Richardson Law Legal Blog

Posted By Steven J. Richardson on June 18, 2010

In this economy, it is bad enough if you do not have a job.  What is worse is if you can get one, but can’t drive to it because your license was suspended for failure to pay surcharges!  However, if you find yourself in that situation in New Jersey, there is some good news: The Motor Vehicle Commission (MVC) has  announced the creation of the MVC Surcharge Payment Incentive Program, which will run June 15 through July 30 2010.  It is designed to help those MVC customers who have had judgments entered against them by the state  pay their balance.  The goal, as stated by Acting Chief Administrator Raymond P. Martinez, “is to give these particular customers a chance to either wipe the slate clean or arrange more affordable payments that will allow the restoration of their driving privileges.”

The seven-week incentive program will offer many people who have outstanding surcharge balances a chance to clear all their debt or make payment arrangements that will help get them driving again. Eligible drivers include those who have been placed in judgment for failing to make surcharge payments or those in judgment who arranged a payment plan but are finding it difficult to make payments.

According to the MVC, approximately 273,000 drivers are eligible for the incentive program, and the average surcharge debt owed is $2,400. Examples of the incentives to be offered are extended, 48-month payment plans, and interest waivers for drivers paying off principal and costs. Most eligible drivers will be directly notified by mail of this opportunity to address their surcharge issues. Drivers need to contact the specific collection firm noted on the personalized letter they received to discuss available options.

If you are in this situation and want more information about the MVC Surcharge Incentive Program, you can contact the specific collection firm noted on your Surcharge Payment Incentive Program letter or visit www.njmvc.gov/surcharge.  Please note, however, that drivers with outstanding surcharges related to Driving Under the Influence (DUI) convictions are not eligible for the incentive program.

Many people end up filing a chapter 13 bankruptcy to get out of a surcharge problem and have their license restored.  Here is an opportunity for many New Jersey drivers to do that without taking that drastic step.  New Jersey is making the offer; you should take them up on it.  It could be the best decision you make this summer!

Category: News, Traffic Court | No Comments »
Tags: surcharges

Posted By Steven J. Richardson on June 16, 2010

People file a chapter 13 bankruptcy to restructure their debt and get their financial lives back on track.  Naturally, one of the first steps towards doing that, even before they file the bankruptcy, is getting a good price on the attorneys fees.  The question “Does this include everything?” is a common one in my office.  The answer is that I will quote a fee for doing the work that is routinely necessary to get a case from the preparation of the paperwork (petition and plan of repayment) to the confirmation of the plan by the court.  However, certain things can happen that will result in what are called “supplemental fees.”  Most of them come about from the client doing or not doing something detrimental to his case.  The following list of “don’ts” represents common ways in which my clients drive up their costs.  Avoiding them, therefore, is very important to insuring that your bankruptcy does not cost more than it should.

1. Don’t Fall Behind on Plan or Mortgage/Car Payments. If you fall behind on payments to the trustee on your plan, he or she will move to dismiss your case.  If you fall behind on regular mortgage or car payments outside the plan, the creditor will move for relief from the bankruptcy stay in order to foreclose on the home or repossess the car.  Responding to such motions triggers additional fees to your attorney to fix the problem, and you may also pay fees and costs to the creditor for having to bring the motion!  Although these fees are often paid through your plan, it will certainly increase the amount of your payment.
2. Don’t Leave Out a Creditor. In either a chapter 7 or a chapter 13, it is important to list all of your creditors; in fact, the bankruptcy code requires you to do so.  However, it is especially important in a chapter 13 because there is a higher likelihood that the omitted debt will not be discharged when your plan is completed.  Adding creditors to a bankruptcy after it is filed entails a filing fee (in NJ it is $26) and usually a supplemental fee to the attorney to file the appropriate paperwork and notice those new creditors.
3. Don’t Fail to Take Your Financial Management/Debtor Education Class. In order to get a discharge, you have to complete this second course and have your attorney file the proper paperwork with the court.  If you do not do this, your case will be closed without a discharge being issued!  To fix this, you must take the class, move to reopen your case (which, in NJ, carries a filing fee of $260), and pay your attorney a supplemental fee (which is due immediately, as there is no longer a plan in which to put the additional costs), then file the paperwork.
4. Don’t Fail to Provide Your Attorney with What He Needs to Confirm Your Plan. Every time I am in court for a hearing on the confirmation of a client’s plan of repayment, I hear dozens of cases get adjourned to a new date because the trustee needs certain information that the debtor did not provide.  Repeated appearance by your attorney can also drive up your fees.
5. Don’t Fail to Appear at the Meeting with the Trustee. The bankruptcy code requires you to meet with the trustee and give testimony under oath.  This MUST be done before your plan can even be considered for confirmation.  If your attorney shows up and you don’t, guess what?  He or she will probably charge you for the extra appearance.

This is far from an exhaustive list or a “top five,” but they are common ways in which people end up spending far more than they have to on their bankruptcy.  Since it is sometimes necessary for an attorney to make a motion or deal with some other out of the ordinary task on your case for which you will be charged extra, why make it worse by not holding up your end?  The bottom line: cooperate with your attorney, do everything he or she says, and avoid the mistakes above, and you will minimize the chances that your bankruptcy will cost you any more than you were originally quoted.

Category: Bankruptcy, Library | No Comments »
Tags: attorneys fees, Bankruptcy

Posted By Steven J. Richardson on June 14, 2010

Student loans, although not automatically nondischargeable (i.e. not wiped out in bankruptcy), have been notoriously difficult to get rid of.  This is because, in order to succeed, a debtor must show “undue hardship.”  But with everyone in bankruptcy suffering from financial hardship, what does this really mean?  I discussed this issue in a post a few years ago, but a recent case in a Minnesota Bankruptcy court shows that this hardship can be proven, and sometimes under circumstances you would not expect.

A recent post on the Bankruptcy Law Network talks about a debtor that discharged $300,000 in student loans even though her husband had recently spent $30,000 from a second mortgage loan to put a new screened-in deck on their home and had also purchased a $40,000 luxury SUV.  What is even more interesting is, all of this happened years after she obtained her bankruptcy discharge. The discharge was obtained in 2004, but the action to determine the loan dischargeable was not brought until 2007.  The court held that is could consider a student loan dischargability case even years after the underlying bankruptcy was discharged and closed.  In addition, and perhaps more importantly, it determined that it was the financial circumstance in 2007, not 2004, that would determine whether there was “undue hardship.”

In determining whether the debtor met this standard, the court considered of importance the following:

• the debtor’s household net income was$4,355.48, while her household living expenses were $5,913.00.  As such, there was no way she could make meaningful payments toward the student loans, nor could she afford to pay the student loans under an Income Contingent Repayment Plan.
• This situation would have been true even if the deck and SUV had not been purchased.
• the debtor’s inability to work, due to family considerations and having to care for her autistic children.  This involved her attendance at 27 to 37 hours per week of therapy for the children provided by the school district.
• it was not actually the debtor’s income that was used for the luxury purchases.

What is also interesting is what the court did not consider to be of importance.  The lender’s argument that the fact that the debtor was making payments on the deck and SUV proved that “the money was coming from somewhere,” and thus the debtor could pay on the student loans, was rejected.

Two important points should be gleaned from this decision.  First, the debtor’s stream of inome and ability to work is considered key to the determination, not what a non-debtor spouse earns.  Second, and perhaps more importantly, “undue hardship” can come about under circumstances that did not exist at the time the bankruptcy was filed, but at some time in the future.  Thus people with student loans that file bankruptcy should, at the very least, consult with their bankruptcy attorney should their post-discharge financial situation change for the worse.

There is one caveat to all of this: the court ruling discussed here was not made in the District of New Jersey, nor in the Third Appellate Circuit in which New Jersey is located.  It was an 8th Circuit Federal Bankruptcy Appellate Panel ruling on a Minnesota bankruptcy court order of discharge.  Thus New Jerseyans should not assume that they would prevail on this point here, and should discuss their situation with a New Jersey bankruptcy attorney.  Nevertheless, it is an encouraging ruling on this issue.

Category: Bankruptcy, News | No Comments »
Tags: Bankruptcy, discharge, student loans

Posted By Steven J. Richardson on June 8, 2010

One question I get asked a lot is what bankruptcy will do to someone’s credit.   This is because there are a lot of myths out there about what happens.  People think they will have bad credit for 7 (or 10) years no matter what.  My answer used to be that it is the worst thing you can do.  It will trash your credit, and  for that reason should always be considered as a last resort, but it is not like breaking a mirror, in that the period of time you will be affected by it is not the same for everyone; it depends on what you do to repair it.  However, with the rise and establishment of the FICO score, and what we are learning about how it is calculated, this answer has changed somewhat.

Years ago, an outfit called the Fair Isaac Company (FICO) established a “secret formula” that creates a score much like those from high school SATs (300 to 850) that rate your credit worthiness.  The scores are based on the contents of your three credit histories (Equifax, TransUnion, and Experian), and as such can vary a bit with the content of each, so it is best to be aware of all three.   If you have a high score prior to bankruptcy, it will drop considerably after you file.  However, if you are in default on your credit cards and have a low score due to a lot of negative marks on your report, the drop will be more modest.  It can also be affected by the number of debts that are discharged.

Another thing to bear in mind is exactly what information goes into the calculation of your score.  As 30% of the score is based on amount of debt owed, the ironic thing is that some people may experience a bump up in their score, as debt balances on their reports drop to zero with their discharge.  Then another 35% is based on your payment history, so the next year or two after you file can be critical to raising your score.  Make sure those mortgage and car payments are made on time every month. You might also get a secured credit card (a card that requires a security deposit and has a credit limit that is a multiple of same) and pay it off every month.  Usually, after about a year or so the bank will convert it to a regular card.  There are all sorts of ways to improve your score, so the more proactive you are in doing so, the faster you will get back up on your financial feet.

Bankruptcy, as I said, is a last resort, but it can often be the best way to get out from under crushing debt. Find out what is true and what isn’t about credit, and take charge of your life after you file by taking affirmative steps to rebuild your score as quickly as possible.  That is the fastest and best way to get the fresh start in life that you need!

Category: Bankruptcy, FAQ | 1 Comment »
Tags: Bankruptcy, credit, credit score

Posted By Steven J. Richardson on June 3, 2010

New Jersey motorists have known for years that they have to buckle up or face the consequences.  Signs that say “Click It or Ticket” are now quite familiar.  However, the New Jersey Legislature has recently amended the provisions of the seatbelt law to require that all occupants of a passenger automobile, including adults who are seated in the rear, use a seatbelt. Under the prior law, adults seated in the rear of a passenger automobile were not required to do so.  There are some exceptions, however.  The law does not apply to  a driver or front seat passenger of:

• A passenger automobile manufactured before July 1, 1966;
• A passenger automobile in which the driver or passenger possesses a written verification from a licensed physician that the driver or passenger is unable to wear a safety seat belt system for physical or medical reasons;
• A passenger automobile which is not required to be equipped with a safety seat belt system under federal law;
• A passenger automobile operated by a rural letter carrier of the United States Postal Service while performing the duties of a rural letter carrier; or
• A passenger automobile which was originally constructed with fewer safety seat belt systems than are necessary to allow the passenger to be buckled.:

The good news is that, as far as enforcement goes, these seatbelt violations as secondary offenses, meaning that police must stop the vehicle for a different violation before issuing a summons and complaint for this offense.  The driver also does not pay.  Each rear seat passenger 18 years of age or older shall be responsible for any fine imposed.  The law takes effect immediately, so be sure to check everyone in your car to be sure they bucked up before you turn the ignition key; you will be doing them a favor if you are later stopped.

Category: News, Traffic Court | No Comments »
Tags: back seat, seat belts