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Law Office of David A. Semanchik May 4, 2021

The recent job market and distressed economy have left millions of Americans struggling with their finances. Many of these people turned to family and friends for help making mortgage or credit card payments, and others paid large sums of money to mortgage consultants who promised to save their homes. Bankruptcy, however, turned out to be the proper path to jumpstart thousands on the road to financial recovery.

New Jersey Bankruptcy Filings

According to U.S. Bankruptcy Court statistics, over 38,000 New Jersey residents filed for bankruptcy protection from Sept. 2010 to Sept. 2011. Over 8,000 of these filings were for Chapter 13 bankruptcy, during which qualified debtors set up a three to a five-year repayment plan.

In Chapter 13, debtors remain in complete control of their property – including the family home – and do not have to sell off any of their assets to repay creditors. Instead, an affordable payment plan is negotiated, approved by the court, and upon its completion, a debtor’s remaining eligible debts are discharged.

Proposed Zero Percent Interest on Mortgages

Proposed changes to Chapter 13 bankruptcy law have homeowners excited at the possibility of paying no interest on their underwater mortgage for five years. The Financial Times reports that the Federal Housing Finance Agency is currently reviewing a plan that would grant Chapter 13 debtors a five-year period where they would pay no interest on their home loan(s).

The proposal has unexpectedly met opposition because critics claim that allowing a bankruptcy court to modify first mortgages would further depress home values and make it more difficult for buyers to qualify for financing. However, others argue that putting an end to the increasing number of foreclosures nationwide should be the top priority.

No final decision has been reached, but it will certainly be interesting to see what changes, if any, are made as a result of these important debates.

While this particular legislation has yet to pass, debtors can still take advantage of the numerous benefits bankruptcy provides. Put an end to harassing creditor calls, save your home, and get started on the path to financial recovery through Chapter 13 bankruptcy. Anyone struggling to pay down his or her debts should speak with a qualified New Jersey attorney to see if bankruptcy can help.