Will I Lose My Personal Injury Award In My Chapter 7 Bankruptcy?

If you are injured in an auto accident or other type of incident caused by the negligence of another person, you have the opportunity to recover for your medical bills and other losses by filing a personal injury claim in civil court. If you prevail in your case, you will receive financial compensation in the form of a personal injury award or settlement.

If you file for Chapter 7 bankruptcy,1 the bankruptcy trustee assigned to your case will seize some of your assets and property for liquidation in order to pay your creditors as much as possible prior to discharge of your debts. This leads a some bankruptcy filers who recently suffered injury to wonder whether they will lose their personal injury award as part of their liquidation bankruptcy.

Personal Injury Exemption

New York state law2 saves bankruptcy filers from losing all of their valued property by providing a number of exemptions from liquidation. For example, you may keep a certain amount of equity in your home or car, certain personal property, insurance benefits, and more. One exemption addresses any personal injury recoveries that you may have received in a separate case.

The law allows you to keep up to $7,500 of a personal injury award that was meant to compensate financial losses. The exemption does not allow you to keep any personal injury recoveries that were meant to reimburse you for intangible losses, such as pain and suffering. If your injuries were relatively minor, chances are that your award was less than $7,500 and you will be able to hold on to that money.

If your personal injury award was greater than $7,500, you will want to discuss your options with a bankruptcy attorney. An attorney can advise you on the best way to use exemptions and other strategies to lawfully hold onto your valuable property and assets. In some case, if your award is particularly large, you may want to consider filing for Chapter 13 bankruptcy instead.

If you are considering Chapter 7 bankruptcy, you likely have a lot of questions. Please do not hesitate to call the office of experienced Long Island bankruptcy attorney Ronald D. Weiss at 631-296-0309 for a free consultation.

FAQs Regarding Long Island Bankruptcy

Of course, anyone who is overwhelmed by debt and considering bankruptcy as an option has questions. At the Long Island office of Ronald D. Weiss, you can find an experienced bankruptcy attorney who will answer your questions and guide you through the process.

The following are some of the most frequently asked questions regarding bankruptcy may be:

Do I need an attorney to file bankruptcy?

While the law permits people to file for bankruptcy pro se (without an attorney), it is not always the best idea. In fact, the United States government officially advises people against filing without an attorney. Bankruptcy law can be extremely complicated, and an experienced lawyer can help you avoid many common mistakes that can have serious consequences, including criminal prosecution in some cases.

Can I keep my home or and other valuable property in a bankruptcy?

The answer to this question depends on a number of factors that are unique to your situation, but in many cases the answer is “yes.” The bankruptcy has various exemptions that allow a debtor who files for a Chapter 7 bankruptcy to keep certain categories of property depending on how much they are worth or how much equity a debtor has in them. In many cases, a debtor who files Chapter 13 bankruptcy does so specifically to keep their property, as this type of bankruptcy reorganizes debts and puts debtors on a court-approved payment plan.

How soon will I benefit from bankruptcy?

Immediately. The moment a person files for bankruptcy the come under the protection of the “automatic stay,” which is an injunction that keeps creditors from engaging in any collection activities, including filing or continuing any civil lawsuits. In addition, they are prohibited from calling you, sending you letters, foreclosing on your home, or repossessing any property.

Will bankruptcy keep me from being able to obtain credit in the future?

While a bankruptcy will stay on your credit report for 7 to 10 years, many people actually have better credit scores shortly after filing for bankruptcy. While it may be difficult to obtain financing immediately after a bankruptcy, people who have a bankruptcy on their credit reports routinely purchase homes, cars, and are approved for credit cards.

Contact a Long Island bankruptcy lawyer today to schedule a free consultation

Anyone who is considering bankruptcy should discuss their options with an experienced lawyer as soon as possible. To schedule a free consultation with bankruptcy attorney Ronald D. Weiss, call our office today at (631) 296-0309.

Does Credit Counseling at the End of a Bankruptcy Case Make Sense?

In our previous blog article, we discussed how amendments to federal laws in 2005 added new requirements for consumers to qualify for Chapter and Chapter bankruptcy. We addressed the requirement for bankruptcy filers to participate in two credit counseling sessions – one before filing a bankruptcy petition and one prior to a debt discharge. In this blog, we will examine the law regarding the “Second Session” of credit counseling, referred to as a debtor education course, and whether this session provides benefits for bankruptcy filers or merely serves as another meaningless hurdle to conclude a case.

The Debtor Education Course Requirement Under the Law

The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) went into effect in 2005, and the Act substantially amended consumer bankruptcy laws. While Congress claimed the changes aimed to protect consumers, in fact, they created new obstacles for consumers to benefit from the bankruptcy process. While legislators said the changes would curb bankruptcy abuse, it seemed like they actually created more administrative hurdles for consumers while still allowing businesses the same access to bankruptcy cases.

Regardless of whether you agree with BAPCPA’s amendments to bankruptcy laws and procedures, the law does apply to all consumer bankruptcy cases in the United States. One step in the process added in 2005 was that consumers now must undergo two credit counseling sessions – one before filing for bankruptcy and the other before they can receive a discharge of their remaining debts. The second debtor education course is meant to educate debtors on how to budget and manage household finances to hopefully prevent the need for another bankruptcy down the road.

Once you complete the debtor education course, you will receive a certificate of completion, which you must file with Official Bankruptcy Form 423. In a Chapter 7 case, you must complete the course and file the certificate within 45 days of your 341 meeting of creditors. In a Chapter 13 case, you must file the certificate on or before the date of the last payment of your repayment plan.

Not completing the debtor education course on time may not seem like a major issue. However, if you fail to file your certificate on time, the law allows the bankruptcy court to dismiss either a Chapter or Chapter case. A dismissal can create many problems, including:
The court will lift the automatic stay, which will allow creditors to reinitiate debt collection efforts, including wage garnishments or lawsuits
You will owe more on your debts than you did prior to filing for bankruptcy
In a Chapter 13 case, you will have made payments for three to five years and still have remaining debts due to no discharge
If you want to reopen your bankruptcy case, you will need to pay the filing fee again, as well as the fees for additional credit counseling courses

You never want to risk having the court dismiss your bankruptcy case, so you should always complete your debtor education course with plenty of time to spare.

Debtor Education: Beneficial or Burdensome?

The first credit counseling session teaches potential filers about debt relief alternatives to bankruptcy. At this point, many consumers have already set their minds on bankruptcy or may have few other realistic options, so they tend to simply go through the motion instead of taking away valuable information from the session. On the other hand, the debtor education course focuses on teaching financial skills a debtor can employ in the future. Final rule 28 C.F.R. §§ 58.25 – 58.36 sets our required topics a course must cover, which include:
Ways to use credit wisely and avoid abuse
Budgeting skills
Other techniques for responsible money management

In many situations, consumers seek relief from bankruptcy because they mismanaged their finances and this course may provide some valuable information. In addition, consumers can take this course early in the Chapter 13 process, so it may possibly assist them with budgeting to ensure they successfully complete their payment plan.
While the course may provide some useful information for some people, there are several reasons why many debtors find little value in the course. Such reasons may include:
The course is brief and not personalized, so some debtors may not know how to apply the lessons to their own financial situations
Some bankruptcy filers know how to manage money properly, and they only need to file bankruptcy due to medical bills, personal injury judgments, or other debts not related to credit misuse or money mismanagement

While the S. Trustee Department must approve all debtor educators, the new requirement led many people to obtain approval to make profits and not necessarily because they are qualified or dedicated to providing financial education

Two years after the enactment of BAPCPA, the National Consumer Law Center conducted a study regarding the effectiveness of credit counseling requirements in consumer bankruptcy. At the time, the study concluded there were “new burdens but few benefits.” In the years since the study, not many changes occurred in the debtor education process, which may indicate there might be a better way to avoid consumer bankruptcy abuse and prevent future bankruptcies than by requiring debtors to pay for a course with little impact.

Consult with a Highly Experienced Long Island Bankruptcy Attorney

Whether filers find the second credit counseling session to be educational or a burden, participation is an important requirement to obtain a discharge of your debts under Chapter 7 or Chapter 13 bankruptcy. If you go through the bankruptcy process and then unknowingly fail to complete this counseling session, you could risk the court dismissing your case and could face a significantly worse financial situation than you had before.

We cannot overstate the importance of having the guidance of an experienced bankruptcy lawyer. At the Law Office of Ronald D. Weiss, we advise clients of their debt relief options and handle every step of the bankruptcy process, ensuring each client receives the best possible outcome. Please call (631) 271-3737 or contact us online for more information about how we may help you.

What Forms Are Required To File For Bankruptcy?

Like most legal cases, a bankruptcy involves a large amount of paperwork. Specific forms must be completed and filed with the bankruptcy court within certain time frames in order to ensure that your bankruptcy case benefits you as much as possible. The required forms can often be confusing and overwhelming to an individual who is not familiar with the bankruptcy process. For this reason, you should never hesitate to seek out assistance from an experienced bankruptcy attorney.

The following are only a couple examples of forms required in certain bankruptcy cases:

Voluntary petition – The voluntary petition provides the bankruptcy court with basic information regarding the individuals filing for bankruptcy and the nature of their case. Such information includes:

Names, addresses, and social security numbers
Whether you are filing as a consumer or a business
The nature of your debts
Whether you have assets that may be put toward your debts
Any prior bankruptcy filings

Schedules – The schedules to the voluntary petition that are required depend on your situation. These schedules may address the following:

List of your real property
List of your personal property
Property that is exempt
Unsecured and secured creditors
Your income
Your expenses
Any co-debtors you may have

The schedules must be completed in extreme detail and with accuracy to ensure the success of your bankruptcy.

Contact an experienced Long Island bankruptcy attorney for assistance today

As you can see, there are complicated forms needed to file for bankruptcy in New York. You never want to risk making an error or omission on these forms or forgetting a form as such mistakes may delay the bankruptcy process or even result in a denial of your bankruptcy. In some circumstances, some errors may even result in a suspicion of bankruptcy fraud. At the law office of Ronald D. Weiss, PC, we know how to complete and file all necessary forms with the court, as well as handle the other aspects of your bankruptcy case. Call us today at 631-319-9238 to discuss how we can help you today.

Does Pre-Bankruptcy Credit Counseling Benefit or Unnecessarily Burden Filers?

A successful Chapter 7 or Chapter 13 bankruptcy can have many benefits for individuals or married couples who are in financial trouble. While the goal of a bankruptcy is the discharge of all your qualified debts, you must meet certain requirements before you can obtain this discharge. One requirement enacted in 2005 is attendance at credit counseling courses: one prior to filing for bankruptcy and one just prior to your debt discharge. Many refer to pre-bankruptcy credit counseling as the “Initial Session” and clients regularly inquire about the purpose or benefits of this counseling requirement.

Law Requiring Pre-Bankruptcy Credit Counseling

Federal law governs most aspects of bankruptcy cases. In 2005, Congress passed the “New Bankruptcy Law,” which is formally titled the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA). With sweeping changes to bankruptcy law and procedure, Congress supposedly aimed to curb abuse of the bankruptcy system by consumers by making the process more complicated and adding in obstacles to eligibility for certain consumer bankruptcies. The law added the means test requirement for Chapter 7, strict residency requirements, and new credit counseling requirements.

Under the amended federal law, consumers must complete the required Initial Session of credit counseling within the 180 days before filing a bankruptcy petition. Consumers must receive counseling from an agency approved in accordance with federal bankruptcy law. The Department of Justice provides a list of approved agencies for each jurisdiction across the United States. Consumers must then include proof of completion of the Initial Session with their bankruptcy petition.

The law does provide some exceptions to the credit counseling requirement, which include:
The filer is on active military duty in a combat zone
A mental condition prevents the filer from understanding credit counseling concepts
Despite properly requesting counseling, a filer did not receive counseling in five days
Exigent circumstances required an immediate bankruptcy filing with no chance to complete the Initial Session

Physical disability or long distances that would make travel difficult used to be exceptions, though counseling sessions are now available over the internet and phone, so consumers rarely successfully use this exception today. If you claim “exigent circumstances” as an exception, the court will examine whether your circumstances qualify as a proper excuse and will likely require you to complete the Initial Session within a certain time period after your bankruptcy filing. This seems to make little sense, as the consumer has already commenced a bankruptcy case, so the credit counseling will do little to change their minds.

If you fail to meet the pre-bankruptcy credit counseling requirement, the bankruptcy court will likely dismiss your case. Some federal bankruptcy circuits will simply strike a petition as if a case never commenced; however, courts for the Eastern District of New York have ruled that a dismissal is the appropriate remedy in this situation. A dismissal will terminate the automatic stay, may result in multiple bankruptcy filings on your record, and can result in repeated filing fees.

Does the Pre-Bankruptcy Credit Counseling Requirement Make Sense?

Since BAPCPA changed bankruptcy laws in 2005, much debate occurs regarding whether the new requirements and obstacles to consumer bankruptcy make sense. Is the Initial Session credit counseling requirement practical and beneficial? Does it create unnecessary administrative hurdles for those seeking financial relief? First, we’ll discuss some possible benefits consumers may reap from pre-bankruptcy credit counseling.

Potential Benefits

Congress intended for pre-bankruptcy credit counseling to educate consumers considering bankruptcy regarding other debt relief options and the general bankruptcy process. In some cases, consumers may rush to file for bankruptcy when there truly are other solutions that may be more appropriate in their situation. A consumer may possibly receive credit counseling and decide to speak with a skilled attorney who can help explore whether bankruptcy is truly the right decision based on their finances.

Additionally, some consumers seeking bankruptcy may not fully understand the legal process and all the possible implications of a bankruptcy. While bankruptcy helps many people each year, it is important to know what you are getting into before you start the process. In some cases, credit counseling can help to solidify the decision to file if the consumer was previously doubting the decision.

Reasons Why the Initial Session Is Often Ineffective

Despite the supposed intention of Congress to benefit consumers by requiring credit counseling, in many ways, the requirement seems more like an unnecessary and ineffective obstacle than a true benefit. The following are some reasons often cited against the Initial Session requirement:

Counseling only lasts 90 minutes and is generally not personalized enough to effectively educate the consumer regarding other debt relief options.
Some consumers know and practice responsible financial handling and need to file bankruptcy based on medical bills or other circumstances they could not avoid.
Often, by this stage in the process, a consumer’s financial situation may be so overwhelming that no realistic alternatives to bankruptcy exist.
Even if an agency presents realistic debt relief alternatives to bankruptcy, a consumer has no obligation to take alternative action to bankruptcy.
When it is time to undergo credit counseling, consumers are often set on their decision to file bankruptcy that they simply go through the motions to meet all requirements to commence their case.

In addition, meeting with a highly experienced debt relief and bankruptcy attorney can often provide similar—if not more beneficial—information to consumers as a credit counseling agency can. When you meet with the right lawyer, they should thoroughly review your financial situation and advise you on the pros and cons of all of your debt relief options, including bankruptcy, as well as inform you regarding the bankruptcy process and any lasting effects.

Consult with a Highly Experienced Long Island Bankruptcy Attorney

Whether you believe that pre-bankruptcy credit counseling is beneficial or an unnecessary burden, the reality is that the law requires completion of this session in order to successfully pursue a consumer bankruptcy. If you would like to learn whether bankruptcy might help relieve financial stress in your situation, consult with the skilled and experienced bankruptcy attorneys at the Law Office of Ronald D. Weiss. Call (631) 271-3737 or contact us online for more information about how we may help you.

Debt Limits on Filing for Chapter 13 Bankruptcy

It seems counterintuitive that there are actually debt limits involved in the bankruptcy process when the bankruptcy system itself was designed to relieve those overwhelmed by debt. For those with only a preliminary knowledge of the bankruptcy system, it may seem even more confusing to learn that the debt limits apply to petitions for Chapter 13 bankruptcy, in which the debtor agrees he can and should pay a portion of his restructured debts over a fixed repayment period. In order to understand this seeming discrepancy, it is important to distinguish between the different types of individual bankruptcy and the means by which the court decides the type a debtor qualifies for. The Bankruptcy Abuse Prevention and Consumer Protection Act of 20051 changed the qualifications for individual bankruptcy and provided for the conversion of a Chapter 7 liquidation petition into a Chapter 13 wage-earner’s plan if it appeared the debtor could afford to make limited payments on his debts. While agreeing to a repayment plan was optional prior to the 2005 amendments, courts, debtors, and creditors alike generally prefer petitioning under Chapter 13 because it often allows debtors to keep their homes and creditors to recoup a portion of their anticipated losses. However, even if all parties are amicable to the Chapter 13 process, for some burdened by fixed levels of secured and unsecured debts, Chapter 7 liquidation may be their only option.

Understanding Individual Bankruptcy Options

If you are an individual debtor considering your bankruptcy options, you are generally limited to filing a bankruptcy petition under either Chapter 7 or Chapter 13 of the bankruptcy code. Chapter 13 bankruptcy, also referred to as a “wage earner’s plan,”2 does not require a complete liquidation anddistribution of your non-exempt assets. Instead, you may qualify to declare Chapter 13 bankruptcy if you are a wage earner, i.e., have a job or steady source of income, with anticipated revenue enough to make payments on your consolidated debts over a three to five year period. The higher your income, the longer you will be expected to remain on a payment plan prior to discharge of your remaining non-exempt debts. Chapter 13 bankruptcy is preferable to some debtors as it provides the following benefits:

Debtors are often eligible to save their homes from foreclosure, unlike during a Chapter 7 liquidation proceeding;
Chapter 13 Bankruptcy serves to protect you from having contact with harassing creditors, who will receive payment only through a bankruptcy trustee appointed by the court;
Chapter 13 proceedings generally protect third party co-signers from liability on certain consumer debts;
Your outstanding debts are consolidated for ease of payment and administration, and you will typically make only a single payment to your bankruptcy trustee; and
With certain limited exceptions, if you abide by the terms of your Chapter 13 payment plan, the court will generally order a discharge of your remaining debts following your payment period.

If, however, you violate the terms of your Chapter 13 plan or otherwise do not qualify for bankruptcy under Chapter 13, the Court may convert your case to a liquidation case under Chapter 7 of the bankruptcy code, also known as Chapter 7 bankruptcy.

In contrast to Chapter 13 bankruptcy, Chapter 7 bankruptcy3 is a complete liquidation, i.e., sale, of your nonexempt assets, often including your home. This is especially true on Long Island, wherehome prices seldom meet New York’s maximum $165,000.00 homestead exemption. Once your assets are liquidated, the money is then distributed in priority order to your creditors, and yours debts are generally discharged thereafter. There is no payment plan associated with Chapter 7 bankruptcy as with Chapter 13 bankruptcy, which is why petitioners with limited income and assets may elect to file for Chapter 7 bankruptcy and take advantage of specific New York asset exemptions,4 such as the homestead exemption and protection of additional assets including sentimental belongings, pets, child support, and limited items necessary for daily living. Chapter 7 bankruptcy, however, is truly a fresh start, and although a qualified Long Island bankruptcy attorney can help you take advantage of your maximum assets exemptions if you are ready to begin anew,this is seldom the best option for families. If you’ve found yourself with insurmountable debt, whether as the result of a medical emergency or predatory lending practices, but do not wish to upend your family, then Chapter 13 might be the preferable option for working individuals. However, if your debts are too high, then you may not initially qualify.

Secured and Unsecured Debt Limitations under Chapter 13

In order to be eligible to file for Chapter 13 bankruptcy, your “unsecured” debts must be less than $394,725.00, and your “secured” debts must be less than $1,184,200.00. An “unsecured debt”5 is defined as a debt that does not give your creditor the right to take possession of either your real (home/land) or personal property (vehicle/furniture) if you default on your payments. Examples of common unsecured debts, include, but are not limited to, the following:

Credit card debt;
Private student loans or personal loans;
Medical debt;
Utility bills; or
Business loans.

Since unsecured debt by its very nature leaves the lender with fewer options for collection and less protection upon default, interest rates on unsecured debts are generally inflated. Many debtors areshocked to learn, therefore, that what began as an unsecured student loan with a principle of$150,000.00 can, coupled with default fees, swell to above the unsecured debt threshold due to high interest rates and compounding interest. However, you are not subject to repossession of property if you default on an unsecured debt, which is the very nature of it being “unsecured”. Secured debts include, but are not limited to:

Your mortgage;
Car loans;
Certain furniture financing debt; and
Private loans by which you agreed to put up property as collateral.

If you default on a secured debt, the lender typically has the right to either repossess or foreclosed on the property that secures the debt. Because New York is a judicial foreclosure state,6 however, your lender cannot foreclose on your home without a court order, and if you declare bankruptcy, any foreclosure proceeding will automatically be stayed until your petition is evaluated.

Defeating Chapter 13 Debt Limitations

Bankruptcy experts have engaged in recent discussions7 about the relevance of Chapter 13 debt limitations, which were first imposed in the 1970s to prevent real estate developers from taking advantage of the Chapter 13 system. In areas such as Nassau and Suffolk counties, where it is well within norm to have a single mortgage above the 1.2 million dollar secured debt threshold, the debt limits were never intended to prevent such debtors from taking advantage of the wage-earner’s system. As such, it is imperative to speak with a New York individual bankruptcy attorney who can analyze the nature of your debt to determine which debts do not count towards your debt threshold. These debts include, but are not limited to, the following:

Contingent debts, i.e., those that have not yet been triggered because a qualifying event, such as a business liquidation, has not occurred;
Liquidated debts, which are debts in which the amount owed has yet to be determined, such as if a personal injury case pending against you after a car accident; and
Certain breach of contract debts.

Further, if you are at or close to the secured or unsecured threshold, a Long Island bankruptcyattorney may be able to work with your lenders to convert your debt. For example, if you have a mortgage of 1.3 million dollars but very little unsecured debt, in order to avoid having to move forward with the lengthy and drawn out Chapter 7 process, your bank may agree to convert $200,000 worth of your debt into unsecured debt, putting you below the Chapter 13 debt thresholds.

Contact an Experienced Long Island Bankruptcy Attorney Today to Discuss Your Options

If you are suffering under the burden of your debt, Ronald D. Weiss, P.C., Attorney at Law can help to ensure you are taking advantage of the bankruptcy proceeding that is right for you and your family. Ronald D. Weiss, P.C., Attorney at Law is your premier bankruptcy attorney on Long Island, serving both Nassau and Suffolk County residents. He can analyze the specific facts of your case, review your debts, and help you meet Chapter 13 thresholds. Contact us online or at 631-479-2455 today for a no-risk consultation.

The Statute of Limitations Defense in New York Foreclosure Actions

In order to fully grasp the sometimes alarming outcome of a foreclosure action when a lienholder violates the six (6) year statute of limitations governing such cases, it is important to understand why statutes of limitations are so prominent in real property actions. Although enacted by the legislator, as opposed to a derivative of the common law, statutes of limitations enforceable in real property actions have been codified since the Roman Empire. As far back as 1236, the English Common law, on which our American system of law is based, put temporal limitations on a claimant’s rights to bring a legal action to reclaim real property. The purpose behind such a limitations period was, and still is, twofold: Firstly, statutes of limitations are designed to promote a property holder’s peace of mind, for example, preventing him from being blindsided by an unexpected eviction action based on an event that occurred twenty years prior; secondly, it is intended to promote resolution of meritorious claims in a timely manner. Overall, land rights are some of the most highly protected rights in the American legal system, which is why New York State requires lenders to navigate a plethora of procedural barriers in foreclosure actions.

Expiration of the New York Statute of Limitations

Pursuant to New York law, a foreclosure action must be commended in supreme court in the county in which the property is located “within six years.” The question then becomes, within six years of what? Generally, this means within six years of default on a payment or “acceleration” of the mortgage note, which occurs when the lender either “calls in the full debt” via letter or files a foreclosure action. In New York foreclosure actions, the statute of limitations is counted from the date of the triggering event. This means that an action for foreclosure based on non-payment of a mortgage installment on January 1, 2010 must be filed by January 1, 2016 or else it will be considered “time barred,” and the defaulting defendant can ask the court to dismiss the action. In the same vein, if a foreclosure action is filed by the lender on February 1, 2010 and later dismissed by the court because the lender failed to properly serve the borrower, the statute of limitations clock begins to run on February 1, 2010 and a new action must be filed before February 1, 2016.

Burden of Proof in Foreclosure Actions

If you believe an action for foreclosure is “time barred,” that is, filed after the statute of limitations has expired, you should contact a foreclosure attorney immediately, as it is possible to waive your defense under the statute of limitations if it is not raised in the early stages of litigation. Your attorney can answer the foreclosure complaint by stating in your answer that the action is time barred, file a motion to dismiss on that ground prior to answering the complaint, or in certain circumstances, file a motion for summary judgment that asks to the court to decide, as a matter of law, that the action is time barred.

Generally, the moving party, that is, the party asking the court to take action, has the burden of proving it is entitled to the relief it seeks. When a party, normally the borrower, moves to dismiss a foreclosure action because the statute of limitations has expired, it must show the following:

That the complaint contains evidence on its face that the action is time barred;
That the defendant, i.e., the borrower, did not waive the statute of limitations, and
That the “documentary” evidence annexed to the motion proves, as a matter of law, that there are no issues of fact to be decided, such evidence can include the

Mortgage note;
Summons and complaint;
Deed;
Contracts, and
Official acceleration letter.

However, testimonial evidence, such as affidavits and deposition transcripts, including certain unofficial letters and notices from the lender, are generally not considered “documentary evidence” under New York law. The proof submitted on a motion to dismiss based on the statute of limitations must be absolute, and this is normally available in foreclosure cases as a defendant can meet its initial burden of proving the action is time barred by showing that the summons and complaint in the present action were filed six years after the mortgage was accelerated. If the lender cannot refute this evidence, the case will be dismissed as “time barred,” and the lender will not be able to bring another action under the same facts.

This is different than if an action is dismissed for another procedural reason, such as failure to properly serve the borrower, as in those cases, the lender may re-file the action. In the case of a successful statute of limitations defense, the action is dismissed “with prejudice,” meaning that the court rendered a decision on the merits of the action itself and it may not be re-filed.

Benefits of a Successful Statute of Limitations Defense

If the court determines that a foreclosure action is “time barred,” then the borrower can file an action for “discharge” of payments due under the mortgage. This means exactly what is sounds like: if a lender previously accelerated the mortgage debt, meaning the lender declared the entire balance due, and the borrower successfully proves that the lender has violated the statute of limitations, then the borrower’s debt is completely discharged and cancelled. You take the real property debt free as if you had paid off the debt even if a balance remains. In Suffolk County alone, a borrower recently had a 2.4 million dollar debt discharged because the lender failed to abide by the statute of limitations. Although this may seem like a shocking result, it is important to remember the principles of American property law as set forth above: (1) you should not be blindsided by a legal action that could cost you your home six years after the mortgage was called in, and (2) in order to promote your peace of mind and judicial efficiency, the lender should have taken action to protect its rights within the reasonable period of time as codified by the statute of limitations.

Contact a Long Island Foreclosure Attorney Today

The statute of limitations is more than simply a “defense” to a foreclosure action in New York. By successfully proving you are entitled to its protection, the remainder of your debt is discharged and your peace of mind restored after a difficult financial season. However, it is important not to forget that such defenses can be “waived,” meaning you can give up this protection if not properly brought before the court after a foreclosure action has been filed. It is also possible to file for discharge even if a foreclosure action has not been commenced if you believe you may be entitled to such based on the statute of limitations. For these reasons, it is essential that you contact a qualified Long Island foreclosure attorney who can analyze your case in order to determine whether the limitations period has run. Ronald D. Weiss, P.C., Attorney at Law is your premier foreclosure attorney on Long Island, serving both Nassau and Suffolk County residents. He can analyze the specific facts of your case in order to determine whether your lender has run afoul of the statute of limitations, and this may result in a complete discharge of your debt. Contact him today online or at 631.479.2455 for a no-risk consultation.