Will Bankruptcy Stop Creditors from Garnishing My Paycheck?

garnishment

You are working hard to make ends meet, you cannot seem to get ahead, and there is rarely anything left over after expenses and some payment on your debts.

Then, all of a sudden, you’re notified by your employer that your wages are subject to garnishment, or “income execution” in New York.

Upwards of ten percent or more of your paycheck is being withheld for payment to one or more of your creditors.  The process will continue until the debt is paid in full. Money you need to pay the rent and keep food on the table is being diverted to your creditors.  What do you do now?

Assuming it is too late to vacate the judgment because you were not properly served with the summons and complaint, there is very little to do to stop the garnishment.  Fortunately, filing for bankruptcy can provide you with the help you need.

Bankruptcy  stops garnishments, and the mere filing of a bankruptcy petition creates an “automatic stay” of all creditor action to recover against you.  If you follow through to completion of your chapter 7 bankruptcy case, the discharge order entered by the court at the end of your case prohibits the garnishing creditor, and other creditors, from collecting against you.  In short, your debt obligations are eliminated or discharged and you are off to a new or fresh start.  No more garnishments, no more creditor collections, no more creditor harassment.  You now have a clean slate.

If you are being garnished or hounded by creditors who will not leave you alone, call my office at 914-385-1032 to make an appointment to explore how bankruptcy might work for you.

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We are a debt relief agency, we help people file for Bankruptcy under the Bankruptcy Code. This Blog is made available by the lawyer or law firm publisher for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand that there is no attorney-client relationship between you and the Blog publisher. The Blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.

HOW TO GET OUT OF DEBT

debt-free-sign

Excessive debt can cause a lot problems, not the least of which are creditor letters, calls and general harassment.  Wouldn’t it be great if, once and for all, you can be debt free?

Here are a few things you can do to get out and stay out of debt

ATTORNEY ADVERTISING — PAST RESULTS DO NOT GUARANTEE FUTURE OUTCOMES

We are a debt relief agency, we help people file for Bankruptcy under the Bankruptcy Code. This Blog is made available by the lawyer or law firm publisher for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand that there is no attorney-client relationship between you and the Blog publisher. The Blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.

Start Your Section 341 Creditors’ Meeting Right: Bring These Items with You!

creditors-meeting

Introduction

An individual chapter 7 debtor is required to appear and respond to questioning at a meeting of creditors convened under section 341 of the Bankruptcy Code.  In most consumer chapter 7 cases, the so-called “341 meeting” is the debtor’s only appearance at any kind of hearing.  At the meeting, creditors may, and the chapter 7 trustee shall, examine the debtor about his or her financial affairs.  The Bankruptcy Code and Bankruptcy Rules set forth a number of documents that must be produced at, or before, the 341 meeting.  This article briefly outlines the documents a consumer debtor should bring to ensure that the 341 meeting goes off without a hitch.

What to Bring

  1. Picture ID issued by a governmental unit or other personal identifying information establishing the debtor’s identity.
  2. Evidence of a social security number, or a written statement that such documentation does not exist.
  3. Evidence of current income such as the most recent payment advice for the period from and after the 60 days before the petition date.
  4. Statements of the debtor’s depository and investment accounts for the time period that includes the petition date:
    1. Checking
    2. Savings
    3. Money Market
    4. Mutual funds
    5. Brokerage accounts.
  5. If required by the means test provisions, documentation of monthly expenses.
  6. Tax return. At least 7 days before the first date set for the 341 meeting, the debtor must provide to the trustee a copy of the debtor’s federal income tax return for the most recent tax year ending immediately before the commencement of the case and for which a return was filed, including any attachments, or a transcript of the tax return, or provide a written statement that the documentation does not exist.

Conclusion

Individual debtors may approach the 341 meeting with some apprehension.  Ensuring that you’ve brought the required documentation may go a long way to reducing your unease.

WHY DO MY CREDITORS SUE ME FOR A JUDGMENT? I HAVE NO ASSETS.

debtA question often asked is why creditors insist on suing to collect unpaid debt even when the debtor has no assets to satisfy the resulting judgment.  I can think of at least two reasons.

First, a judgment is good for 20 years in New York.  That means that the creditor, or “judgment creditor” once a judgment has been entered, has 20 years from the entry of the judgment to collect (or “execute”) on the judgment.  Who knows what might happen in a span of time that long?  It’s entirely possible that the judgment debtor (the debtor after a judgment has been entered) may begin to assemble valuable assets through higher earnings power, significant gifts, an inheritance, the receipt of life insurance, or a judgment in favor of the judgment debtor.  Creditors can afford to think long-term and just because you are presently collection-proof does not mean that you always will be.

Second, you may not have assets, but you are likely to have a job (or in the future will get a job) that pays you wages that can be garnished periodically by the judgment creditor.  This collection process is called “income execution” in New York.  Again, creditors can take the long view and can afford to be patient as they collect methodically and periodically through garnishment.

In short, just because you don’t have any assets now does not mean creditors will go away.  You can make creditors go away by filing and successfully administering a bankruptcy case.

If you would like to discuss how bankruptcy might work for you fill out the form below, hit “Submit” and I will send you a free copy of my article “What Are the Advantages and Disadvantages of Filing for Bankruptcy Protection under Chapter 7 of the Bankruptcy Code?”

ATTORNEY ADVERTISING — PAST RESULTS DO NOT GUARANTEE FUTURE OUTCOMES

 

 

 

WHAT ARE THE ADVANTAGES AND DISADVANTAGES OF A CHAPTER 7 BANKRUPTCY CASE FOR CONSUMER DEBTORS?

bankruptcy-knowledge

 

A bankruptcy case is a legal proceeding brought by a debtor to achieve certain objectives made possible by a federal statute known as the “Bankruptcy Code.”

For individuals, there are two types of relief available. The first is a liquidation case under chapter 7 of the Bankruptcy Code, often referred to as “straight bankruptcy.” In a chapter 7 case, the debtor’s “non-exempt” assets are converted to cash with the proceeds distributed to creditors. In exchange, the debtor is released of most debt obligations owed as of the date of the commencement of the bankruptcy case.

The second type of bankruptcy relief is reorganization of the debtor’s financial obligations under, in the case of most individual debtors, chapter 13 of the Bankruptcy Code. Under this chapter, the debtor prepares a plan to use future income to satisfy all or part of the debtor’s pre-bankruptcy debts. The debtor in a chapter 13 case generally retains his or her assets.

The Bankruptcy Code, as amended from time to time, was drafted to promote two primary goals – the first, a “fresh start” for the debtor; and second, equity among creditors. Consumer bankruptcy cases are focused more on the first goal – that is giving the debtor “a new opportunity in life, unhampered by the pressure and discouragement of pre-existing debts.” Local Loan Co. v. Hunt, 292 U.S. 234, 244 (1934).

This article briefly describes the advantages and disadvantages of a chapter 7 bankruptcy case for an individual, or “consumer,” debtor.

Advantages of a Chapter 7 Bankruptcy Case for an Individual Debtor

Discharge of Most Debts

The number one goal of most consumer bankruptcies is a discharge of most debts. A “discharge” means that the debtor is no longer legally obligated to repay the debt and the creditor to whom the debt is owed is permanently enjoined from attempting to collect on the discharged debt from the individual debtor.

Protection of Property and Income against Execution by Unsecured Creditors.

Certain of the debtor’s property and assets may be placed beyond the reach of creditors through the use of exemptions in bankruptcy. Bankruptcy also stops any garnishment of wages after the bankruptcy petition is filed.

Automatic Stay

The simple filing of a bankruptcy petition creates (with certain exceptions) an automatic injunction that prohibits creditor action against the debtor including repossessions, garnishments, and foreclosures. The stay also ends creditor collection efforts including dunning letter and telephone calls. The automatic stay gives the debtor a chance to take a “step back” and assess the situation more clearly without the interruptions associated with creditor collection activities.

Another Protection Afforded by Bankruptcy

Bankruptcy may present the only way for a debtor to regain a driver’s license subject to revocation because of an unpaid accident judgment.

Disadvantages of a Chapter 7 Bankruptcy Case for an Individual Debtor

Bankruptcy is not the only way to fix an individual debtor’s debt and legal problems, and there may be several valid reasons not to file for bankruptcy protection.

Loss of Some Property in a Chapter 7 Bankruptcy

A consumer debtor will likely lose non-exempt property in a chapter 7 case, but that may be of little importance if the debtor has little or no nonexempt property. The vast majority of consumer chapter 7 cases are so-called “no asset” cases because the debtor has no nonexempt, unencumbered property to be administered and sold for the benefit of unsecured creditors.

Effect on Credit

Bankruptcy will most likely become a part of an individual debtor’s credit history for as long as ten years. That may or may not be a problem when seeking future credit — some creditors believe the debtor’s bankruptcy discharge makes the debtor less likely to default on new, post-bankruptcy debts. In addition, the debtor always retains the option of voluntarily repaying an important creditor with whom they wish to maintain a line of credit.

Cost of Filing a Chapter 7 Bankruptcy Case

In addition to attorney’s fees, fees for filing the petition and the cost of credit counseling and a personal financial management course must also be taken into account.

Conclusion

The foregoing is a non-exhaustive list of factors to be considered in deciding the best course of action when a consumer debtor is overwhelmed by too much debt. Other factors specific to an individual may play a more important role in determining whether to file for bankruptcy protection under chapter 7.

If you are thinking of filing for bankruptcy, contact me at 914-385-1032.

ATTORNEY ADVERTISING — PAST RESULTS DO NOT GUARANTEE FUTURE OUTCOMES

We are a debt relief agency, we help people file for Bankruptcy under the Bankruptcy Code. This Blog is made available by the lawyer or law firm publisher for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand that there is no attorney-client relationship between you and the Blog publisher. The Blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.