Bankruptcy work is rife with questions about debt collection. The most common question for me is: Help, I owe [fill in the blank] a lot of money! Can a creditor just take money out of my bank account?

At least in New Jersey, the answer to this question is yes and no. Unless you’ve been sued and a judgment has been entered against you, don’t worry, because a creditor cannot just take your money or property. That’s what due process is all about.

But if a creditor has sued you in court and you either failed to answer the lawsuit or you answered but lost the lawsuit somehow, a judgment can (and probably will) be entered against you. Then, a New Jersey creditor could obtain permission from the court to pursue your assets to satisfy the judgment. This creditor can go after money you have sitting in a bank account, which will result in all of your account’s funds being frozen, at least temporarily. They can also obtain a wage garnishment order to take money directly out of your paycheck before you get paid. While there are other remedies a creditor can technically pursue, these are the two that are used most often. For example, it’s unlikely that a credit-card company is going to take and sell your items of personal property – that’s just too much work for too little return.

Be careful if you have moved recently, or if you never updated your address with your creditors. They might legitimately believe that you live somewhere else and try to serve you with a lawsuit at your old address. The problem is that you might not be aware of a judgment against you. While you might have a legitimate argument that you were not properly served with the lawsuit, it’s highly unlikely to be worth your time and money finding and hiring an attorney to challenge the judgment. If the challenge works, you still have to defend against the lawsuit. If your challenge to the judgment does not work, you are still faced with owing money to your judgment creditor, after having paid an attorney to represent you. Many attorneys (myself included) just don’t think it’s worth even taking these types of cases, especially if the judgment debtor would benefit from a bankruptcy instead.

Bankruptcy can wipe out your personal liability on a judgment debt. However, if the creditor’s enforcement of its judgment rights has resulted in a lien being placed on your property, you may wish to consider taking the extra step of having the lien removed, since bankruptcy cannot wipe out the lien. You don’t need to worry about the lien if you do not own any real estate or if you think you won’t purchase any real estate in the future.

If you are calling attorneys for help because you owe money and you are scared that a creditor is going to sue you and you want to know exactly when this might happen and when it does, how long it will take them to get your bank account/wages/whatever, STOP. Unless you are prepared to do something about it right then and there (such as hiring the attorney to help you file for bankruptcy or to defend against the lawsuit you have already been served with), you have no reason to call attorneys, because they can’t help you. I say this because I often get these kind of calls, where the person calling is just exploding with worry, but has completely closed off any possible remedy because, for whatever reason, they won’t file for bankruptcy, at least not right now.

If you actually wish to discuss the pros and cons of personal bankruptcy, I (and many other attorneys) would be happy to take your call. But if you have done your research and you have closed off the possibility of bankruptcy and you already know what all of your non-bankruptcy options are, please save yourself (and me) the time and don’t call.

Photo by taberandrew.