Update and Comment: New Jersey Foreclosure Mediation and Bankruptcy

Justin Gillman — Tue, 16 Jun 2009 22:05:44 +0000

Yesterday, we posted information on the press release issued by the New Jersey Bankruptcy Court regarding the New Jersey Foreclosure Mediation Program and Bankruptcy Debtors which was posted online at http://www.njb.uscourts.gov/notice/2009_02_04_foreclosure.pdf. In that post, there was reference to a General Order of the United States Bankruptcy Court District of New Jersey regarding Negotiations between Debtor(s) and Mortgage Servicers to Consider Loan Modifications. The post failed to include the link to the General Order of the Court. See http://www.njb.uscourts.gov/notice/2009_05_20_JHW-GenOrder_Re_Loan_Modification-05-19-09_signed.pdf

By way of comment, there are many practical problem that currently exist in Debtors efforts to engage in such discussions with their mortgage companies or servicers. First, despite this General Order, many servicers continue to advise bankruptcy debtors that loan modification is not available while they are “in bankruptcy”. As is clear by the information provided by the New Jersey Foreclosure Mediation Program and that of the New Jersey Bankruptcy Court, this is not accurate. As there is no forum in Bankruptcy Court to address this issue, Debtors are forced to submit to the New Jersey Foreclosure Mediation Program and still proceed with their bankruptcy case. This causes confusion for both the homeowner and the mortgage servicer.

Although there are many other practical problems, another major issue is the inability of homeowners to point to any clear standard of whether they “qualify” for a modification. President Obama has announced a program which contains details regarding whether a homeowner may qualify for modification. See http://www.whitehouse.gov/blog/09/02/18/help-for-homeowners/. However, what is a New Jersey homeowner to do if they feel they qualify based on all of the stated guidelines and their lender refuses to propose or accept a modification? These are the questions which give New Jersey homeowners facing foreclosure and bankruptcy the most difficulty and those which are currently not addressed in either state or federal law.

Under any circumstances, we continue to advise our clients to attempt to obtain modifications and to consult with their attorney prior to and during this process. In some cases, a Chapter 7 bankruptcy case may be filed to address the unsecured credit card debt of a homeowner and reduce their “debt-to-income ratio”. However, in all cases, debtors should consult with experienced counsel regarding the particular circumstances of their case.

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.

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:

Gillman & Gillman | Experienced New Jersey Bankruptcy Lawyers » New Jersey Foreclosure Mediation

Update and Comment: New Jersey Foreclosure Mediation and Bankruptcy

Update on New Jersey Foreclosure Mediation and Bankruptcy Debtors