The Supreme Court’s landmark decision of Till v. SCS Credit Corp., 541 U.S. 465 (2004), took up the issue of the proper method of selecting an interest rate sufficient to pay present value under section 1325(a)(5)(B)(ii). The Court considered and rejected the coerced loan, presumptive contract rate, and cost of funds approaches, and instead settled on a formula approach. Under this formula approach, the interest rate is determined by starting with a national prime rate and adjusting upward to account for greater risk of default.
The filing of a petition with the Bankruptcy Court instantaneously shields the debtor from most further acts by creditors to collect on debt owed as of that date. Filing automatically invokes the automatic stay under § 362(a) of the Bankruptcy Code. As a result, the debtor‘s estate is preserved for all creditors. The stay protects both the debtor, who gets relief, and the creditors as a group, whose claims are protected against other creditors who could otherwise pursue their own remedies.
The filing of a bankruptcy petition is designed to result in a discharge of most of the debts the person filing bankruptcy (the “debtor”) had as of the date the case is filed. Approximately 30 days after the bankruptcy petition and schedules are filed, a meeting (called “The First Meeting of Creditors” or a “341 meeting”) is held where any creditor can attend and ask questions concerning the Plan. The Chapter 7 341 meetings for cases filing in the District of New Jersey are held in Newark, Trenton, and Camden.
Even before a foreclosure judgment is entered, a mortgage holder may be entitled to injunctive relief restraining a homeowner from collecting or receiving rents if it can show that it will undoubtedly suffer immediate, irreparable harm in the event the restraints are not granted. It may also be able to obtain a court order compelling the tenants of the mortgaged premises to pay rents to a receiver.
The opportunity for summary judgment (either partial or complete) is one of the great benefits of the federal rules, and one of the strongest reasons for parties in state court actions to remove actions to federal court, if at all possible. Many state courts, including the State of New Jersey, permit summary judgment, and have modeled the rules on the Federal Rule of Civil Procedure 56. However, summary judgment is not always adhered to as rigorously in the state courts as it is in the federal system and the results tend to be very judge-specific.
For a business to bring itself through a bankruptcy and end up as a reorganized debtor with a confirmed plan of reorganization is a great achievement. Confirmation can only be accomplished with foresight, planning, and of course, a team of professionals to help guide the way. In obtaining the creditor buy-in necessary to confirm a chapter 11 plan, the business debtor must understand and explain the issues that caused it to require bankruptcy protection and be able to explain why those issues will no longer plague the reorganized company. It must provide an analysis of projected cash-flows and convince creditors that the obligations promised in the plan of reorganization can be met.
A mortgage holder is entitled to an order appointing a rent receiver to collect rents (as that term is defined in the loan documents) and maintain the mortgaged premises in the event of a borrower’s default. Failure to make obligatory monthly installments of principal and interest is a defined as a default under most mortgage notes and mortgages.
The Truth in Lending Act, arguable the nation’s most powerful Consumer Protection Act, and the New Jersey Consumer Fraud Act, give homeowners the means to fight back against a predatory lender. These claims could void the mortgage, dramatically reduce the sums a borrower owes, and because of the discretion granted trial courts under Regulation Z, could enable the trial court to allow a borrower to pay any remaining sums owed in reasonable monthly installments. When asserted as a counterclaim in a mortgage foreclosure action, the nature of the counterclaims creates genuine issues of material fact that precludes summary judgment.
There is a huge stigma that goes along with filing for bankruptcy. The word bankruptcy invokes a feeling of failure and immorality. People dread the thought that bankruptcy may be in their future. But debt consolidation, debt resolution, credit management, debt relief, etc.; these terms invoke a completely different emotional response. These concepts are marketed as an alternative to bankruptcy: a way out of financial hardship, but not shirking one’s responsibilities.
Don’t be The Next Victim
Debt relief agencies are great at marketing, but are a poor choice in most circumstances. Debt relief agencies promote that their services are an alternative to bankruptcy, but in truth they are praying on people’s emotions, spouting a false narrative, and creating false expectations.
The moment a bankruptcy petition is filed, an event known as the Automatic Stay is triggered and the bankrupt debtor is protected from continued collection activities[i]. The Automatic Stay encompasses a wide array of prohibited activities. Commonly, a bankruptcy petition is filed to stop a foreclosure, to prevent a creditor from garnishing wages, or just to stop the harassing phone calls. But, the filing of a bankruptcy petition also mandates that a creditor take corrective action when inaction infringes on the rights of a bankrupt debtor. And when corrective action is not taken, it is the creditor that may end up paying the price.