Update and Comment: New Jersey Foreclosure Mediation and Bankruptcy

Yesterday, we posted information on the press release issued by the New Jersey Bankruptcy Court regarding the New Jersey Foreclosure Mediation Program and Bankruptcy Debtors which was posted online at http://www.njb.uscourts.gov/notice/2009_02_04_foreclosure.pdf.   In that post, there was reference to a General Order of the United States Bankruptcy Court District of New Jersey regarding Negotiations between Debtor(s) and Mortgage Servicers to Consider Loan Modifications.    The post failed to include the link to the General Order of the Court.   See http://www.njb.uscourts.gov/notice/2009_05_20_JHW-GenOrder_Re_Loan_Modification-05-19-09_signed.pdf

By way of comment, there are many practical problem that currently exist in Debtors efforts to engage in such discussions with their mortgage companies or servicers.    First, despite this General Order, many servicers continue to advise bankruptcy debtors that loan modification is not available while they are “in bankruptcy”.    As is clear by the information provided by the New Jersey Foreclosure Mediation Program and that of the New Jersey Bankruptcy Court, this is not accurate.    As there is no forum in Bankruptcy Court to address this issue, Debtors are forced to submit to the New Jersey Foreclosure Mediation Program and still proceed with their bankruptcy case.    This causes confusion for both the homeowner and the mortgage servicer.

Although there are many other practical problems, another major issue is the inability of homeowners to point to any clear standard of whether they “qualify” for a modification.     President Obama has announced a program which contains details regarding whether a homeowner may qualify for modification.   See http://www.whitehouse.gov/blog/09/02/18/help-for-homeowners/.   However, what is a New Jersey homeowner to do if they feel they qualify based on all of the stated guidelines and their lender refuses to propose or accept a modification?     These are the questions which give New Jersey homeowners facing foreclosure and bankruptcy the most difficulty and those which are currently not addressed in either state or federal law.

Under any circumstances, we continue to advise our clients to attempt to obtain modifications and to consult with their attorney prior to and during this process.     In some cases, a Chapter 7 bankruptcy case may be filed to address the unsecured credit card debt of a homeowner and reduce their “debt-to-income ratio”.     However, in all cases, debtors should consult with experienced counsel regarding the particular circumstances of their case.

This blog and site provide information about the law designed to help users educate themselves about their own legal needs. But legal information is not the same as legal advice — the application of law to an individual’s specific circumstances. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a lawyer if you want professional assurance that our information, and your interpretation of it, is appropriate to your particular situation.


Our bankruptcy lawyers are available for a free case review. Please fill out the contact form and we will get back to you as soon as possible. Thank you!

For a free consultation