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How Bankruptcy Can Save Property From Foreclosure In New Jersey


New Jersey residents, who are facing foreclosure, may seek refuge by filing for bankruptcy. Individuals may file for Chapter 7 or Chapter 13 bankruptcy, in New Jersey, depending on their financial position. Definitions of both laws are available on Robert Manchelís website

Generally, a mortgage company cannot prevent an individual from filing for bankruptcy protection. Immediately upon the filing of a bankruptcy petition, the mortgage foreclosure action must stop. Itís the law. The debtor (person filing for bankruptcy) is required to pay to a trustee (bankruptcy administrator), the total amount of the mortgage arrears (amount behind), including all costs and fees, as of the time of the filing. The arrears are generally paid to the trustee over the life of the bankrputcy case, which is generally 36 to 60 months. The monthly payment to the trustee is referred to as a trustee or plan payment. The first trustee payment is due on the first of the month, after the month of the filing.

New Jersey residents can obtain answers to questions regarding foreclosure resolution and bankruptcy laws by visiting

The trustee payment is generally more than the amount required to pay only the mortgage companyís arrears, as other creditors may be required payment. There is only one monthly trustee payment, no matter the number of creditors that will be paid through the plan. In the event that a number of creditors are to be paid though the plan, the trustee will disburse the appropriate funds to each creditor, in compliance with the bankruptcy laws. A limited explanation as to how creditors, other than the mortgage company, are entitled to payment, through the bankruptcy plan, is explained below.

Each type of debt has a specific classification. The three classifications of debt are priority, secured, and unsecured. Debt classified as priority, generally, must be paid, through the trustee payment, which is added to the mortgage arrears. An example of priority debt is certain tax liability and child support arrears. Debt classified as secured must be paid either through the bankruptcy plan and/or directly to the creditor. An example of secured debt is a mortgage and auto financing. Any amount paid to a secured creditor through the bankruptcy plan, is added to the mortgage arrears that are due to the mortgage company.

Debt classified as unsecured is debt that is owed to a creditor which does not maintain an interest in property, such as credit card debt or health care provider debt. The debtor may be required to pay none, some, or all of the unsecured debt through the bankruptcy plan, based on the following factors: personal income; household income; expenses; and, asset value. Any portion of the unsecured debt that must be paid, is required to be paid through the trustee payment, which is added to the mortgage arrears. If the debtor is required to pay only a portion of the unsecured debt, the unsecured creditors are paid on a pro rata basis. Any amount that the debtor is not required to pay is eliminated, without payment. A debtor must have the ability, either individually or with the assistance of another, to make the required trustee payments.

In addition to paying the monthly trustee payment, the debtor must pay their regular monthly mortgage payment on a timely basis. The first mortgage payment is due on the first day that the mortgage payment normally comes due after the filing. In other words, if a mortgage payment is due on the first of the month and an individual files on the 15th of the prior month, the first mortgage payment is due on the first of the month, after the month of the filing.

For more information on bankruptcy laws in New Jersey, visit

Robert Manchel is a New Jersey, Board Certified Consumer Bankruptcy Attorney, whose practice is limited to foreclosure resolution and bankruptcy law. For more information, please contact Mr. Manchel at (856) 797-1500, 1(866) Ė503-5655 or go to his web site at

Robert Manchel handles cases from the following counties: Cumberland, Atlantic, Salem, Gloucester, Camden, Burlington, Hunterdon, Somerset, Middlesex, Ocean, Mercer, Monmouth, Philadelphia.

Disclaimer: The bankruptcy laws are complex and may be applied differently, in each case, and State. There may be numerous exceptions and variations for each law and rule. Do not rely on the information provided in this article. If you are considering filing for bankruptcy protection or have foreclosure issues, you should consult with an experienced lawyer. We are a debt relief agency. We Help people file for bankruptcy relief under the bankruptcy code.

© 2008 Robert Manchel


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