Posted by Kevin on September 19, 2019 under Bankruptcy Blog | 
Bankruptcy can prevent future judgment liens. It usually stops a lawsuit from turning into a judgment, and then a judgment lien on your home.
Judgment Liens Are Dangerous
Our last blog post was about how filing bankruptcy can sometimes remove, or “avoid,” a judgment lien from your home. This is a great potential benefit of bankruptcy if a judgment lien has already been recorded.
But it is often much better to file a bankruptcy case before a judgment lien hits your home’s title. Here are a few of the practical reasons why:
- You have to meet certain strict conditions to be able to avoid the judgment lien. If you don’t meet them, even bankruptcy won’t get rid of that lien on your home. You may have to pay all or part of the debt in spite of filing bankruptcy.
- Even if you succeed in avoiding the lien in your bankruptcy case, it is an extra step that can cost you more. And the cost can go up substantially if the creditor fights your lawyer’s efforts to avoid the lien. Besides higher lawyer fees, you may have to pay for a home appraisal and for the court testimony of the appraiser.
- The existence of a judgment lien adds uncertainty, and thus some extra anxiety, to your bankruptcy process. The goal of bankruptcy is relief. So it’s better to prevent a judgment lien from hitting your home than messing with it after it has hit.
Judgment Liens Are Preventable
Filing bankruptcy usually stops an ongoing lawsuit against you from turning into a judgment. Bankruptcy’s “automatic stay” immediately stops “the… continuation… of a judicial, administrative, or other action or proceeding against the debtor… .”
Filing bankruptcy also usually prevents future lawsuits against you from being filed much less turning into judgments. The automatic stay” immediately stops “the commencement… of a judicial, administrative, or other action or proceeding against the debtor… .” Section 362(a)(1) of the U.S. Bankruptcy Code.
The exceptions are debts that cannot be written off (“discharged”) in bankruptcy, such as certain ones based on fraud, income taxes, child or spousal support, most student loan debt and criminal behavior. But bankruptcy does discharge most debts. So filing bankruptcy will stop ongoing and future lawsuits on most of your debts. And it will prevent those debts from turning into dangerous judgment liens on your home.
The Timing Can Be Crucial
You know when things are going south financially. You are making no more than minimum payments on your credit cards. You miss payments here and there but convince yourself that you will make it up next month. But you don’t make it up. Debt collectors are calling daily. And the dunning letters are also coming in. You could bury your head in the sand and that will lead to lawsuits, judgments, and judgment liens on your home.
Most times, it is best to be proactive. At the very least, you should be seeking out an experienced bankruptcy attorney to analyze your situation and let you know whether bankruptcy can be an effective tool to deal with your creditors.
Posted by on February 4, 2019 under Bankruptcy Blog |
Most debts that people get behind on are at some point—often quite quickly—assigned by the original creditors to collection agencies. This can happen two ways. Either the creditor still owns the rights to the debt and the collection agency simply gets a percentage of what it collects, or the creditor sells all of its rights to the debt to a collection agency and then is legally no longer in the picture.
Either way, the collection agency then tries to get you to pay the debt. At first—it will tend to contact you and try to make you pay whatever it can. Depending on the facts of the situation—including whether you have a job or real estate or other assets—the collection agency will then decide whether it’s worth suing you. If you ARE sued, there’s a good chance that the collection agency believes it can force payment from you by garnishing your paycheck or bank account, or by putting a lien on your home or by attaching other assets.
This is a signal you need to pay attention right away.
In fact, the collection agency is banking on you not taking the lawsuit seriously enough. The sad truth is that a large majority of the time people don’t respond to lawsuits so that judgments are entered against them by default.
Don’t assume that there is nothing you can do. Learn your options. How? Most consumer or bankruptcy attorneys will give you a free consultation. This consult should provide you with the following:
a) You will understand the consequences of the lawsuit, and your options for dealing with it. Know what your options are instead of assuming you have none.
b) You may have defenses so that you don’t legally owe the debt after all. Collection agencies routinely try to collect debts on which the statute of limitations has expired. They can sue the wrong person. They may include allegations which are not accurate or supported by law.
c) You may have a counterclaim—an argument that the creditor acted illegally in some way and actually owes you money for damages. At the least this could give you leverage to settle the debt under much better terms.
d) Once the time to respond expires and a judgment is entered, it is usually too late to deny the allegations in the complaint.
e) By having an attorney review the lawsuit and your overall debt picture, and discuss your options, you may end up solving deeper problems. Most consumers do not have an attorney who they talk with regularly. So problems accumulate. You don’t have a chance to ask questions when they arise. This often leads to lots of confusion and anxiety. Seeing an attorney about a pending lawsuit could lead to addressing how to improve your entire financial life.
Final advice worth repeating- if you are sued, you must act quickly. In NJ, you have only 35 days to respond to a lawsuit.
Posted by on June 20, 2016 under Bankruptcy Blog |
The automatic stay goes into effect simultaneous with the filing of your bankruptcy petition. The “petition” is the document “commencing a case under [the Bankruptcy Code].” Sections 101(42) and 301(a). So the very act of filing the petition itself “operates as a stay.” Section 362(a).
The instantaneous effect of the automatic stay is amazing especially in comparison to most other court procedures. Most take weeks, or even in the case of emergencies at least days or hours. Usually some kind of request or motion needs to be filed to get the court’s attention, the other side is given some opportunity to respond, and then there may be a hearing of some sort, before finally a judge makes a decision.
But the automatic stay skips all that. It is, at least at the beginning, completely one-sided, in your favor. You “win” an immediate court order, without the creditors having any immediate say about it, without involving a judge at all.
So the automatic stay gives you an immediate breathing spell, freezing all collection efforts against you, whether your creditors like it or not.
Awesomely Broad Protection
This break from your creditors covers “any act to collect, assess, or recover” a debt—just about anything a creditor could do to.
Besides stopping all collection phone calls and bills, the automatic stay stops all court and administrative proceedings against you from starting, or from continuing. If your bankruptcy is filed right before a lawsuit is to be filed at court against you, the lawsuit can’t be filed. Same with a home foreclosure. A prior judgment against you can’t result in your paycheck or bank account being garnished. If you’re behind on your vehicle loan payments, the repo man can’t come looking for your vehicle. If you owe back income taxes to the IRS, it can’t record a tax lien against your home and vehicle.
The automatic stay is powerful stuff.
“Relief” from the Automatic Stay
Any creditor can ask the court to cancel the automatic stay so that the creditor can again take action against you, your assets, or the collateral in particular. The most common situation for this is a creditor asking for the right to take back the collateral securing the debt—to repossess a vehicle or to start or continue a home foreclosure. Whether or not the court will give it this right, or give “relief from stay” in any situation, depends on all the details of the case. It requires a careful analysis to be done by and discussed with your attorney.
Exceptions or Limitations to Automatic Stay
There are some, and we will address some of them in upcoming blog posts.
Posted by Kevin on March 31, 2016 under Bankruptcy Blog |
Don’t react to getting lawsuit papers by avoiding them. React by helping yourself. Get some competent legal advice about what this lawsuit really means, whether and how it can hurt you, and what you likely can do about it.
Lawsuits by most creditors aren’t “personal.” They’re just a business decision. The lawsuit papers you have in your hands tell you that the creditor has decided that suing you is a good bet. It thinks that the lawsuit will help get the debt paid. The creditor likely even has in mind specifically how it expects to get paid. It may well be targeting your bank account, your paycheck, your home, or some other income or asset.
The creditor is also making another easy bet—that in fact you won’t do anything about the lawsuit papers after getting them. At least not in time to prevent the lawsuit from turning into a judgment against you. Most people don’t.
So the creditor is banking on you letting them get a “default judgment,” a court decision in favor of the creditor which happens automatically (or at least without a trial) if you do not formally reply to the lawsuit on time.
Once armed with a judgment, the creditor to start grabbing your money and your assets, through orders of the court, sometimes in ways you might not expect.
A Judgment against You is More than Just an Admission that You Owe the Debt
But even if the judgment does not result in giving a creditor a way to get money out of your right away, it has longer-term consequences. For one, judgments can be reported to credit agencies. Affects your FICO score and, therefore, your ability down the line to get credit. In addition, once the deadline to respond passes and a judgment is entered, you’ve give up on some important rights:
a) Your right to raise possible defenses. Creditors and collection agencies can be shockingly cavalier about whether the debts they are pursuing are legally valid. Think about it: since in the vast majority of the time consumers don’t respond to lawsuits and judgments are rubber stamped, there’s not much incentive for the creditors to get their paperwork right. You need to have an attorney review the lawsuit to find out if the statute of limitations on the debt has expired, or if you have any other defenses. After the judgment is entered against you, it is extremely difficult, and a lot more expensive, to raise any such defenses.
b) Your right to raise counterclaims. A counterclaim is your argument that the creditor did something wrong—in the way the debt was created or in how it was collected. Counterclaims say that you have been legally damaged, entitling you to compensation. A default judgment against you either waives your right to bring a counterclaim, or takes away the counterclaim’s leverage when it would do you the most good.
c) Your right to dispute facts. The debt could become more difficult to write off in bankruptcy after a judgment is entered, if certain facts are alleged in the lawsuit (and deemed admitted by your lack of a response). This could put you at a serious disadvantage if you ever need to file bankruptcy.
That is not to say that you cannot, within a set period of time, come into court to set aside the default judgment and then raise those defenses. But, in NJ at least, you must file a motion and appear in court, and a judge makes the call. It is difficult to do and expensive as opposed to filing your answer on time and putting forth your defenses as a matter of right.
If you do get sued, do not bury your head in the sand. Consult and attorney.
