Tag Archives: Chapter 13

Bankruptcy Alphabet: J is for Judgement Debtor

“Judgment debtor” is a term of art referring a party against whom a creditor obtained a judgment. I frequently get questions about lawsuits and judgments. Common questions includes:

What happens if I ignore a lawsuit?
Can I file for bankruptcy before or after judgment?
Can I discharge a debt even after judgment has been entered?
If there is a judgment, can they take my house?

Here is my general short answer.

The longer you wait, the more difficult it will be to fix your problems and the fewer your options will be.

How does the creditor get a Judgment?

First, let’s start with a basic scenario.

You owe Discover $15,000. You fall behind and at some point, Discover (or a debt collector) brings a lawsuit against you. A lawsuit is initiated by filing a summons and complaint with the county court. You must also be served with the summons and complaint. (In case you are wondering, in general, a “process server” will come to your home or work and hand you the summons and complaint.)

After you’ve been served, you have 30 days to respond to the complaint by filing an answer or attacking the complaint for defects. Let’s suppose you decide to ignore the lawsuit, and pretend that you didn’t see it. After the 30 days are up, Discover can move for a default judgment. The court will then enter or “order” a judgment against you.

What happens after the Judgment is entered?

Once Discover has the order in its hands, it can exercise several rights to satisfy its judgment. Most common methods include:

Wage garnishment - this is the most common. By law, your employer is required to withhold and remit up to 25% of your income.

Judgment lien - Discover can also place a lien on your home or other property you own.
Levy bank accounts

How do I fix this?

The short answer is that wage garnishments may be fixed in or outside of bankruptcy. A lawyer may be able to set aside the default judgment in State court and stop the wage garnishment. A judgment debtor can also request the wage garnishment amount be adjusted. But, ALL of this will cost you additional attorney fees and court costs.

If you do decide bankruptcy (either Chapter 7 or Chapter 13) is the way to go, we can also “avoid” a judicial lien. It may also be possible to get some of the garnished or levied funds returned in bankruptcy. But only for funds were taken within 90 days prior to filing your bankruptcy. Bankruptcy also had the added advantage of the Automatic Stay (we have a link to something for this?), which stops all collection activities including wage garnishment the moment you file for bankruptcy.

So, if you are facing a lawsuit or a judgment, it is time to get off the internet and get a good lawyer. I mean run, do not walk and get some help!

Image credit: Leo Reynolds

Free Workshop for Dealing With Your Debts

Free Workshop at the San Francisco Law Library on February 6, 2012.

San Francisco Bankruptcy Lawyers Jeena Cho and Jeff Curl will address various ways to deal with your debt including:

Debt settlement
Chapter 7 or Chapter 13
Dealing with underwater homes
Consequences of doing nothing

Monday, February 6, 2012

12:00 PM - 1:00 PM

San Francisco Law Library
401 Van Ness Ave, Room 400
San Francisco, CA 94102

Bankruptcy Alphabet: I is for Instant

Instant - I want it NOW!

We have a tendency to want (and expect) things to happen instantly. And we want those instant solutions to be without any negative consequences.

Frequently, I’ll meet with clients who will sit down and tell me (a) they do not want to file for bankruptcy and (b) they want to get out of debt instantly.

Here’s the thing. Despite what the lotto commercials say, for most people, getting out of debt and accumulating savings requires one simple formula:

Spend less than you earn.

But, here’s the problem - if you are like most of my clients, after all the bills are paid each month, you are at a negative number requiring you to use credit cards to make up the difference. Next month, you are even further behind and the cycle continues.

There comes a point where you’ve accumulated so much debt that no amount of belt tightening, reduction in expenses and instant ramen will get you out of debt. Bankruptcy laws exists so that you won’t be enslaved to your debt forever and gives you a chance to live a productive, successful, debt-free life.

Is bankruptcy an instant solution? No. But it’s probably as close to an instant solution as one can find with Chapter 7 taking about 3 - 4 months and Chapter 13 taking 3 - 5 years.

By the way, if your debt free strategy involves winning the lotto, you might want to read this article from Freakonomics.

Image credit: Leo Reynolds

Bankruptcy Alphabet: H is for Home is where the heart is

Home - Should you stay or go? Is Chapter 13 an option?

We all know the saying - “home is where the heart is” but what if I told you that your home is costing you, your family, and your heart nothing but heartaches? When does it make sense to walk away? Is Chapter 13 a good way to save your home?

The Problem - Overextended on home

If you were like many homeowners, you thought you had equity in your home and tapped into that equity by taking out a Home Equity Line of Credit (HELOC) or a second mortgage. Now you find yourself struggling to make your mortgage payments and your home is upside down. All of your efforts to negotiate a loan modification is falling on deaf ears and each time you speak with customer service they have a different story. (Or your mortgage company has lost the paperwork for the 9th time.)

Maybe you’ve already started to fall behind and now all the late charges and other fees are mounting up to something unthinkable. Maybe you’ve started to take on credit card debt so you can stay afloat. Maybe you’ve started liquidating your retirement.

The Solution

So, now what? This would be a good time to have a frank discussion with yourself. Chances are, your mortgage payments are only going to continue to increase. (Let’s face it, the interest rates can’t go any lower.) And the possibility of making more money isn’t looking that great. (Besides, aren’t you working enough as is?)

Consider the following:

How much is your home worth? This should be an obvious starting point. If your home is significantly underwater, it might be time to cut your losses.

How much is the principal & interest payment on your home? During the housing boom, many people purchased homes that they should have never qualified for because they don’t have the income to support the payments. One good example of this are people who had negative amortized loans who are now struggling to make the adjusted payments. Crunch the numbers to see how much your monthly payment should be. You can use a mortgage calculator to do this.

Can you get rid of the second mortgage with Chapter 13?

If your home is upside down leaving the second mortgage completely unsecured, you may be able to get rid of your second mortgage in a Chapter 13. This is better than any loan modification out there because the banks don’t have a say in the matter. If the value of your home is worth less than the first mortgage, we can get rid of the second mortgage - for good.

Who’s in charge?

It’s time to let your brain sit in the driver’s seat and take a hard look at your numbers. I’ve met with many clients who will insist a loan modification is the answer to their problems but when looking at the numbers, even at 0% interest, the client could not afford their home. Remember, your home should not only provide a place for you and your family to live, but should also be a good investment. Don’t let your home ruin you and your family’s financial future.

Bankruptcy Alphabet: G is for Good to Me

There is one comment I hear on a regular basis from clients that has always baffled me. It’s when a client says something like “Oh, but I don’t want to file Chapter 7 bankruptcy on Chase because it has been so GOOD to me.” It’s usually followed by “I get money back, I get points, gave me free checking, I know the teller, the branch manager”, etc.

I don’t think I’m breaking any news story here but just for the record, Chase doesn’t care about you. Neither does AMEX (even if you have a Platinum card), or Discover, or Bank of America or… you get the idea. They DO care about taking your money. No doubt. However, they don’t care about you.

As eloquently put by Seth Godin on Caring:

“No organization cares about you. Organizations aren’t capable of this. Your bank, certainly, doesn’t care. Neither does your HMO or even your car dealer. It’s amazing to me that people are surprised to discover this fact.”

They don’t care that you’ve lost your job or that you’ve gone through medical issues. They don’t care that you can’t repay credit card debt with 32% interest or come up with $500,000 in one lump sum to repay a balloon payment on your home.

If they cared about you, they wouldn’t charge you 33% interest rate or triple your monthly mortgage payment. They wouldn’t hire Linda Green to robosign fake mortgage documents. They wouldn’t charge outrageous late fees, bounced check fees, ATM fees, annual fees, and other junk fees.

They bribe you with bonus points, miles, cash back bonuses, and platinum status. If I had a dollar for every time a client told me “well, {evil bank} has really been good to me” or “I feel guilty about filing bankruptcy against {bank}” or “I’ve had that account for __ years” I’d be a rich woman.

So, please stop telling me how Chase really cares. Banks are in the business of making money. They are pretty good at faking it and pretending they care but they really just want your money.

Other G’s from Bankruptcy Attorneys

Garnishment
Garnishment
Garnishment
General Unsecured Creditor
Gifts
Goals
Good Manners
Guaranty
Guilt

Image Credit: Leo Reynolds