Wage Garnishment

Published on: January 30, 2012

Does Filing For Bankruptcy Stop A Wage Garnishment

By brinkmanandalter2 brinkmanandalter1

Yes, it does. And depending on how quickly you get your Missouri or Illinois bankruptcy filed, you can actually prevent the creditor from taking any action at all (so as to avoid any money being garnished from your pay checks).

The filing of a bankruptcy is accompanied by what is called an Automatic Stay. This is a fancy way of saying that everything stops. All creditor activity must immediately cease, including phone calls and letters. This Stay also extends to anything awarded to the creditor by way of a hearing. When a creditor sues you for breach of contract on a debt that you owe, the judgment from the court allows the creditor to do one of three things: 1) garnish your wages; 2) levy your bank account; 3) place a lien against your property. The creditor can execute one of these options, or it can do all three at once. The most likely, of course, is the wage garnishment. The creditor simply sends your employer the necessary documentation, and the payroll department begins to deduct.

But once a bankruptcy is filed (whether it is a St. Louis Chapter 7 bankruptcy, or a St. Louis Chapter 13 bankruptcy), the garnishment must end. Your bankruptcy attorney simply notifies the creditor’s attorney of this fact, and that attorney then sends a Release of Garnishment to your payroll department. In addition, the underlying debt is discharged, along with the rest of your unsecured creditors (whether they be in the form of credit cards, medical bills, payday loans, deficiencies from a repossession or foreclosure, etc.)

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Published on: January 26, 2012

If I Am Sued By A Creditor, Should I Appear In Court?

By brinkmanandalter2 brinkmanandalter1

My suggestion would be, yes, you should appear in court on the day of your hearing. Not doing so can have negative consequences (even if you end up filing a Missouri or Illinois bankruptcy later on). let me explain why.

If you fall behind on your debts, one of the things that a creditor can do is to sue you for breach of contract. In other words, you agreed to make certain payments per month, you failed to do so, and now they want the court to recognize that you have breached your end of the deal. In order to make this happen, the creditor (through their attorney) will file the Petition for Breach with the proper jurisdiction, and then have you served with a summons. The summons is very important, because this is the document that informs you that a hearing has been set on matter, which includes date, time, and location. If you are not properly served with a summons, the hearing cannot take place.

Assuming you are properly served, the summons will indicate the date and time on which the hearing will be held. This hearing is your opportunity to make any argument you might have as to the validity of the debt in question. But if you do not appear on the designated date and time, the creditor will receive what is called a ‘Default Judgment.’ A default judgment is an order from the court essentially saying that the creditor wins by default (because you did not show up). Once the creditor receives this type of judgment, it may then move forward with its range of remedies. These would include a wage garnishment, bank levy, or placing a lien against your property. So this is why it is important to make an appearance.

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Published on: December 19, 2011

Can A Collection Agency Threaten To Garnish My Wages?

By brinkmanandalter2 brinkmanandalter1

The only way that a debt collector can threaten such a thing is if they have gained prior approval from the original creditor that they bought the debt from, and they are literally ready to file suit against you in the next day or so. Other than that, no, they cannot threaten such a thing.

When a debt is sold to a third-party, this company is subject to the dictates of the Fair Debt Collection Practices Act (FDCPA). This is a federal law which regulates the extent to which a collection agency can collect on a debt. The prohibitions are clearly marked and defined, making a great variety of activities that debt collectors normally engage in unlawful. The problem though is twofold: 1) most people don’t even know that such a law exists, and 2) most collection agencies rarely follow the rules of the statute. In fact, most debt collection agencies flout the law habitually. They have determined that such adherence is not necessary, if for no other reason than because their threatening tactics work. If you are being harassed by an individual who calls you night and day, and who is scaring you with talk of law suits and garnishments, then chances are you will somehow find the money to make them go away. The problem (amongst many) is that such a thing is illegal.

If when the collection agency bought the debt (for pennies on the dollar) from the original creditor, the original creditor gave it explicit approval to sue for non-payment, then the collection agency would in the right to make such a claim. But this is rarely the case. Let’s think about this for a moment: if you owe an old hospital bill of $300 that has now been passed onto collections, and the debt collector is threatening to garnish your wages, we can assume that this is an idle threat. It would cost them way more to hire an attorney and/or for the filing fee with the court. So the chances of them actually filing suit against you is slim to none. But if in fact they do make such a threat, and there was no explicit approval (and especially if the original debt was so low), then they have violated the FDCPA. If a violation can be shown, the damages that the agency has to pay is roughly $1,000. That amount of money will of course not change your life, but it is something. In addition, the statute states that any attorney fees have to be paid by the creditor. This means that there are no upfront fees to you.

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Published on: December 8, 2011

Is There A Limit To How Much Debt I Can Get Discharged In A St. Louis Bankruptcy?

By brinkmanandalter2 brinkmanandalter1

There are certain limitations, but it depends largely on what type of Missouri bankruptcy you wish to file. The two main options are a St. Louis Chapter 7 bankruptcy and a St. Louis Chapter 13 bankruptcy. These chapters have substantive differences in how debt is handled (or whether you would even qualify for one). But the debt limits proscribed by the Bankruptcy Code are very clear.

When you file a Missouri Chapter 7, there are no limitations as to the amount of unsecured debt to be discharged. A Chapter 7 gets rid of these kinds of debts forever, such as credit cards, medical bills, payday loans, deficiencies from a car repossession, gym memberships, and even magazine subscriptions. Once the debts are knocked out, you can immediately begin to rebuild your credit rating as you move forward with life. So if the amount of unsecured debt you are currently carrying is $30,000, or $300,000, or even $3,000,000, it’s all going to get discharged.

There are, however, debt limits in a Missouri Chapter 13. A Chapter 13 is described as a repayment plan over the course of three to five years during which certain debts are paid back. Primary examples of the kinds of things to be paid back would be mortgage arrearage, car loans, tax debt, back child support, attorney fees, and sometimes a percentage of your unsecured debts. If the amount of unsecured debt is above $336,900, then you will not qualify for a Chapter 13. Or if your secured debts (like house mortgage or car note) are above $1,010,650, you again will not qualify under this chapter of bankruptcy. In this kind of situation, you may wish to consider a Chapter 11 bankruptcy (which is described as a reorganization).

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Published on: November 22, 2011

Can I Include Medical Bills In A Bankruptcy?

By brinkmanandalter2 brinkmanandalter1

Yes, you absolutely can. In fact, it is rare when such bills are not a part of a bankruptcy. Very frequently, people will have upwards of several thousand (if not tens of thousands) in medical-related bills.

Medical bills (whether they originate from your doctor’s office or the hospital) are described as unsecured debts. Unsecured debts are debts that have no collateral attached to them. In other words, there is nothing securing the underlying amount that you owe. A secured debt (like a home mortgage or car note) does have collateral attached (like the house or the automobile). With a secured debt, if you don’t pay the monthly installment, the remedy for the creditor is to either foreclose on the loan, or repossess the car. But with an unsecured debt, the remedy for non-payment would be to call you relentlessly, and then eventually sue you for breach of contract (and once they get a judgment, they could move forward with a wage garnishment, bank levy, or lien against your house).

But these kinds of debts can be taken care of in a Missouri bankruptcy. In a St. Louis Chapter 7 bankruptcy, all unsecured debts (credit cards, medical bills, payday loans, etc.) are discharged. This means that the creditor can never again demand payment from you, call you, or anyway attempt to collect on the debt ever again; and you will never again be obligated on the debt, to either make any further payments or answer the creditor’s questions. It simply goes away for good.

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Published on: November 17, 2011

If I Lost My House Through A Foreclosure, Can The Mortgage Company Come After Me For The Deficiency?

By brinkmanandalter2 brinkmanandalter1

In the state of Missouri, yes they can. This may not have necessarily been the case several years ago, when the economy was in better shape. When a house was foreclosed upon in 2002, the mortgage company or bank would have been just as likely to write the debt off as to come after you for the deficiency. But in this economy, it is a much different story.

First of all, when a home loan is foreclosed upon, the sale almost always results in a deficiency. This means that the home sold for less than what was still owed on the loan. For instance, if you have a home loan for which the outstanding balance is $140,000, and that loan is foreclosed upon; but at the foreclosure sale, it only goes for $100,000 (believe me, foreclosure prices are bargain-basement; that is also why foreclosures tend to have a depressing effect on the values of surrounding homes). In this scenario, a deficiency of $40,000 is created (140,000 – 100,000 = 40,000). And it is this amount that the mortgage company can demand from you.

Of course at this point, the $40,000 becomes unsecured debt (as opposed to the secured character it took on before), because there is no longer any collateral to secure the debt against (i.e. the house that was foreclosed on). So if you can’t make payment arrangements on the 40K, the mortgage company (or collection agency that they turn the debt over to) will likely sue you for breach of contract. And once they get a judgment (and believe me, they will), the creditor can do things like garnish you wages or exercise a levy against your bank account.

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