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3/5/2020 I am being sued on a debt that the bank had previously charged off. Can they do that?Read NowIt is a common misconception that once a debt has been charged off by a creditor that the creditor can no longer collect on the debt and the debt just kind of goes away. Unfortunately, that is not the case.
A charge off is actually merely an accounting procedure by the creditor, whether it is a bank, credit card lender, mortgage company, auto loan company, or any other type of creditor. The creditor has at that point decided the account is no longer an asset to the company. Although the debt being charged off by the creditor is not a defense to having to pay the debt, there may be another defense. Whether the creditor or a collection company for the creditor can collect on the account depends on the statute of limitations. In Alabama the statute of limitations for most debts is either 3 years or 6 years, depending on the type of debt, from the last payment made on the debt. Be careful here, a payment of any type toward the debt could make a debt which has passed the statute of limitations or is about to pass the statute of limitations collectible again for another 3 or 6 years. Many times you may not hear anything about the debt for years, but out of the blue you are sued or begin receiving collection phone calls or letters regarding the debt. This often happens when a debt has been sold or transferred to different collection companies or debt buyers. If you have been sued on a charged off debt or are being harassed by a creditor or a collection company, a bankruptcy may be your best way to stop it. There may also be other ways to defend against the debt or settle the debt. Please educate yourself and do not let yourself be bullied by these companies. Order my book by clicking here and/or contact an experienced bankruptcy lawyer immediately.
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3/5/2020 A debt collector called me and said “We will garnish your next paycheck.” Can they do this?Read Now I am continuously amazed at the depths some debt collectors will go to in order to scare unwary debtors into making payments they cannot afford at the time. The statement “We will garnish your next paycheck” is probably a lie.
In Alabama in order for a creditor to obtain a writ of garnishment against your employer to withhold money from your paycheck, that creditor must have a judgment against you. In order to have a judgment against you, that creditor must have filed a lawsuit against you and won either after a trial or by default, that is, because you did not file a response. Normally when this threat is being made, a lawsuit has yet to be filed. How do you know if you have been sued? First, if suit has been filed against you, you should have been served with a Summons and Complaint by either the sheriff’s department of your county or by certified mail. However, if you cannot be found by the creditor, the creditor may have you served by publication, that is, by running a notice in the newspaper in the county of your last known address. If you are still unsure, you may call the clerk of court of your county. What if I have been sued? See a lawyer immediately. Depending on which court, Small Claims/District or Circuit, you have either 14 or 30 days respectively from the day you were served to file an answer. Filing an answer generally denying the allegations in the lawsuit will prevent the creditor from obtaining a default judgment against you and will lead to your case being set for court after a few months. This will give you time to save money and/or get your bankruptcy filed. What if I already have a judgment and/or garnishment against me? If you already have a judgment and/or garnishment against you, I would again suggest you see an attorney immediately. You may be able to have the judgment set aside or appealed, but only if you act very quickly. This may also be a good time to take a strong and hard look at bankruptcy. With a bankruptcy you should be able to discharge the judgment prior to garnishment and stop any garnishment that is already in place. Upon filing a bankruptcy, you may even be able to have a portion of any money garnished from your check returned to you. The bottom line is do not let harassing calls from creditors or debt collectors scare you into giving them money you cannot afford to give them. Many will say anything they think will frighten you. If a debt collector says anything that worries you, make an appointment with an attorney and see what your rights are. It’s probably a good time to take a look at your financial situation anyway. Please email me with any questions regarding the topic of garnisments or any other bankruptcy or debt related topic. 3/5/2020 What happens if I have a claim or lawsuit that I may get some money from in the future, but I need to file bankruptcy now?Read NowWhen “Jane” came to me about filing bankruptcy she was in dire straits. She had been sued by at least one creditor and was about to have her wages garnished. If her wages were garnished, the loss of 25% of her wages not have left her enough income to keep her mortgage and utilities paid and meet her other necessities.
Jane met all the qualifications to be able to file a Chapter 7 bankruptcy, but there was an issue. Jane’s father had died about one year earlier and his estate had a lawsuit against the nursing home where he died. A person having a claim of some type, but currently being in poor financial shape is fairly common. Often times an on the job injury (Worker’s Comp) or a car wreck (Personal Injury) results in a loss of income and an inability to pay debt. Jane had been told by the estate attorney that her father’s type of case, a wrongful death due to alleged malpractice by the nursing home, rarely settle and it could be years before the case went to trial. Even then there was no assurance they would win. So, what do you do? First, I explained to Jane that if she wanted to file bankruptcy, it is absolutely required that the lawsuit/claim be listed as an asset. This is very important and there has been a lot of litigation over this issue in the past few years. Lawsuits and estates are public records and are impossible to hide, do not try. Failing to list a claim or lawsuit on your bankruptcy petition may damage your chances of recovering any money from that lawsuit or claim. Second, I informed Jane that if and when she becomes entitled to any money from the lawsuit, the money would have to be paid to the bankruptcy trustee of her bankruptcy case and she may receive very little of the proceeds. The amount she would receive would depend on her remaining personal property exemption, the amount of the proceeds, and the amount of claims filed by creditors. With knowledge of the possible outcome, Jane decided she still needed to file bankruptcy immediately. Although Jane’s situation was different, it is normally required that the attorney representing the debtor in their lawsuit or claim file a motion with the bankruptcy court to be approved as the attorney and to have their fee contract approved as well. About a year after filing, her father’s wrongful death case settled. Jane’s share was about $20,000. What happened to the money? The $20,000 was paid by the estate’s attorney to the bankruptcy trustee. Jane still had $1,000 of her $3,000 personal property exemption available, so she was allowed the first $1,000. The trustee received a fee out of the proceeds, normally 10%. Then creditor claims were paid. In Jane’s case only $12,000 of creditor claims were filed which was much less than her debt at the time she filed. After all creditor’s claims were paid, Jane received the remainder. So, all in all Jane received about $6,000 from the settlement. I am sure Jane would have rather had the entire $20,000 share of the settlement, but her actual outcome really was not that bad. If she had had the $20,000 immediately before she filed, she would have had to have paid all or almost all of it to creditors. At least she was able to eat and pay her bills during the year before the case settled and was even able keep a good portion of the settlement after bankruptcy. Remember, this is not always the case. If all her creditors had filed claims, she would have only received the $1,000 exempt portion. If you are having financial difficulties, find out the truth about how bankruptcy may be able to help. Request my free book and/or call attorney Richard L. Collins or another experienced bankruptcy attorney. Here is a brief overview of a bankruptcy.
There may come a point in a person's life, whether its due to health problems, spending problems, employments problems, etc., where a person owes more money than even the tightest budget will allow him to pay. When this happens and monthly payments begin to be missed, the people and businesses who are owed the money (the creditors) start calling and sending letters. Eventually, if the creditors are not satisfied, there are foreclosures and repossessions of vehicles and/or lawsuits getting filed which will then lead to judgments, garnishments and liens. A bankruptcy can stop most of these bad things from happening. A bankruptcy can immediately stop the phone calls, letters, lawsuits, garnishments, foreclosures, and repossessions. This is called the Automatic Stay and it "stays" all collection efforts. A Chapter 7 bankruptcy will wipe out almost all unsecured debt, like credit cards and medical bills. Most of the time under a Chapter 7 you will be able to keep your house and vehicles if you are current or almost current on those payments and continue to make your payments to those creditors as agreed to in your contract. A Chapter 13 allows you to create a plan to pay some or all your debt back to the creditors. A Chapter 13 can stop your house from being foreclosed on or your car from being repossessed by allowing you to pay back your arrearage over time. It will also protect a house or vehicle in which you may have too much equity under the State of Alabama's exemption laws. Alabama's exemptions are very low, so this comes in handy frequently. The amount you pay back is based on your income and expenses and the amount of debt you need or want to pay back over the length of the plan. Most plans last for five (5) years which is the maximum length of the plan. So, the bottom line is a bankruptcy can stop collections of debt by creditors, wipe out all or part of your debt, and/or create a plan to pay back some or all of your debt while normally letting you keep the real and personal property you want to keep. It is not all rosy though. There are issues that can make filing bankruptcy very tough. Bankruptcy also has long term effects on your credit. I will deal with these issues in later posts. If you are having financial difficulties, find out the truth about how bankruptcy may be able to help. Request my free book and/or call attorney Richard L. Collins or another experienced bankruptcy attorney. |
AuthorI am an attorney located in Cullman, AL. I practice extensively in the area of consumer bankruptcy law, that is, I file Chapter 7 and Chapter 13 bankruptcies for individuals. I handle cases all over North Alabama and have helped hundreds of clients through the bankruptcy process., I receive many referrals from former clients and their families and other attorneys. Why? Unlike other firms, I have a local office. If you are from out of town, we have the technology available to keep your traveling to a minimum. Also, unlike many firms, you will meet personally with an attorney, not a paralegal. An attorney will handle your case from start to finish. , Archives
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