Gillman & Gillman | Experienced New Jersey Bankruptcy Lawyers » Chapter 11 Bankruptcy

Where is a Bankruptcy Case filed in New Jersey?

Justin Gillman — Fri, 19 Jun 2009 12:38:49 +0000

A common question we get is “where will my case be filed”? Bankruptcy cases arise from the Federal Bankruptcy Code and therefore are heard and prosecuted in Federal Courts. In legal terms, this is called “jurisdiction”.

“Venue” is the legally proper place where a particular case should be filed or heard. The Federal Code provides that a Bankruptcy Case (or as it states in the Code, “a case under Title 11″), under any of the Chapters, may be commenced in the district “in which the domicile, residence, principal place of business in the United States, or principal assets in the United States” of the individual or corporate debtor has been located during the 180 days immediately proceeding the bankruptcy filing. There are other provisions in the Federal Code that give a debtor latitude in certain circumstances to file a case in other locations, if, for example, a new case is to be filed by an affiliate of a corporate debtor who has already filed in a particular district.

Cases which are filed in New Jersey, are filed in the venue of the U.S. Bankruptcy Court for the District of New Jersey. The New Jersey Bankruptcy Courts are is divided into three (3) units or vicinages. These vicinages are located in the federal courthouses in Newark, Trenton, and Camden.

New Jersey Local Bankruptcy Rules govern the assignment of cases. Although a debtor has a right to file a bankruptcy case in any of these vicinages, the Court can transfer a case if it finds that the matter is more properly heard in another vicinage. Generally though, the assignment of a case is based on the county in which the debtor resides (if the debtor is an individual or married couple) or the address where a corporate debtor has its principal place of business in New Jersey. The Local Rules divide the assignment of cases as follows:

1. The Newark vicinage consists of Bergen, Essex, Hudson, Morris, Passaic, Sussex and Union Counties.

2. The Trenton vicinage consists of part of Burlington (except for the townships of Cinnaminson, Delran, Edgewater Park, Evesham (Marlton), Maple Shade, Moorestown, Mount Laurel, Palmyra, Riverside and Riverton), Hunterdon, Mercer, Middlesex, Monmouth, Ocean, Somerset and Warren counties.

3. The Camden vicinage consists of Atlantic, part of Burlington (the townships of Cinnaminson, Delran, Edgewater Park, Evesham (Marlton), Maple Shade, Moorestown, Mount Laurel, Palmyra, Riverside and Riverton), Camden, Cape May, Cumberland, Gloucester and Salem counties.

Over the years, the Courts in the District have changed the assignment of cases by modifying the Local Rules.

Thus, even in what would appear to be a simple matter as the location of the filing of a bankruptcy petition, an individual, married couple, or corporation, should review the location (venue and assignment) of a potential bankruptcy filing with an attorney experienced in these matters. This blog and site provide information about the law designed to help users educate themselves about their own legal needs. But legal information is not the same as legal advice — the application of law to an individual’s specific circumstances. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a lawyer if you want professional assurance that our information, and your interpretation of it, is appropriate to your particular situation.

Checklist: Tax Planning for Individuals filing Chapter 7, Chapter 13, or Chapter 11 Bankruptcy

Justin Gillman — Wed, 17 Jun 2009 14:17:32 +0000

The following is a short checklist of Tax Planning and Practice Strategies which may be followed by an attorney for an Individual considering the filing of a Chapter 7, Chapter 13, or Chapter 11 Bankruptcy.

1. Whether to File a Bankruptcy Case?

The first question to be reviewed is whether a bankruptcy filing of any kind is best for the individual. (Note: When discussing individuals, this is meant to include one person or a married couple filing a joint bankruptcy case.). Issues such as the treatment of outstanding taxes in the case, whether an individual is able to repay the necessary amounts through the case, and whether the cost associated with the case is worth the benefit to be received. For example, if an individual is unable to payoff a tax obligation in a Chapter 13 bankruptcy case in the required time, they may be better served with an Offer in Compromise with the IRS.

2. When to File?

The timing of the filing of a Bankruptcy Petition can be crucial in tax issues. One of many examples is the ability of a bankruptcy debtor to discharge certain unsecured taxes. Unsecured income taxes that were first due more than three (3) years before the bankruptcy case was filed, for which a timely and non-fraudulent return was filed, can be discharged in full in any chapter of bankruptcy. Therefore, before filing such a case, the individual and attorney should review whether the return was timely filed and whether the tax has been “due and owing” for more than three years.

3. Where to File?

Although it is rare for individuals to have choices in New Jersey as to where their case is filed, in some limited examples, individuals may have the ability to file in more than one jurisdiction and should review the relative benefits of filing in each venue.

4. Which Chapter of the Bankruptcy Code Under Which to File?

This is often the most important decision for individuals and often involves reviewing all of the financial circumstances, past, present, and future, with counsel.

5. What must be accomplished before filing a Bankruptcy Case?

Since the bankruptcy code generally requires that tax returns which are due be filed prior to the filing of the Petition, individuals should review their past tax filings and confirm that all returns are filed. If returns remain due, there should be immediate planning to have the returns filed as soon as possible.

This blog and site provide information about the law designed to help users educate themselves about their own legal needs. But legal information is not the same as legal advice — the application of law to an individual’s specific circumstances. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a lawyer if you want professional assurance that our information, and your interpretation of it, is appropriate to your particular situation.

Senate Defeat of Legislation to Amend Chapter 13 of the Bankruptcy Code to Allow Modification of Mortgages On Debtors Principal Residence.

Allen Gillman — Mon, 11 May 2009 19:22:44 +0000

Senators have defeated an amendment offered by Senator Dick Durbin (D-IL) to the Helping Families Save Their Homes Act (S. 896) by a vote of 45 to 51 which would have amended Sec. 1322(b)(2) of the United States Bankruptcy Code and allowed, subject to certain conditions, the amendment of a mortgage secured by the debtors personal residence.

Question: Does the defeat the Chapter 13 mortgage modification legislation prevent all modification of mortgages secured by a debtors principal residence.

Chapter 13 Bankruptcy may still allow some homeowners to eliminate second mortgages on their homes if the amount of the first mortgage is equal to or exceeds the value of the home and owners of multi- family homes in which they reside may be able to modify their mortgages.

Chapter 13 permits a debtor to “modify the rights of holders of secured claims, other than a claim secured only by a security interest in real property that is the debtor’s principal residence. 11 U.S.C. Sec. 1322(b)(2) What this means is that even if a mortgage on a debtor principal residence far exceeds the value of the property, a Chapter 13 Plan cannot reduce the amount of the mortgage or the interest rate on the mortgage. The purpose of Sec. 1322(b)(2) is “to encourage the flow of capital into the home lending market” by affording anti-modification protection to home mortgage lenders. Nobelman v. Am. Sav. Bank, 508 U.S. 324, 331, 113 S. Ct. 2106, 124 L. Ed. 2d 228 (1993) (Stevens, J., concurring)

The real estate bubble which caused home prices to rise levels far beyond the means of many if not most home buyers was fueled by ‘creative financing’. In addition to outright fraud, an example of such financing was 80-20 financing which required no down payment. Instead home buyers financed their home purchase by taking out both and first and second mortgage at the time of purchase. Another example were the so-called ” payment – option arms which allowed home buyers to pay less than the interest on their mortgages with the result that the principle balance on these mortgages increased each month.

As a result of the bursting of the bubble many homes are now worth substantially less the the mortgage or mortgages on them. The defeated legislation would have allowed bankruptcy judges – subject to certain conditions – to reduce the both the amount of the mortgage and to the interest rate on the mortgage. Bankruptcy law currently bars modifications on primary residences, while allowing modifications for vacation homes, family farms, and yachts. The amendment would have permitted bankruptcy courts to restructure the debt on home mortgages by reducing the principal owed, extending the repayment period, and reducing interest rates. Under the bill, eligibility would have been limited to homeowners with mortgages originated before 2009, worth less than $625,000, 60 days delinquent, and subject to a notice that a foreclosure may be commenced.

Although the defeat of the legislation does not remove the bar to modification on primary residences by a Chapter 13 Plan, the majority of courts have held that a second mortgage which is completely unsecured my be ‘stripped off’ the primary residence. For example a homeowner who purchased home for $400.000.00 using by financing it with an $320,000.00 first mortgage and a $80,000.00 second mortgage may be able to treat the second mortgage as unsecured and discharge the debt in a Chapter 13 Bankruptcy Case if the value of the home has declined to no more than $320,000.00.

Bankruptcy Courts in Chapter 13 Bankruptcy cases have also held that if a mortgage on the debtors primary residence is secured by additional collateral it may be modified. In one case, a mortgage on a two family home was secured by the debtors residence and the rent from the second apartment and the Court allowed the modification of the mortgage.

It should be noted that these cases relate only to Chapter 13 bankruptcy cases. The ability to ‘strip off’ or ‘cram down’ a wholly unsecured second mortgage is not available in a Chapter 7 bankruptcy case. Debtors in Chapter 11 Bankruptcy cases have similar abilities to modify the rights of secured creditors as is discussed above.

Caution: Whether or Not a Chapter 13 Bankruptcy Petition Can Enable a Homeowner to Modify a First Mortgage or Discharge a Second Mortgage Can Only Be Determined After a Careful Analysis of a Debtor Economic Circumstance and a Professional Valuation of the Debtor Home.

Those experiencing difficulties making their mortgage payments should also carefully review the remedial programs being implemented by the Federal Government http://makinghomeaffordable.gov/modification_eligibility.html