Gillman & Gillman | Experienced New Jersey Bankruptcy Lawyers » New Jersey Chapter 13 Bankruptcy

Update on New Jersey Foreclosure Mediation and Bankruptcy Debtors

Justin Gillman — Mon, 15 Jun 2009 15:52:03 +0000

The New Jersey Bankruptcy Court issued the following press release regarding the New Jersey Foreclosure Mediation Program and Bankruptcy Debtors. The information may also be viewed at http://www.njb.uscourts.gov/notice/2009_02_04_foreclosure.pdf.

Information for Bankruptcy Debtors and Others Concerning The New Jersey Judiciary Foreclosure Mediation Program

The New Jersey Judiciary Foreclosure Mediation Program is a new state supported program that combines the efforts of the State Judiciary, the Office of the Attorney General, the Housing Mortgage Finance Agency in the Department of Community Affairs, the Public Advocate, the Department of Banking and Insurance, and Legal Services of New Jersey. The Program seeks to resolve the growing number of foreclosure actions in the state by encouraging work-out and payment arrangements between distressed borrowers and lenders.

Application may be made at any time after a foreclosure complaint has been filed up to the time of the sheriff’s sale by homeowners who have filed an answer and are contesting the foreclosure, as well as by homeowners who failed to appear and whose cases are currently uncontested. A request for mediation does not prevent the lender from continuing to seek a foreclosure judgment and writ, but it will stay the sheriff’s sale while mediation is pending, if the homeowner files a successful motion in state court seeking a stay.

The filing of a bankruptcy case is not a bar to acceptance in this program, whether the case is actively pending, the debtor has received a discharge, or the case has been dismissed. Effective May 18, 2009 the Bankruptcy Court for the District of New Jersey has entered a General Order Clarifying that Participation in the New Jersey Judiciary Foreclosure Mediation Program Does Not Violate the Automatic Stay. Per the terms of this General Order, participation by debtors and mortgagees in the Foreclosure Mediation Program does not violate the automatic stay of actions or proceedings against the debtor under 11 U.S.C. § 362(a) in any way. The parties are not required to obtain relief from the automatic stay in order to participate in the Foreclosure Mediation Program.

Interested parties should reference the General Order and its governing provisions in full concerning the rights of Bankruptcy Debtors and Mortgagees who choose to participate in the New Jersey Judiciary Foreclosure Mediation Program. It is also important to note that Debtors who choose to participate under the terms of this General Order must meet all of the qualifications for the Program.

To qualify for the free mediation program,

! The applicant must be the owner-occupant of a 1-3 family residential property;

! The property must be his/her primary residence;

! The applicant must be the borrower and the lender must be foreclosing on its mortgage loan.

The mediation proceedings will be held at the courthouse in the county of venue and the mediator’s services are free.

Certain homeowners may also qualify for free foreclosure prevention housing counseling provided by counselors certified by the Department of Housing & Urban Development (HUD) and the New Jersey Housing & Mortgage Finance Agency (NJHMFA).

For more information, please call the Foreclosure Mediation Hotline at 1-888-989-5277. Operating hours are 8:00am to 6:00pm on Monday through Friday.

Additional information is also available online at:

www.nj.gov/foreclosuremediation

www.judiciary.state.nj.us/civil/foreclosure/mediation.html

Chapter 7 and 13 Consumer Bankruptcy and Tax Returns

Justin Gillman — Fri, 12 Jun 2009 12:27:40 +0000

When the Bankruptcy Code was changed in 2005, significant changes were made to the tax return filing requirements for Chapter 7 and Chapter 13 consumer bankruptcy debtors. The changes increased the need for a Debtor and their counsel to review tax filing information before filing a Chapter 7 or Chapter 13 consumer bankruptcy case.

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (which applies to bankruptcy cases filed after October 17, 2005) requires that the debtor file tax returns or transcripts with the Court. See 11 U.S.C §521 et seq. In New Jersey Bankruptcy cases, Local Rules permit this requirement to be met by forwarding the last filed tax return or the tax transcript to the Trustee in the Chapter 7 or Chapter 13 case. This must be done at least seven (7) days prior to the first date of the meeting of creditors.

In Chapter 13 bankruptcy cases in New Jersey, a particular issue arises ”for any return that is not past due as of the date of the filing of the Petition”. For example, if a Debtor files a Chapter 13 Bankruptcy Case in New Jersey on April 1, 2009, the tax returns for the tax year 2008 are not “past due” until April 15, 2009. Due to the nature of the case and the need to fix the amount of claims in the case, it is difficult to confirm the Chapter 13 Plan without the return being filed. If that same Debtor has filed a timely extension of the duty to file the return (automatically fixed at six months, see http://www.irs.gov/newsroom/article/0,,id=108542,00.html), what is to be done with the unfiled return?

11 USC §1308 requires that “if the debtor was required to file a tax return under applicable non Bankruptcy law, the debtor shall file with the appropriate tax authorities all tax returns for all taxable periods ending during the four (4) year period ending on the date of the filing of the Petition.” Subsection (b)(1)(B) provides that “for any return that is not past due as of the date of the filing of the Petition, the later of (i) the date that is 120 days of that meeting; or (ii) the date on which the return is due under the last automatic extension of time for filing that return to which the debtor is entitled and for which request is timely made in accordance with applicable non Bankruptcy law.” There is a procedure built into subparagraph (B)(2) which provides that after notice and hearing, the Court can enter an Order before the tolling of any applicable filing. If the debtor demonstrates by a preponderance of evidence that the failure to file a return as required by this subsection is attributal to circumstances beyond the control of the debtor, the Court may extend the time to file the return for either thirty (30) days or “a period not to extend after the applicable extended due date for a return described in subparagraph (2).”

Important is the use of the word “may” in this provision. The Code gives the Court discretion to extend the time. Ultimately, the decision of whether the Debtor in a Chapter 13 case should be granted time to file the return is given to the bankruptcy judge.

In a recent case, a Debtor I was representing in a Chapter 13 bankruptcy case in New Jersey had filed a timely extension but was faced with the Chapter 13 Trustee’s request that the case be dismissed for failure to file the 2008 tax return. Although we were able to argue that the case should not be dismissed, the Court fixed a date before October 15, 2009, for the return to be filed.

This is an example of how the provisions of the bankruptcy code as it applies to Chapter 13 debtors in New Jersey are often complicated and should not be reviewed without the advice and counsel of an experienced bankruptcy attorney.