The vast majority of chapter 13 bankruptcies filed in New Jersey are to save a home from foreclosure.  The debtor, for one reason or another, gets behind in the payments, and the bank seeks to take the house.  He or she then files a chapter 13 promising to pay back the arrearage over time with monthly installments. Although this sounds simple, it is not.  Bankruptcy can give you a fresh start and allow you to save your home, but you need to put in the necessary effort to make it successful and have the discipline to make sure all necessary payments are made through the life of your plan.

During the three to five years you are making the payments, creditors are constantly looking over your shoulder to make sure you stick to the plan and your overall financial obligations.  Should they think you are not, they may either seek the dismissal of the case or ask the court to grant them relief from the bankruptcy stay so that they may enforce their rights in state court.   If the creditor is secured, this could mean the sale of the collateral through the repossession and sale of a car or the foreclosure of a home.  I have found that when it comes to this, the best defense is a good offense.

While you are in bankruptcy and making monthly payments to your trustee, you are also paying bills for regular monthly expenses going forward.  This includes the mortgage, the car payment, real estate taxes and homeowner's insurance (if they are not escrowed with the mortgage), and the like.  Over the years of representing debtors in chapter 13, I have regularly defended them when a secured creditor claims that "post petition" (i.e. after the bankruptcy is filed) payments are not being made on the mortgage, the car loan, or the real estate taxes.  A problem often arises, however, when the client cannot put his or her hands on the canceled checks or other proofs of payment.

The solution, of course, is in good recordkeeping.  If you are in a chapter 13, keep a file in which you put proofs of payment for all of your monthly expenses, organized chronologically.  This can also include proof of plan payments in case the trustee claims you are behind on those.  This will make it so much easier for your attorney to mount a defense against a creditor, should that be necessary.  Yes, it is a lot of work, but it is time well invested in the success of your bankruptcy plan and your financial future.

Steven J. Richardson
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Bankruptcy, Collections, Student Loan, DUI and Traffic Court attorney in Woodbury, NJ.