Once you file for bankruptcy protection, creditors are barred from taking any action against you. If a judgment has yet to be entered, then that cannot happen without them asking the bankruptcy court first. In this situation, that creditor is treated just like any other unsecured creditor.

If  a judgment has already been entered, that may change things.  First of all, that judgment creates a lien on any real estate that you may own in New Jersey.  So, if you own real estate, the debt may have gone from an unsecured debt to a secured debt through a judgment lien. That is the bad news.

The good news is that in many cases, if you do not have a lot of equity in the property, the judgment lien can be avoided.  People in bankruptcy in New Jersey are allowed to keep assets that do not have a net value  over and above a fixed amount called an “exemption.”  Therefore, if the judgment lien is “sitting” on that equity, it “impairs” your ability to enjoy the benefit of that exemption.  This means that if you do not have any more equity in your house than you can legitimately exempt, you can “avoid” the judgment lien.  The problem comes in if you have more equity in your home than you can exempt, the judgment lien may stay in place.  You should bear in mind, though, that the “avoiding” of that lien requires an extra step in your bankruptcy for which many attorneys charge an extra fee.  Thus waiting until a judgment is entered could end up costing you more money to file bankruptcy.

Another angle of attack on the judgment lien is if you file bankruptcy within ninety (90) days of the date the judgment was entered. One reason people file bankruptcy is to prevent any one creditor from gaining an advantage (such as filing the first wage execution, bank levy or, in this case, judgment lien).  A fundamental principal of bankruptcy law is to treat creditors of the same class equally, and by obtaining a judgment lien ahead of other unsecured creditors, the judgment creditor has obtained an advantage.  This amounts to a “preference” under the bankruptcy code, and can be the basis of an objection.  But again, that is an additional step that you will need to take, which could end up costing you extra.

The obvious lesson here is that waiting too long to file bankruptcy can cause you headaches, from costing you more money to wipe out your debt to facing the possibility of having to pay off a lien.  Realistically speaking, most bankruptcy cases that are filed do not result in assets being sold because most debtors do not have assets over and above what they may exempt. But judgment liens can create a complication for you, so if the sharks are circling and the lawsuits are starting to pile up, it is time to talk to a bankruptcy attorney.  Don’t wait until it is too late!

1) the nature and circumstances of the defendant’s conduct, including whether the conduct posed a high risk of danger to the public or caused physical harm or property damage;

2) the defendant’s driving record, including the defendant’s age and length of time as a licensed driver, and the number, seriousness, and frequency of prior infractions;

3) whether the defendant was infraction-free for a substantial period before the most recent violation or whether the nature and extent of the defendant’s driving record indicates that there is a substantial risk that he or she will commit another violation;

4) whether the character and attitude of the defendant indicates that he or she is likely or unlikely to
commit another violation;

5) whether the defendant’s conduct was the result of circumstances unlikely to recur;

6) whether a license suspension would cause excessive hardship to the defendant and/or dependents; and

7) the need for personal deterrence.

These are in addition to any other factors that the court may deem relevant.

In addition to these factors, the Court stated that comparisons to motor vehicle statutes that impose mandatory license suspensions also may be a useful guide in some cases. It is also not necessarily the number of the above considerations that apply, but the weight to be attributed to one or more of them.

My caution in my previous post still applies: don’t think you are safe from license suspension because the traffic statute you break does not include that as a penalty; if the court deems your violation to be “willful,” you could still lose your license.  The ability to drive in New Jersey is a privilege, not a right!

When someone is arrested for drunk driving and taken to the police station, they are read the first  part of a standard statement saying that they do not have the right to refuse the breathalyzer either on the grounds of wanting an attorney present or their right against self-incrimination.  If the person does not respond, invokes their right to an attorney or against self-incrimination, or if the response is ambiguous, the police must read the second section of the statement, which reiterates that those rights do not apply, and that a clear answer must be given in the affirmative to avoid a charge of refusal.  But what if the person agrees unequivocally to give breath samples after being read the first section, but then is unable to give a sufficient sample, what happens then?

Well, fortunately New Jersey’s Appellate Court gave us the answer at the beginning of this month in the case of State v. Schmidt.  It ruled that before charging a person with refusal, the police should read the second part of the DWI standard statement in those circumstances where the defendant gives an initial, unqualified consent to submitting a breath sample and thereafter is unable or unwilling to provide an adequate sample for analysis.  Sometimes people try to “game the system” and look like they are cooperating and giving samples, but in reality are just trying to make it look like there is something wrong with the machine.

This does add an additional layer of protection by requiring the police to say, in effect, “stop fooling around or we will charge you with refusal,” but it is not the end of the story.  If you find yourself in that situation, bear two things in mind: 1) don’t try to be cute, they can still get you; and 2) if you have asthma, COPD, or some other disorder that may well interfere with your ability to give a proper sample, speak up! Let the police know that no matter what you do, it just isn’t going to work.  They can always try taking a blood sample, but at least you can try to avoid a refusal charge, which is never good.  As I have said many times on this site: the law does provide certain protections, but that does not mean you should not speak up for yourself and provide protections of your own.

The decision of the appellate court was appealed, and on July 12, 2010, the New Jersey Supreme Court ruled that a person who has been arrested for drunk driving has the right to be informed of the obligation to submit to a breath test in the language he or she speaks.  As a practical matter, the Attorney General and the Motor Vehicle Commission will be tasked with providing a means of having the warning language available in a wide variety of foreign languages spoken in New Jersey.  It only took a year, but at least justice was finally served.

The key thing to bear in mind is that if your English is not that strong, and you do not understand the often convoluted text of the standard warning police are required to read to those arrested for DWI, speak up. They are now under a duty to make sure you understand.  Tell them what your native language is and wait until they are able to provide you with either some one who can translate it for you verbally, or give you the text written in that language.  It’s the law!

In the case of State v. Federico the judges held that jail terms imposed as a result of multiple traffic ticket convictions arising out of a single incident may not exceed 180 days. The case here involved someone who was convicted of a third offense DWI, along with driving on the revoked list as a result of a prior DWI conviction.  Each of these offenses requires a jail term, and the total time exceeded 180 days.  In arriving at this decision, the Court noted that federal constitutional law would permit a sentence exceeding 180 days following the conviction for a variety of petty offenses stemming from the same incident. However, as a matter of long-standing policy, in the absence of the offer of a jury trial, 180 days of incarceration is the maximum permitted in our state for convictions of multiple petty offenses arising from the same incident.

One should bear in mind, however, that this is for traffic court offenses, not criminal matters such as shoplifting, assault, and the like.  These are considered disorderly, or petty disorderly conduct, charges, as opposed to traffic tickets.  Even so, it does give someone an idea of the maximum time he or she may face as a result of these types of violations.

The court held, in the case of State v. Privott, that the fact that the police have a legitimate basis to frisk a criminal suspect for weapons does not provide the officers with the right to go further than patting him down.  In this case, they lifted the suspect’s clothing for the purpose of recovering evidence.  The court observed that,

“In assessing the scope of the search by the officer, the evidence is clear that defendant was cooperative at all times. When stopped, defendant placed his hands against a fence as instructed by the officer. A reasonable search, as well as the least intrusive maneuver needed to protect the safety of the officer against a possible weapon, would have been the traditional pat-down search of defendant’s outer clothing. That did not occur. Rather, the police officer lifted defendant’s tee-shirt to expose defendant’s stomach, and in doing so, observed a plastic bag with suspected drugs in the waistband of defendant’s pants. That maneuver exceeded the scope of the patdown search needed to protect the officer against defendant having a weapon and was akin to a generalized cursory search of defendant that is not condoned.”

In saying this, the court recognized that this kind of search is done for the safety of the officers, and not as an excuse to look for any other evidence.  So I guess when it comes to pat-down searched in New Jersey, it’s touch but don’t look!

An article on the Bankruptcy Law Network brings to light an interesting case from a Georgia Bankruptcy Court where the wife planned to file bankruptcy from the very beginning, telling her attorney that she would pay him from 401(k) pension funds obtained in the divorce.  After she filed, seeking discharge of over $35,000 in fees, the attorney filed an objection to discharge, claiming that the debt was incurred by the debtor through “false pretenses, false representation or actual fraud” under section 523(a)(2)(A) of the bankruptcy code.  After a trial, the court agreed, and the fees were still due and owing.

This brings up the general admonition to be careful about what debt you incur once you realize that you are insolvent.  Creditors and bankruptcy trustees scrutinize the activities of debtors in the months leading up to the filing of the petition.  Was there a lot of credit card use?  What was purchased?  What is worse, bankruptcy law interprets fraud from an objective, rather than subjective, standard.  In other words, you may not have any intent to defraud creditors.  You might have every intention to pay once you get a job, get that bonus, or get that raise.  However, it is your objective ability to pay the debt at the time it is incurred, not your subjective intent, that rules here.  If this sounds like you, be sure to discuss it with your attorney as part of the bankruptcy preparation process, because if you incurred a debt that you simply could not afford, it might be denied a discharge under the section mentioned above, even absent the bad intent of the woman in that case.

First, what if you need Social Security benefits for retirement or a disability?  Income “on the books” is reported to the Social Security Administration, not only in the form of the FICA taxes withheld, but also your work history.  If you work for any significant period of time “off the books,” then later need to apply for retirement or disability benefits, you will be paid less than if you had reported the income because your earnings record will be deflated.

Second, what if you are injured on the job?  I consult with many clients in the construction industry.  What I tell them is that if you are not on the company books as an employee, there might be a coverage issue for New Jersey worker’s compensation insurance.  That is even if the employer has compensation coverage!  That may be the reason you are off the books in the first place!  Now you are struggling to get treatment and disability income that you might have easily received if you were “on the books.”  It can also be difficult to calculate temporary or permanent disability benefits accurately without “off the books” income information.  One example is under-reported tips by restaurant staff.  They may well end up getting less than they might while out on disability, because they can’t substantiate their true income.

Another good example of this problem is also one that is in the news.  National Public Radio reported recently that the fishing industry in the Gulf of Mexico is going to have big problems regarding the BP oil spill (other than the obvious).   The article begins by observing:

“Cash is king in the Gulf fishing industry. And many fishermen and residents say a large, if unquantifiable, amount of the Gulf Coast’s economy operates with cash. It’s a segment of the economy that, for generations, has been kept in the shadows of the Internal Revenue Service.”

Unfortunately, the spill has devastated their business, and they want to make a claim from the $20 billion compensation fund BP set up.  But how do they substantiate that claim?  How do they show that this is really their loss without the business records to back it up?

Third, what if you have to file bankruptcy?   I have had clients that have not been able to do so because they or their spouses had under the table income that would come to light through the bankruptcy petition, either by disclosed income in the petition that did not line up with tax returns or because they simply could not document it for some of the income analysis required under the code.

The bottom line: there is such a thing as being too clever for your own good.  Bite the bullet, work on the books, and pay the taxes.  You will be better off in the long run.

Until recently, if the income tax return of the debtor was due at least three years before the filing of the petition, was actually filed two years before the filing of the petition, and assessed at least 240 days before the filing of the petition, the tax was generally dischargeable.  The problem, though, is that the IRS has successfully challenged the two year prong of that rule at the trial court level.   In three cases, taxing agencies have successfully argued that a late filed return is not a “return” under the provision of the bankruptcy code dealing with the dischargeability of taxes because a late filed return does not satisfy all “applicable filing requirements” since filing on time is one such requirement.  In re Creekmore, 401 B.R. 748(Bankr.N.D.Miss.2008); Links v. U. S., 2009 WL 2966162 (Bkrtcy.N.D.Ohio); McCoy v. Mississippi State Tax Commission, 2009 WL 2835258 (Bkrtcy.S.D.Miss.).

For example, suppose you haven’t paid all of the income taxes from tax year 2005, and the return for that year was filed on or before April 15, 2006.   This would generally be dischargeable.  However, what if the return for 2005 was not filed until much later, such as January of 2008?  It would have been filed more than two years ago, but arguably not “on time.”  Here you would need to discuss this with an experienced bankruptcy attorney to see if discharging that tax is still possible.  On the other hand, if you have tax debt that fell due three years ago on a timely filed tax return, you may well be able to get out from under it by filing bankruptcy.

The problem with these companies is their approach to settling your debt with creditors.  Most of them tell you to stop paying on your credit cards and, instead, make a monthly payment to them.  This money amasses in their coffers and, after a significant sum of money has accumulated, less their fees, of course, they use this money to negotiate lump sum settlements with creditors.  This, however, takes about two to three years.  The big problem is that the creditors get cranky when they aren’t paid, and in that same two to three year period, lawsuits are brought, judgments are entered, wages are garnished, and bank accounts are levied upon.   When this happens, many of these companies wash their hands of the problem.  They also deduct their fees, whether or not they are successful in their negotiations with creditors!

As you can imagine, all of this does not lead to a very high success rate.  As reported on the New York Times web site on June 19, 2010,

“In the case of two debt settlement companies sued last year by New York State, the attorney general alleged that no more than 1 percent of customers gained the services promised by marketers. A Colorado investigation came to a similar conclusion.

The industry’s own figures show that clients typically fail to secure relief. In a survey of its members, the Association of Settlement Companies found that three years after enrolling, only 34 percent of customers had either completed programs or were still saving for settlements.”

One obvious question is: with these pitfalls and a low success rate, why would anyone choose to retain the services of these companies?  The answer is, misleading marketing.  This practice has drawn the attention of the federal government.  The same Times article reports:

“In April, the United States Government Accountability Office released a report drawing on undercover agents who posed as prospective customers at 20 debt settlement companies. According to the report, 17 of the 20 firms advised clients to stop paying their credit card bills. Some companies marketed their programs as if they had the imprimatur of the federal government, with one advertising itself as a “national debt relief stimulus plan.” Several claimed that 85 to 100 percent of their customers completed their programs.

“The vast majority of companies provided fraudulent and deceptive information,” said Gregory D. Kutz, managing director of forensic audits and special investigations at the G.A.O. in testimony before the Senate Commerce Committee during an April hearing.”

I am not saying that all companies are like these under investigation.  However, it does make me very skeptical of the efficacy of retaining their services if they show a 66% failure rate while debtors still end up paying for the service. My advice is this: If you are considering bankruptcy, speak with an attorney and ask him or her whether, under your circumstances, it would be a good idea to try this option before paying your hard earned money for the possibility of ending up in a worse situation.