Tag Archives: lawsuit

What If I Didn’t List Something. . . .

First of all, there is a huge difference between failing to list an asset, like that mineral interest you inherited from your Grandparents, and failing to list a debt, like a car loan. Either one is perjury, if the omission was intentional; and either one can be grounds for a finding of bankruptcy fraud or even a denial of discharge if the facts are right. So, you really do need to put some time and effort into making sure that your Schedules include all of your assets and all of your debts.

So, what happens if you missed something? Assets are a whole different issue, I will touch on another time. Let’s talk about not listing a debt. It can be easy to forget an old medical bill or there can be debts you don’t even know about. Let’s say you had a car repossessed a few months before the bankruptcy filing. You scheduled the repossession on your Statement of Financial Affairs, but you didn’t list the Creditor; because you didn’t realize that you were still going to owe them money.

The creditor doesn’t get notice of the bankruptcy, and a year or two later the creditor sues you for the difference between what you owed at the time the car was repossessed and the amount they got for the car (after subtracting repo fees, sale fees, reconditioning fees, etc, etc., etc.). So, a year or two after your bankruptcy you are being sued for thousands of dollars. Now what?

That depends. The first issue is which chapter you filed under. This assumes that you filed a Chapter 7 bankruptcy. The analysis for a Chapter 13 is quite different. The second issue is whether or not your Bankruptcy was an asset case or a no-asset case. In other words, whether or not your Trustee managed to distribute any money out to your creditors. Most Chapter 7 Bankruptcies are no-asset cases. The biggest variable, believe it or not, is where you filed your Bankruptcy.

If you filed your Chapter 7 Bankruptcy in Oklahoma (and this blog is always restricted to Oklahoma issues, since that is the only State in which I am licensed to practice), and it was a no-asset case; you’re almost home free. As long as the failure to list the debt was truly unintentional and in good faith, your liability for that debt was included in your discharge. That does not mean, however, that you can sit back and do nothing. The creditor has incurred collection costs as the result of your failure to give them notice. So, you need to take action ASAP to let them know about the Bankruptcy. The best way to do this is to contact your Bankruptcy attorney and have them send a letter to the creditor’s collection attorney explaining the facts, providing information about the bankruptcy filing and providing information on the law in Oklahoma as to the inclusion of omitted debts in a no-asset discharge. You can expect to pay for that service, but in my opinion it is money well spent. The last thing that you want to do is wind up facing a wage garnishment that could have been avoided or find that you may have waived some rights by allowing the creditor to continue acting out of ignorance of your bankruptcy filing. Remember, you have a duty to give notice of the bankruptcy filing to everyone you owe money to. Failing to do so does not necessarily leave you at the creditor’s mercy; but that does not mean it is completely without ramifications.

Elaine

What do You Do When You Can’t Pay Your Bills

Most of the people who call me have always paid their bills. They have never been in the kind of position that leads them to call a Bankruptcy lawyer before, and they are scared and don’t know what to do.

The first thing that I tell them is to just breathe. Calm down. Stop the racing mind. Just breathe.
Now, prioritize. Pay the utilities, the car payments, the house or rent, the groceries first. Second, if at all possible keep a small cash reserve. Did you hear me say pay the credit cards? Sure, if you can, you should always pay your bills; but if you can do that, you aren’t reading this. If you are reading this you have lost a job or your income has dropped dramatically, you’ve had major health problems, or even worse, your child has had major health problems. Even good insurance won’t necessarily insulate you from major financial ramifications.

Seriously, I have had people on the phone hyper-ventilating at the thought of not paying their credit cards. I ask them what they think will happen, and they can’t tell me; but it is clearly TERRIFYING. We’re talking asteroid slamming into the Earth, wiping out all life kind of terrifying – which may explain what happened to the dinosaurs. They missed a payment on their Master Card. Ok, so, I’m teasing a bit.

Here is what is likely to happen if you stop paying your credit cards. First of all, they are going to start calling – a lot. This is why God invented caller ID. Then, they are going to shut down your charging privileges – probably not a bad thing. About the same time, they will start reporting you delinquent to the credit reporting agencies. Sometime thereafter, you will get a letter that they are referring your file to a LAWYER for further action. The word lawyer is in all caps, because the only reason for this letter is to be scary. They can send your file to anyone they want to for “further action” or whatever other scary (and generally vague) terms they want to use, and they don’t have to send you a letter telling you they are doing it. When that file lands in the lawyer’s office, his office will also send you a letter telling you that they have it. Notice, that no lawsuit has been filed yet? It is easier and cheaper to try and scare you with letters than it is to sue you. That doesn’t mean you won’t be sued, you probably will be – eventually; but in the meantime you still have a bit more time to try to find your feet.

You will know you have been sued when you are served. The actual rules for service of process are complicated, but if you wind up with a copy of something called a Summons and a Petition or Complaint – odds are pretty good that you have been sued. How do you know that is what these things are? Well, they have the name of the court at the top, then the names of the parties beneath that on the left, with a case number on the right, then a bunch of paragraphs explaining who you are, who is suing you, and why you are supposed to owe them money. Letters start, “Dear so and so”. Court pleadings don’t.

Once you have been sued, you will be given a certain amount of time in which to file an Answer or otherwise appear and dispute the case. If you don’t do that, then a default judgment can be taken against you. Once a judgment has been taken against you, then (at least in Oklahoma) the creditor can attempt to garnish your wages, levy on bank accounts or otherwise force you to pay them money – and it will hurt. A wage garnishment can take up to 25% of your gross wages – not take home – gross. Of course, you will still pay taxes on the pre-garnishment amount,, so your net will be substantially reduced. Most people can’t afford that.

Everyone in financial trouble is different. Some people will decide to contact a lawyer earlier in this process than others. One thing that is almost universally common is that most people who have accounts in collection want to pay them. They frequently put off calling a lawyer hoping that they will be able to pay them. Where this becomes tragic is when they wait too long hoping against hope that something will save them from drowning. Then, their employer is served with a wage garnishment; and they have no money to pay attorneys fees or filing fees. They don’t have the paperwork started to get a bankruptcy filed; and they can’t afford to pay really basic living expenses if they are having their wages garnished. At that point these people are starting to be out of options. So, once you are sued, it is probably time to call a lawyer if you haven’t already and get things started. The collection process takes long enough and filing a lawsuit increases the collection costs enough that if you haven’t found a way to get the account paid by then; you probably aren’t going to.

Once a lawsuit is filed, time is no longer on your side.

Elaine

I’ve Already Been Sued — is it too late to file for Bankruptcy?

I get this question a lot, and it is one of those questions that requires a little interpretation.  I don’t think that anyone who calls and asks this question really believes that just because you have been named in a lawsuit means that you can never file for Bankruptcy, which is what the question asks.  In reality there are three questions lurking here.

The first question fleshes out this way, “I’ve been sued over a debt I did not and could not pay.  The Plaintiff has taken a judgment against me and recorded that judgment in County records.  What exactly does all of that mean, and if I file for Bankruptcy now, what can a Bankruptcy do for me with respect to that judgment?”

Like with most things the answer to that question is going to vary from State to State, and I do not presume to discuss anything here other than Oklahoma State law.  That being said, in Oklahoma a judgment gives the creditor certain rights, including the right to garnish wages, levy on bank accounts and record that judgment in County records.  Once the judgment has been recorded, it creates a lien on any real estate owned by the Debtor in that County.

That isn’t nearly as bad as it sounds.  First of all, there are some limits on wage garnishments.  Bank levies are rarer for a variety of reasons, but what most callers asking this question are really concerned about is a judgment lien attaching to their house.  Now, a judgment lien attaches to all real estate owned by the Debtor in the County, so if a Debtor owns a house that he lives in and another house — say a rental property, the lien will attach to both properties.  That is significant, because in a Bankruptcy a judgment lien can be removed from homestead property, but it cannot be removed from real estate that you own and don’t live in.  Also, a judgment lien cannot be foreclosed on homestead property (meaning the creditor can’t force a sale of the house to get its money), but it can be on property that the debtor owns but doesn’t live in.

Translated, this means that in a Bankruptcy a judgment lien can be removed from your home.  If you own other property, it probably cannot be removed and will survive the bankruptcy.

Now, just because you’ve been sued, doesn’t mean a judgement has been taken against you.   This is really the answer to the second question.  The second question fleshes out like this, “I’ve just been sued.  The lawsuit was filed a few days ago, and a process server just handed me the Petition and Summons.   Does that mean that a judgment has been taken against me?”  In a word, No.   These things take time.  A lawsuit generally ends with a judgment.  it doesn’t start with one.   However, filing a bankruptcy takes some time as well, so, calling an attorney sooner rather than later is always a good idea.
The third question is “I’ve just been sued.  I owe the money.  Can a bankruptcy filing stop the lawsuit, prevent a judgment from being entered and make sure that no wage garnishment will ultimately be served on my employer?”

The answer to that question is very simple.  Yes.  Lawsuits, wage garnishments and bank levies are all stopped by a bankruptcy filing.  They are not stopped by your making an appointment with a bankruptcy lawyer, by your filling out forms or even by your paying the lawyer money.  They are stopped when your Bankruptcy petition is uploaded to the Bankruptcy Court’s electronic filing system.

The minute that a Bankruptcy is filed an order issues automatically from the Bankruptcy Court that stays (meaning temporarily stops) all collection activity against the Debtor or property of the debtor.  That means everything stops.  The automatic stay is one of the really cool things about a bankruptcy filing.

So, is it too late?  No.  That does not mean that waiting any longer is a good idea.   Getting the bankruptcy filed will take time, so be sure that you leave yourself the time you need to prevent the creditor suing you from causing you any unnecessary pain.

Elaine