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13 Plan Payments

ELECTRONIC PAYMENTS COMING FOR CHAPTER 13

The Office of the Chapter 13 Trustee for the Trenton Vicinage (covering Warren,
Hunterdon, Somerset, Middlesex, Mercer, Monmouth, Ocean and most of Burlington
Counties) has announced that starting this summer they will institute a program for
electronic transfer of regular monthly Chapter 13 Trustee Plan payments. This will be a
considerable convenience for Chapter 13 Debtors.

This program will permit Chapter 13 Debtors to register on line with the Trustee's
program and then electronically transfer their required plan payment. The transfer
will cost $1.50 per use, but this is less than the cost for a bank check and even most
money orders. The transfers will not be automatic or recurring and only deducted from
the Debtor's bank account by logging on and submitting this request. Therefore, it will
be imperative that the funds are available upon submission or future use of the program
will be denied.

For more information, please visit the Trustee's website at russotrustee.com and click
EPAY, or contact our Chapter 13 coordinator Marc Esterow at Extension #4005.

Your Tax Debts May Be Dischargeable in Bankruptcy

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The saying is that the only thing that is inevitable is "death and taxes.". Bankruptcy cannot alter anyone's life expectancy but it may be able eliminate a substantial amount of tax obligations. Contrary to what most people realize, income taxes are often capable of being eliminated in Chapter 7 and Chapter 13 Bankruptcy filings.

The basic restrictions require the tax to be more than 3 years from the date due (plus extensions), more than 2 years from a late filing, and more then 240 days from the date of any IRS assessment. Assuming these conditions can be met, a bankruptcy discharge eliminates the tax debt along with all other unsecured debts. Even if the debt is not dischargeable, often the penalties and interest are.
This unique area of bankruptcy law is not for the weak. The restrictions can be fairly complex and the IRS can impede this right of discharge of taxes by filing tax liens or aggressively seeking collection prior to expiration of the statutory deadlines. Different rules apply to business and personal taxes. Planning your potential bankruptcy filing is imperative. Only a thorough review of specific transcripts from the IRS can determine for sure what can or cannot be discharged - and when. All too often, inexperienced bankruptcy counsel may prematurely file a bankruptcy, thus leaving the debtor on the hook for these obligation, with penalties and interest!

The attorneys at Abelson & Truesdale are fully versed in this specialized field of Bankruptcy law, having invested hundreds of hours of detailed instruction from the country's foremost practitioners and scholars on this subject. Mr. Abelson has recently returned from an intensive course with Morgan King, Esq., the California attorney who literally wrote the book on this subject- the very book most IRS revenue officers use themselves.

Let us assist you in review of your situation. If bankruptcy is not a viable option for your situation, we will gladly discuss potential IRS remedies such a Collection Due Process (CDP) requests or Offers in Compromise (OIC) requests, the standards for which have been recently liberalized by the IRS. Please contact our office for a thorough Pre-Bankruptcy Tax Review.

Success in the United States Supreme Court

November 11, 2011

We are very pleased to report that the United States Supreme Court has upheld our victory in the United States Court of Appeals for the Third Circuit in the case Rodriguez v. Countrywide Mortgage Co. (Supreme Court Docket 10-1285). This decision clearly holds that in a Chapter 13 Bankruptcy, a mortgage company cannot attempt to collect pre-bankruptcy escrow arrears directly from a debtor after the filing of the bankruptcy petition, by merely re-labeling it a post petition escrow shortage. Monies that were contractually due prior the bankruptcy are part of the bankruptcy proof of claim entitled to be paid through a Debtor's Chapter 13 plan.

The Supreme Court has declined to review the decision of the 3rd Circuit after first requesting a brief from the United States Solicitor General. Along with Henry Sommer, Esq., a distinguished colleague from NACBA (the National Association of Consumer Bankruptcy Attorneys), Mr. Abelson persuaded the Solicitor General 's office to side on behalf of Bankruptcy Debtors nationwide to encourage the Court to leave the 3rd Circuit ruling intact.The impact of this decision will save thousands of dollars for many bankruptcy debtors struggling to cure their mortgages through Chapter 13.

Recent Changes to HAMP

November 4, 2011: 

President Obama announced this week executive changes to HAMP, the Home Affordable Refinance Program, designed to encourage mortgage modifications and prevent the continuing rise of foreclosures in the United States. The changes are meant to promote refinances by relaxing the eligibility standards from Fannie Mae and Freddie Mac government backed loans to include loans that may be underwater. However, be aware that these revisions will not apply if there has been a delinquency in the past year – which will severely curtail its effectiveness as a broad based foreclosure alternative. Since successful mortgage modifications offered through HAMP remain voluntary by the mortgage companies, and offered in a very small percentage of cases, Chapter 13 Bankruptcy, with its five year mortgage arrears cure, or the new Loss Mitigation Program established by the United States Bankruptcy Court for the District of New Jersey effective August 1, 2011 remains at this time, the best, if not the only hope of preserving homes in distress.

The New Bankruptcy Law (2005)

There is a new bankruptcy law. The Bankruptcy Abuse and Consumer Protection Act goes into effect on October 17, 2005. Listed below are updated answers to common questions regarding bankruptcy:

What is the new bankruptcy law?
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, a major reform of the bankruptcy system was passed by Congress and signed into law by President Bush in April 2005.

The new law makes many changes to the existing law. Before you decide whether to file, it is critical to consult with a consumer bankruptcy attorney who has been trained on the new law.

When did the law take effect?
The new law went into effect on October 17, 2005. All bankruptcies filed after that date are governed by the new law.

What are the major changes in the new law?
Major provisions of the new law include:

Mandatory Credit Counseling. Before filing for bankruptcy most applicants must receive credit counseling in a government-approved program.

A "means test" determines who can file for Chapter 7 bankruptcy. Under the new law, bankruptcy applicants who wish to file under Chapter 7 must meet certain eligibility requirements under a "means test."
Under the means test, if your current monthly income is less than the median income in New Jersey, you can file for bankruptcy under Chapter 7.

But if your current income is above the median income in New Jersey and you can afford to pay $100 a month toward paying off your debt, you cannot file under Chapter 7 and must proceed under Chapter 13. What you can afford to pay is based on a formula that includes your monthly income, your expenses, and the total amount of your debt.

Tax returns and proof of income are required. Under the new bankruptcy law, people wishing to file bankruptcy under Chapter 7 or Chapter 13 must show proof of their income by providing federal tax returns from the last year. If you want to file bankruptcy but have not paid taxes for the previous tax year, you must do so before the bankruptcy can proceed.
More filings under Chapter 13. As discussed, if you are ineligible for filing under Chapter 7 based on the means test, you must file under Chapter 13 instead. There are a number of differences between Chapter 7 and Chapter 13, but the main distinction is that under Chapter 13 you enter into a repayment plan in which you must repay a certain amount of money to creditors, based on a strict expenses-to-income formula.

Fewer "Automatic Stay" Protections for Filers. Under bankruptcy laws in effect before October 17, 2005, people who filed for bankruptcy were entitled to certain immediate protections from creditors and others - including most debt collection and lawsuit actions. These protections are part of what is called the "automatic stay" effect of a bankruptcy filing, because many potential legal actions against the filer are stopped. But under the new bankruptcy law some of these protections will be eliminated.

New Priority for Unpaid Child Support and Alimony. Bankruptcy laws provide a system of re-payment priority for people and companies that are owed money (called "creditors"). Under the new bankruptcy law, among the changes in creditor priority is that people who are owed unpaid child support and alimony will take priority over any other creditor.

Mandatory Financial Management Education. After the conclusion of bankruptcy proceedings. Before any debt can be discharged, bankruptcy debtors must participate in a government-approved financial management education program. This program is undertaken after the debtor has obtained credit counseling.

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