Wednesday, January 29, 2014

What Does It Mean to Have Judgment Filed Against You?

Are judgments considered secured debt? Or, are they only considered secured to the point of being a lien above and beyond any exemptions? Isn’t a judgment simply a finding by the court that you owe a debt? I am particularly interested in how judgments are dealt with in a chapter 13. I’m trying to avoid filing a 13 while I wait to see what happens with my income (up or down), and I could feasibly live through a few months of wage garnishments if necessary. However, if judgments themselves create a problem, maybe I should just file?
A judgment refers to a decision by a court that has been entered into the public record. Before a judgment can be issued, a lawsuit must be filed against you. If you do not file an answer to the lawsuit within the time period required by law (usually 20 to 30 days after service of the lawsuit on you), the plaintiff can ask the judge to issue a “default judgment.”

You can also negotiate a “consent judgment” with the plaintiff – in a collection case, a consent judgment usually includes payment terms. You can also file an Answer to the lawsuit and go to trial. The decision by the judge or jury – whether favorable or unfavorable – will be set out in a judgment.
If a judgment has been issued against you in a collection case, your creditor becomes a secured creditor instead of an unsecured creditor. Secured creditors have more rights than unsecured creditors. In most States, a judgment creditor can satisfy its judgment by garnishment against your bank account or your wages, although in some States (such as California), the judgment creditor must take additional steps to have the right to take your property away from you.  A judgment creditor can also place a lien against any real estate that you own in the public record. This lien will encumber your property and will need to be paid before you can sell your real property.

Every State has its own rules about how much a judgment creditor can seize from you at any one time and about the judgment creditor’s rights against real and personal property. In Georgia, where I practice, the process by which a judgment creditor can move against a judgment debtor is relatively fast and not particularly burdensome. In other States, the judgment creditor must expend time and money to secure its judgment. California bankruptcy lawyer Cathy Moran writes that judgment creditors must file additional court paperwork before it can excercise their rights against California judgment debtors.

In a Chapter 13 bankruptcy, a judgment creditor has the right to file a secured claim. Typically, secured claims are paid in full in a Chapter 13 and they are paid before unsecured creditors.
In some jurisdictions, debtors routinely file a motion in bankruptcy court to avoid the lien. This procedure varies depending on where you live.

A judgment will also appear on your credit report and can negatively affect your credit score.
I think it is dangerous to have one or more outstanding judgments pending against you. While bankruptcy is not always the best option, I think it would be wise to at least discuss your bankruptcy options and the potential dangers inherent in judgment collection with a qualified bankruptcy lawyer.
by Jonathan Ginsberg

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Wednesday, January 22, 2014

When Can I File Bankruptcy Again?

There is no limit on the number of bankruptcy cases that one may file. In fact, there is no limit in between time frames to file bankruptcy. Nevertheless, if sufficient time between filings does not take place, you may be not be eligible for “discharge.”

So if a bankruptcy case is filed too soon, even though it will not be dismissed, a discharge may not take place. Why would anyone do this? Well there are several reasons to name a few.
If enough time has not taken place, but a debtor wants to eliminate their debt in a subsequent chapter 7 and has sufficient assets to do so, filing another case may be a good idea. Suppose a debtor has a messy asset(lawsuit, insurance claim, etc) but wants to use that to pay creditors. By filing another chapter 7, the trustee can liquidate that asset to pay the debts. Although the debtor may not be getting top value for the asset since the trustee only cares about getting enough money to pay the creditors, it may be worth the peace of mind for the debtor in not dealing with the asset and having the trustee in charge of converting it to dollars.

Or, maybe a debtor recently filed a chapter 7 and has remaining non-dischargeable student loans or taxes. The debtor could then file a subsequent chapter 13 and be protected for the next 5 years without any worries of lawsuits, levies, or wage garnishments, even though at the end of 5 years no discharge is entered. Then, maybe at that date, the debtor might also be eligible to eliminate the debt in another chapter 7 or 13.

In a nutshell, the time frames between discharge eligibility are as follows:

8 years between 7s. -727(a)(8)
2 years between 13s. -1328(f)(2)
4 years between a 7 and 13 -1328(f)(1)
6 years between a 13 and 7(if under 70% plan). -727(a)(9)

The time is counted from filing to filing — not from first discharge to second filing.
So don’t immediately give up on bankruptcy relief just because not enough time has passed. With a little pre-bankruptcy planing and creative filing techniques, you and your attorney can probably get you the relief you need!

Written by Michael G. Doan

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Monday, January 20, 2014

Bankruptcy and Divorce

All too often money problems lead to divorce.  So it’s normal that a bankruptcy (or two) will be part of the picture.

Should you file bankruptcy first, or wait until the divorce is filed or concluded?  A good question.  The answer depends entirely on where you live and what issues need to be resolved.

A married couple, even if they aren’t living together, can file  together.  After the divorce, they can no longer do that, so two cases might need to be filed. Thus, you can save a filing fee if you file before the divorce. But, and this is a big but, you can’t expect to maintain a Chapter 13 bankruptcy if you are divorced.  So, it’s best to talk to a competent bankruptcy attorney and be completely honest about the domestic situation before filing.  And, you might find that the attorney, upon learning that a split up is imminent, won’t represent both of you, because of the potential conflict of interest.

Additionally, if you are still living together, the income of both spouses, at least to some extent, will need to be included in the calculation of the means test to determine if a Chapter 7  is a viable alternative. So, if the combined income is too much, it might be better to wait until you have separated before filing.

Generally, there are three things that get sorted out in a divorce: property division; child custody; and spousal and child support.   The automatic stay in bankruptcy will stop any property division but won’t stop the determination of child custody or the payment of  support.  Thus, if you file for bankruptcy before the property is fully divided up, that process will go on hold for a while.  Since the determination of property rights includes the payment of debts, the bankruptcy will often help resolve some of those issues.

If your marriage is breaking up, it might be nice to clean up your debts too and get a true fresh start.

Bankruptcy Law Network

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Thursday, January 2, 2014

How to get student loans forgiven

Conventional wisdom has it that student loans, whether federal or private, are impossible to walk away from. However, recent research shows that's not the case. Jason Iuliano, a Princeton political science Ph.D. student who also has a degree from Harvard Law School, did a comprehensive search of bankruptcy cases in which borrowers sought to discharge student loans; he found that in four out of 10 cases, judges erased all or part of the debt. Here's the rub: Only 0.1 percent of student loan borrowers who declared bankruptcy actually tried to get their loans forgiven!

If you or a family member are struggling under financial pressures and have student loan debts that you can't pay, you should first pursue a break from payments, known as deferment or forbearance, or an income-linked repayment plan such as Pay as You Earn, which I discussed in a previous column. However, here's what you need to know about taking the last resort to get rid of your debts.

Student loans aren't dischargeable under normal bankruptcy proceedings. You have to file a separate suit, called an adversary proceeding, that is like a mini-trial within a bankruptcy case.

Most courts use something called the Brunner test to decide if your student debts cause you "undue hardship," which is necessary for getting all or part of the loans written off. The Brunner test requires proving three things in your adversary petition: first, that you cannot maintain a minimal standard of living for yourself and your dependents while making your loan payments; second, that this situation is likely to persist (sometimes called the "certainty of hopelessness"); and third, that you have made a good-faith effort to repay your loans. Typically, the lender, like Sallie Mae, offered the borrower a settlement out of court. He believes that if more people were aware of the adversary proceeding option, there would be far more cases of getting federal loans forgiven.

If you have private (sometimes called "alternative") student loans, Richardson has a final piece of advice. Private lenders are usually pretty unwilling to negotiate. "You have two choices: pay or not pay," he says. And the loans, like federal loans, are not discharged in bankruptcy. However, if you really can't pay, the lender will have to take you to court and get a judgment in order to collect. After a few years, if the bank doesn't take the time to pursue you, the statute of limitations on the unpaid debt will run out. And seven years after you first go into default, the incident should be expunged from your credit report. In no way is this a recommended course of action, but if you truly have no other choice, it's good to know that your life doesn't have to be over because of an ill-considered student loan.

By Anya Kamenetz, Tribune Media Services | The Savings Game

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