Tag Archives: garnishment

Being Garnished on a 20-year-old Debt?

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I’ve been getting a lot of calls from people who have just gotten a wage garnishment on a repo’d car that they had completely forgotten about. In most cases, these repos were 20 years ago or MORE! Excuse Me!?! How Does that happen?

The first time I got the call, I was as shocked as the person calling me. Twenty years is a seriously long time, and the worst part of it is that interest (at the contract rate and these don’t tend to be low interest loans) continued to accrue for that entire time.

So, how does that happen? Well, a judgment can be kept alive indefinitely if the creditor is willing to spend the time and money to do it. They have to either have a garnishment issue to a bank or an employer even if they don’t find anything, just issuing it is enough, at least every five years. So, it doesn’t have to go to your bank or your employer. It just has to go to some bank or some employer. The other alternative is to file a Notice of continuation, basically a statement that the creditor still intends to try to collect this judgment, and it needs to remain viable. That is pretty much it. Do that at least every five years for twenty years and then get lucky when you issue that renewing garnishment and it lands at the right bank or the right employer, and all of a sudden my phone is ringing.

Yep, it really does work that way. It used to be that it was rare to see someone trying to collect a judgment for much more than five years. That is changing, and I think it is something our Legislature needs to be looking into changing. Sorry, but a repo or an unpaid credit card in your twenties shouldn’t be able to jump out of nowhere and bite you in your forties.

Elaine

Keep in Touch with your Lawyer!

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It is even more important than usual during Coronavirus days to keep in touch with your lawyer — even if all businesses in your area are closed.  Sure, it is always important for all kinds of mundane reasons, like a change of address; but now those worries that are keeping you awake at night?  Call or email your lawyer.  You never know what tricks your lawyer may have stuck up a sleeve, and even if all businesses are closed, lawyers are pretty good about keeping an eye on email.  You might also call the office number.  It might be answered, and it might have a recording giving you information on how to get in touch.

First of all, your lawyer should be keeping a close eye on the various Coronavirus relief bills passing through Congress.  Second, your lawyer should have copies of the actual administrative orders from your Mayor or your Governor closing businesses, etc.  Your lawyer can tell you if they apply to you and how they are or can be enforced.  Your lawyer should also have a feel for employment law issues that may be effecting you, whether you are being told to work or not to work.

A bankruptcy lawyer can also help you with deciding which bills to pay and which not to when money gets really tight.

If you are in a bankruptcy, your lawyer can help you with issues like the reach of the automatic stay and the discharge injunction — that includes helping you shut down the phone calls if some creditor decides bankruptcy doesn’t really apply to them.  If you are in a Chapter 13 plan your lawyer can explain to you what remedies are available to you if you can’t make your plan payments or you need to change your plan terms.

Your  lawyer can also explain to you what court activity is ongoing in your area — are Sheriff’s sales still being held, are foreclosure cases being filed and heard, what about garnishments and collection cases?

Do not just sit at home and make yourself sick with worry.  Lawyers are trained problem solvers.  Sure, we can’t solve all of them, but we can try.

Elaine

Pay Attention When Filing for Bankruptcy

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When you file for bankruptcy, you are required to provide a ton of information to the Court and the Trustee assigned to your case.  Although it is true that no one is perfect, everyone makes mistakes, there are things about all of our lives that we frankly don’t know; none of that explains the multitude of phone calls I get from people who seem to know less about their lives than I do — and I haven’t even met them yet.

When I get a call from someone about filing for bankruptcy I begin by asking some basic questions — about how much debt, what kinds of debt (credit cards, medical bills, taxes, repo’s, pending law suits, student loans, child support), whether or not the person has been sued recently, have they filed their taxes, do they own their home, are they current on mortgages and car debt.  I’m not looking for exact figures, but I do expect that people have a basic grasp on things.

When I get answers that don’t make sense, I start typing.  I start with the Supreme Court’s online network that includes dockets for all Oklahoma District Courts.  It is searchable by name.  That shows me very quickly every lawsuit filed in the last ten or more years against someone (although, admittedly, when someone’s name is Tim Smith, this is less than helpful).  Then, I check the County Assessor’s website for real property ownership records — again, searchable by name.  Then, I check the County Clerk’s website for judgment liens, tax liens, transfer of real estate, mortgages and UCC-1 filing statements.

In just a couple of minutes I frequently know a lot more about the person I’m talking to then they seem to.  I can’t count the number of people who tell me that they’ve never been sued — they are just having their wages garnished.  Really?  Sure, child support and some student loans can do a wage assignment or administrative garnishment without a lawsuit; but that is almost never the case.  They just weren’t paying attention to the question, or they didn’t want to admit to it, or — something; and to a large extent it is my job to try and catch when a client isn’t paying attention and doesn’t answer something correctly or accurately; but there are limits to what I can do.

Ultimately, it is the client who signs bankruptcy papers.  It is the client who can have his discharge denied for failure to disclose assets, or even liabilities.  It is the client who can go to jail for bankruptcy fraud.

I understand that the events that frequently lead up to a bankruptcy filing are the kinds of things that get out of control and thinking about them can be at best depressing and at worst terrifying.  Still, if you tell your lawyer about the garnishment summons your employer just got, your lawyer can help you get your case filed in time to stop it, notify the creditor to release it ASAP when the case is filed, possibly even help recover funds.  If you tell your lawyer that your Mother has added your name to her house — to avoid probate, of course.  In addition to helping you educate your Mother about better and safer options, your lawyer can help keep your Mother’s house out of your bankruptcy.  If you tell your lawyer that you have been sued, your lawyer can help you determine whether or not you need to have judgment liens removed from your house.

Oh, and if you don’t tell your lawyer about these things, odds are very good that your Bankruptcy Trustee will find out about them.  Of course, that will happen after the case is filed, and your hands will be pretty much tied.

So, if you find yourself thinking that you have more debt than you can pay.  Stop.  Take a deep breath — and think.  Think about all the things you have been trying not to think about, because it is just all too foreign and overwhelming.  Then, call a local bankruptcy lawyer for help; and be prepared to answer questions and ask questions until you are comfortable that you have disclosed everything you need to disclose.

Elaine

More GMX Resources Lawsuits

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Last week I wrote about stockholders in GMX Resources who were being sued as part of its bankruptcy for the recovery of dividends that they received prior to the bankruptcy filings. There are a ton of those cases filed. I haven’t spent a lot of time with the consolidated docket, but it looks like there were just under 200 Adversary Proceedings filed to recover property or payments of some kind in this Bankruptcy. About half of those were filed against owners of Preferred Stock, and I wrote about those last week. It appears that the other half were filed against people, or more frequently companies, who had received what are called Preferential Transfers; and I thought I this would be a good excuse to explain preferential transfers.

Preferential transfers are the product of two policies: 1. To make sure that when someone files for bankruptcy all creditors who have similar legal rights wind up getting treated essentially the same way; and 2. To encourage creditors to give debtors a bit of room to get back on their feet when they start to show signs of financial trouble.

Here are two examples of that. There is a natural inclination when you know you are sinking fast to want to repay loans from people you care about rather than those you might not. So, when that tax refund comes in, and you know you need to file for bankruptcy, are you going to repay the loan from your Mom or a credit card account? Well, yea, of course you are; but in terms of good policy, it isn’t fair for Mom to get better treatment than any other creditor.

This leads us directly into the next reason. If one creditor can get paid when no one else does and that creditor gets to keep the money, then at the first sign of trouble there will be a rush to squeeze money out of the Debtor – a virtual feeding frenzy if you will. Now, consider this in the context of a small business. Something bad happens. The business falls behind on paying its bills. At the first sign of trouble, all of its creditors take immediate steps to make sure that they get paid. The business collapses, because it lacks sufficient cash flow to keep the doors open.

Whereas, if the creditors had given the business 60 or 90 days to find its feet, the business might have stabilized, paid all its creditors, stayed in business, and continued providing an income for its employees and its owner. When you think about it, this kind of thing happens in the life of virtually all small businesses; and as it happens, creditors usually do give businesses time to get back on their feet – but they aren’t doing that at the risk that someone else will be less understanding and wind up with all the money and no one else will get anything. No. Creditors give debtors a chance to get back on their feet, because they know that if someone else doesn’t and the business files for bankruptcy, the money the greedy creditor got will be taken back and distributed out equally.

The tool for recovering those funds? Why an avoidance action to recover a preferential transfer, of course. This is a tool that bankruptcy trustees use frequently. If a Debtor’s wages are garnished in the 90 days before a bankruptcy? Well, that is one creditor getting paid and making sure no one else does. The trustee can take that money back. This is actually kind of nice when a debtor is being garnished and he owes recent taxes. When the trustee takes the garnished wages back, the first creditor he pays is the taxing authority.

There are defenses to preferential transfers, just like there are to fraudulent transfers. There are also times when it can be in a debtor’s best interests to have a Trustee recover preferential transfers. The nice thing about preferential transfers from the Debtor’s perspective is that the window for the transfer is generally quite short. Unless the transfer was made to (or benefited) an insider (like family), the transfer has to have been made within 90 days of the bankruptcy filing. That is a time period that can usually be waited out if necessary. Of course, if the transfer was to a family member, then the look back period is a year. That can be harder to wait out, although I have done it twice in the recent past.

The worst thing you can do about any type of transfer if you are getting ready to file for bankruptcy is to not tell your lawyer about it. I promise you, what he doesn’t know will hurt you.

Elaine

Medical Debt and Credit Reports

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The reporting of medical debt on credit reports has gotten quite a lot of press lately.  The Consumer Financial Protection Bureau has recently done a fairly extensive report that includes a number of findings.  One of these is that 1 in 5 Americans has outstanding medical debt on their credit reports.  Another is that slightly more than half of all debt in collections is medical debt.

The CFPB makes the point that part of the problem with medical debt appearing on credit reports is rooted in the complexities of the health insurance billing process.  No dispute there.  The CFPB also wants to enact regulations to change the way that medical debt is reported on credit reports.  The goal is to make medical debt less detrimental to a credit score (at least as it is currently calculated) than other kinds of debt.  I have a problem with that.

WHAT!?!  I’m supposed to be all pro-consumer.  How can I have a problem with that?  Simple.  First of all, there is no such thing as a single credit score.  We all have many of them, and they change constantly.  Establish rules for how credit scores are to be calculated, and the credit reporting agencies will simply change the way they package the information.  Why?  Because they exist to serve their clients’ needs, and their clients are people who lend money and collect money.

But, but, but, classifying medical debt on credit reports differently from other (presumably less noble debt) only makes sense!  If you do that, than anyone looking at a credit report can tell that this person always pays for his car, he just can’t pay that horrendous hospital bill that his insurance company refused to pay.  So, a car lender ought to be able to glance at a credit report and score and tell that this person makes his car payments, so it would be good business to make him a car loan.  Right?

Not so fast.  If someone applying for a car loan owes $30,000 to the local hospital the fact that he has always made his car payments before is not going to stop the hospital from suing him and garnishing his wages.  If the local hospital is taking 25% of the gross off of just about anyone’s pay check (Oklahoma law, only), that could change whether or not he is still able to make his car payment.

Despite popular opinion, credit reports (and credit scores) don’t measure how good a person you are; and the idea of reporting medical debt differently seems to buy into that fiction.  An outstanding liability that remains legally enforceable — whether it be medical, taxes, child support or credit cards — is always going to be a threat to someone’s ability to repay a new obligation.  Wage garnishments, bank levies or any other form of enforcement action that is available to the creditor will impact on someone’s ability to make future payments.  Changing how something is reported or how it is factored into a magic number won’t change that.

The ways to make meaningful changes in your ability to access credit remain the same.  First, if your insurance company denies a claim — appeal it.  Complain to the State insurance commissioner.  Do everything you can to get the claim paid.  Second, police your credit report.  If something shouldn’t be there, get it removed.  If debt has been re-aged or is otherwise no longer enforceable — dispute it.  If you owe the money and it really is legally enforceable, then you either need to find a way to wait it out (and hope that they don’t sue you just before the Statute of Limitations runs) or consider a bankruptcy filing.  Even if a chapter 7 isn’t the answer, a chapter 13 might be.

Oh, and don’t be afraid to ask for help; and don’t be embarrassed.  No one who knows enough about credit reports or the collection industry to be of any use will confuse anything on your credit report with your value as a human being.

Elaine

What Will I Have to Pay in a Chapter 13?

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A Chapter 13 Bankruptcy is basically a modified payment plan where you can restructure certain kinds of secured debt, get current on secured debt on which you have fallen behind (like a house or a car) and pay some percentage of your general, unsecured debt (like medical bills and credit cards).

Let me begin by saying that SOME percentage of your unsecured debt means just that – SOME. I say that to clients in my office, and they almost universally translate the word some to mean all. They are not synonyms. The actual percentage paid by most Chapter 13 debtors is closer to zero percent than it is to 100%, and most of us can afford to pay 0%.

So, what does that actually mean?

There are two primary factors that determine how much money you will have to pay to make a Chapter 13 plan work. The first is determined by what is generally known as the Means Test. The Means Test is basically a worksheet where you start with your income and deduct your reasonable and necessary living expenses until you come up with an amount left over. If that figure is positive, then you will have to pay that amount each month for probably 60 months to your general unsecured creditors (the credit cards, medical bills, personal loans, that kind of debt). In other words, if you have $112 a month left over, you will have to pay $112 each month for (probably) 60 months plus 10% as a trustee fee, so $123 a month, over the life of your plan for the benefit of the general unsecured creditors. Most of my clients are paying a lot more than that on this kind of debt when they come to see me. So, for most people flunking the Means Test and having to pay something to their general, unsecured creditors is actually an improvement!

The other factor is the kind of debt that you have. If you want to keep the house and the car and you owe money on them, you are going to have to keep paying for them. This really shouldn’t be a surprise. The car, in the Western District of Oklahoma, will have to be paid through the plan; meaning that the plan payment you pay to the Trustee every month will include enough for him to make your car payment for you. If you are behind on the car at the time that you file the case, you can expect that you will catch up on it (and probably pay it off) over the life of the Chapter 13 plan.

Your house is a little different. If you are current on the house at the time that you file for bankruptcy (in this district), you may continue to pay the mortgage payment directly. However, that means completely current. So, if your mortgage payment is due on the first, and late on the 15th, That means it is due on the 1st. So, if you file bankruptcy on the 2nd, that payment had better already have been made. If you are behind on your mortgage payment, then it will be paid through the plan and the plan will include enough money to get you caught up an d current on it over the life of the plan.

If you owe other secured debt, debt that is secured by a lien on a specific piece of property, and you wish to keep the property, then that debt will have to be paid during the life of the plan. Debts that are given certain priority for payment in the Bankruptcy Code must be paid in full over the life of the plan. For most people that means recent taxes, and past due child support or alimony, these are things that have to be paid over the life of the plan. What most people expect to see listed here but isn’t is student loans. Student loans are a whole different problem in a Chapter 13 that will be addressed separately.

So, what this means is that most Chapter 13 plans pay for the house, the cars, the taxes, the child support (if any), fees to support the Trustee’s office and the Debtor’s attorneys fees. Then, there will be some amount added to be shared amongst the general, unsecured creditors who are usually everybody else. That amount is determined by the Means Test, and in many cases it is less than my clients have been paying on that debt before they filed.

Now, I don’t mean to kid you. A Chapter 13 plan is not a walk in the park. There are good reasons why only about 30% of all cases filed successfully complete. It isn’t, however, nearly as bad as clients expect it to be.

Often when clients come to see me their mortgage company is wanting a year of missed payments made up in six months or less. They are facing a wage garnishment that will take 25% of their gross income. The IRS is threatening to levy on their bank accounts. There is a repo guy out looking for their car, and the lender wants all the missed payments plus late fees, plus interest plus the repo guy’s fees by Tuesday. A Chapter 13 plan, even if it is expensive, can be a huge relief after the financial pressures most of my clients find themselves facing.

So don’t be afraid to investigate a possible Chapter 13 filing. It can do things for you that you can’t get done anywhere else, and, although, it won’t be cheap, it may be more affordable than any of your other options.

Elaine

Bankruptcy and the Holidays

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Every year I expect for my phone to stop ringing right before Thanksgiving and not to start up again until after the first of the year.  After all, who wants to think about filing for Bankruptcy during the holidays?  Even better, who wants to come up with cash for attorneys fees in December?

Then, the phone rings; and it rings again.  Sure enough, the Oklahoma County Sheriff’s office scheduled Sheriff’s Sales for December 13.  Thanks, Sheriff!  “What?  Love, Beal and Nixon is about to garnish your wages and right before Christmas?  Really? ”  Thanks, guys!

The sad thing is that these phone calls don’t have to happen in December.  That foreclosure going to Sheriff’s Sale December 13?  It was filed early this year, and the home owner was missing payments before that.  The garnishment that will be coming out of the December 15th pay period?  Well, that lawsuit was filed last summer.

If those two callers had called earlier this year, they might have had more options.  They would have had more time to get some money together.  They wouldn’t have needed to add a Bankruptcy filing to their holiday to-do list.  Is it too late?  No.  In a very real sense will you more fully appreciate the Christmas story with a December Bankruptcy filing?  Well, quite possibly; but it really isn’t the kind of religious experience I recommend.

So, for this coming year — call earlier, because come December of next year, you won’t want to be having to find time and money for me when you could be enjoying the season of grace and expectation, of unconditional love and acceptance; instead of the automatic stay.

See you in January.

Elaine