognize the name Scott Storch, who has worked with artists such as Beyonce, Justin Timberlake and Dr. Dre. At the height of his career, he was worth an estimated $70 million. He admits that bad financial choices led to his need to file for Chapter 7 bankruptcy.

Storch says his cocaine habit caused him to make impulsive purchases worth millions of dollars. At one time, he owned a mansion, 13 luxury cars and a pinkie ring worth $3 million by itself. He took lavish trips that could cost up to $250,000 just for airfare if he was traveling overseas. He could easily spend a half a million dollars on shopping sprees.

Second mortgage may not be canceled in Chapter 7 bankruptcy

New Jersey homeowners may need to be aware that the U.S. Supreme Court recently ruled that a second mortgage on the filer's residence may not be considered an unsecured debt and be discharged in a Chapter 7 bankruptcy. Even if the value of the home is less than the first mortgage, the second lien will not automatically be stripped. The case originated after Bank of America insisted that the second lien of a Chapter 7 filer remain intact, even if the bank will not receive any proceeds from the sale of the home.

The filer claimed that since the home was severely underwater, the second mortgage should be treated as an unsecured debt. Unsecured debts are routinely discharged in a Chapter 7 bankruptcy while priority is given to creditors with secured debts, which means that they are backed by collateral such as a home or vehicle. The court unanimously agreed with Bank of America that the lien should continue to be considered a secured debt, which means that the homeowner would remain liable for the balance after the bankruptcy.

A letter can stop harassing phone calls from creditors

When New Jersey residents get behind on their bills, it can be overwhelming. Creditors and debt collectors begin calling, which only adds to the stress and frustration people who are having trouble with their finances are already feeling. Under the Fair Debt Collection Practices Act, writing a letter to each company will stop harassing phone calls from creditors. However, before taking that step, consumers should verify the details of the debt they supposedly owe to each creditor.

Debt collectors do not always have the correct information regarding a consumer's debt. In addition, some debt collection calls are actually scams. During the first call, a consumer should obtain the full name and address of the debt collector and the original creditor and the account number for the debt they are attempting to collect. The consumer has the right to request a written validation of the debt.

Bankruptcy can be complicated

Bankruptcy can be a complicated and paper intensive process. What some people may not realize is that the paperwork requirements begin before the petition is even filed. Every filer -- regardless of whether filing Chapter 7 or Chapter 13 -- must complete a credit counseling course within 180 days of the filing of the petition. The U.S. Bankruptcy Court must approve all credit counseling services, and a list of approved services for New Jersey residents is maintained by the court.

If the course is not completed, the court may dismiss the bankruptcy before it even begins. The course will examine your financial situation, discuss alternatives to bankruptcy and discuss a personal budget. The sessions can be conducted in person, online or over the telephone.

Not having enough medical insurance could lead to bankruptcy

Between the monthly premiums and the out-of-pocket expenses that accompany medical insurance, many New Jersey residents are finding that having medical insurance does not seem to be saving them any money. Individuals who contract illnesses or are injured in accidents often end up with an overwhelming amount of medical debt. This situation could lead to the need to file bankruptcy.

There seems to be a delicate balance between being able to afford the premiums and being able to pay the out-of-pocket costs associated with using the coverage. Many New Jersey residents can only afford to pay a certain amount in monthly premiums, which limits the type of health care coverage they can obtain. This often means that the deductibles are higher and patients will owe more in medical bills -- especially for a protracted illness or lengthy recovery from an accident.

Woman found a way to stop harassing phone calls from creditors

It is most likely a safe bet that no New Jersey consumer is fond of debt collectors. The practices used by debt collection agencies and other creditors bend -- if not break -- the limits placed on them under the Fair Debt and Collection Practices Act (FDCPA). One woman from the Midwest managed to find a way to stop harassing phone calls from creditors attempting to collect a debt from her that she did not even owe.

She filed a lawsuit against a debt collection agency called Portfolio Recovery Associates LLC for malicious prosecution. Even though she repeatedly told the company that she was not the person who owed the debt, a lawsuit was filed against her. The original lawsuit went on for approximately 15 months before it was dismissed. However, the company threatened to re-file at a later date.