Tag Archives: prevent judgment lien

“Automatic” Protection from Your Creditors

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9301721438_21b25771be_z“Automatic” protection from your creditors is what you get as soon as you file for bankruptcy.

Many bankruptcy attorney ads say: “Stop garnishments.” “Stop foreclosures.” “Stop repossessions.” So bankruptcy stops all those bad things. But is it as good as it sounds? How does it really work?

The most basic protection that bankruptcy provides is the immediate protection that it gives you, your paycheck, your home, and your possessions. You get this protection the minute a bankruptcy is filed for you. Other than some rare exceptions, all collection efforts by creditors against you or your property must come to an immediate stop. You’ll hear this referred to as the “automatic stay.”

“Stay” is just a legal word for “stop” or “freeze.” “Automatic” means that this “stay” goes into effect right when your bankruptcy petition gets filed. That filing itself “operates as a stay” of virtually all creditors’ actions to pursue a debt or grab collateral.

But your creditors need to know that you filed for bankruptcy so that they can abide by the stay. If your creditors are all listed in your bankruptcy paperwork, they should all get informed by the bankruptcy court within about a week or so after your case is filed, without any additional action by either you or your attorney. If you are not anticipating any action against you by any of your creditors sooner than that, usually letting the court inform them of your bankruptcy is good enough. But if do expect some quick creditor action, be sure to talk with your attorney about it so you’re both on the same page about informing that creditor sooner.

But what if a creditor unexpectedly takes some action in the days after your bankruptcy is filed but before it finds out about it? The automatic stay is so powerful that if this does happen, the creditor must undo whatever action it took against you, even if it did not know about your bankruptcy filing. So if after your bankruptcy is filed, a creditor, for example, files a lawsuit against you or turns its earlier lawsuit into a judgment, that lawsuit must be dismissed or the judgment must be set aside.

If you are in New Jersey and you are having problems with debt, call me at (201) 676-0722 for a consultation, or email me at weilattorney@gmail.com.

Photo credit: Next TwentyEight

Is a Creditor Getting a Judgment Against You?

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If you have a judgement against you from a creditor, it can hurt you. Judgments can hurt in three ways:  1) They allow the creditor to use powerful collection tools against you; 2) A judgment can make you rush into bankruptcy at a bad time; and 3) Under some circumstances, a judgment can make it harder to discharge the debt in your bankruptcy.  This post addresses only the first of these three.

Most creditor and collection-agency lawsuits for debt collection result in judgments against those who owe the debts. That’s because the reason for debt collection suits is to legally establish that the debt is owed, which is usually not in dispute. Also, much of the time the debtors are at the ends of their financial ropes and can’t afford an attorney to find out their options or to defend the lawsuit. So judgments are entered “by default”—meaning the deadline for the debtors to respond passed without any action by them, allowing the creditor to get a judgment. Sometimes debtors do not receive notice that a judgment has been entered against them or they receive notice and do not recognize it for what it is. Thus, many debtors do not realize there are judgments against them, especially when nothing apparently happens for months or even years afterwards. And very few people are fully aware of the possible consequences.

Most people know that a judgment gives a creditor the power to garnish wages and/or to levy against bank accounts. But preventing garnishments by keeping your bank account empty and by not being paid a regular wage often are not enough to make you “judgment proof.” For example, a judgment usually becomes a lien against any real estate you own now or will own in the future. That includes not only property held in your own name but also your rights to property held jointly with a spouse, parent, or through a trust or estate. A creditor has other tools available, including getting a judge to order you to answer questions under oath, in writing, about what you own – in New Jersey, this is called an “information subpoena”.

Beyond the direct damage a creditor with a judgment can do to you before you file your case, such a creditor can cause you problems in your bankruptcy case.

If you file bankruptcy quickly to stop a garnishment or other collection activity, you lose one of your most important advantages: the timing of your bankruptcy filing. Much of what happens in your bankruptcy case turns on exactly when it was filed. Not having the flexibility to pick the best timing can, among other things, turn a Chapter 7 into a Chapter 13, can mean a difference of many thousands of dollars, and can turn a straightforward case that meets your goals into a more complicated matter.

The lesson here is, whenever possible, take the time to see a bankruptcy attorney if you have overall financial problems, particularly if you are being sued. Try not to wait until after a judgment has been entered against you.

Photo by Dennis Wong.