Q: Creditors are harassing me – but I lost my job, and cannot pay. Do I need to file bankruptcy?
A: If you owe money, but have no job or assets, you probably do not need the protection that bankruptcy gives you. There are no debtor prisons in America, and creditors cannot enforce a judgment if you literally have nothing. People who file bankruptcy, usually do so, because they have something to protect. Money in the bank, a car, house or even wages from their job. Wages can be garnished, money in the bank can be levied.
Q: Will a bankruptcy stop collection agencies from calling me?
A: Yes, but you don’t have to file bankruptcy just to stop them. Under the Federal Fair Collection Practices Act, you can legally force collection agencies to stop phoning or harassing you, by writing to them and demanding that they stop, even if you owe them a bundle and can’t pay a cent. However, these debts do not go away by itself, and even if you do not have a job now, you may find one later, and have these and other future assets threatened. Therefore, a bankruptcy now may be the best solution. Another reason to consider a bankruptcy now, even if you do not have current assets to protect, is that after a bankruptcy, you can immediately begin the process of repairing your credit. This usually takes some time, so an early start will get you there faster.
Q: I have just received a summons from a creditor. Is it too late to file a bankruptcy?
A: No. When you file for bankruptcy, an automatic stay goes into effect immediately stopping any lawsuit filed against you and any action against your property by a creditor, collection agency or government entity. This can be very important, Especially if you are at risk of being evicted or foreclosed on, being found in contempt for failure to pay child support or losing such basic resources as utility services, welfare or unemployment
Here is how the automatic stay affects some common emergencies:
Utility disconnections. If you’re behind on a utility bill and the company is threatening to disconnect your water, electric, gas or telephone service, the automatic stay will prevent the disconnection for at least 20 days. Bankruptcy will also discharge the past due debts for utility service. Although the amount of a utility bill itself rarely justifies a bankruptcy filing, preventing electrical service cutoff might be justification enough.
Q: Foreclosure. If your home mortgage is being foreclosed on, the automatic stay temporarily stops the proceedings, but the creditor will often be able to proceed with the foreclosure sooner or later. If you are facing foreclosure, Chapter 13 bankruptcy is almost always a better remedy than Chapter 7 bankruptcy, if you qualify, because it provides for a repayment plan on the arrears.
Eviction. If you are being evicted from your home, the automatic stay can buy you a few days or a few weeks, depending on the court. But if the landlord asks the court to lift the stay and let the eviction proceedings continue, which landlords usually do, the court will probably agree, reasoning that eviction won’t affect the bankruptcy. Despite the attractiveness of even a temporary delay, it is seldom a good idea to file for bankruptcy solely because you’re being evicted. You’ll probably be better off looking for a new place to live or fighting the eviction in Municipal court instead.
Enforcement action for child support or alimony. If you owe child support or alimony, bankruptcy will not interrupt your obligation to make current payments. And while the automatic stay will temporarily stop proceedings to collect back support you owe, usually the bankruptcy court will permit collection to go forward if the creditor requests it. In any event, these debts will survive bankruptcy intact and will have to be paid once the case is closed. Chapter 13, however, lets you pay the back support as part of the repayment plan.
Public benefit overpayments. If you receive public benefits and were overpaid, normally the agency is entitled to collect the overpayment out of your future checks. The automatic stay prevents this collection; furthermore, the debt (the overpayment you owe) is dischargeable unless the agency convinces the court it resulted from fraud on your part. Whether or not the threatened collection of an overpayment justifies bankruptcy depends on how severely you will be affected by the proposed reduction in benefits.
Multiple wage garnishments. Although no more than 25% of your wages may be taken to satisfy a court judgment (up to 65% for child support and alimony), many people file for bankruptcy if more than one wage garnishment is threatened. For some people, any loss of income is devastating; also, some employers get angry at the expense and hassle of facilitating a succession of garnishments and take it out on their employees. Although federal law prohibits you from being fired for one garnishment, an employer can fire you for multiple garnishments.
Most married couples are better off filing for bankruptcy together, if all property and debts are community property. If, however, you are in a relatively new marriage, have not accumulated any joint (marital) property and you want to get rid of separate (premarital) debts, you are probably safe filing alone. In addition, you may want to file alone if: You live in a community property State, but your debts are primarily non-community in nature, Your spouse owns separate, valuable property, such as a second home, or you and your spouse own a house in tenancy, (look at your deed), or you and your spouse have separated.
Certain categories of debts cannot be discharged in Chapter 7 bankruptcy. These are called non-dischargeable debts, and it doesn’t make much sense to file for bankruptcy if your primary goal is to get rid of them. The main ones are: Back child support or alimony obligations, Student loans that first became due fewer than seven years ago, Court-ordered restitution. Taxes less than three years past due.
The bankruptcy judge may rule other debts non-dischargeable if the debt resulted from a wrongful act on your part and the creditor raises the issue and proves your bad actions in the bankruptcy court. These debts may be ones incurred on the basis of fraud, such as lying on a credit application or writing a bad check . Debts from willful or malicious injury to another or an other’s property, including assault, battery, false imprisonment, libel and slander, and debts from larceny (theft), breach of trust or embezzlement. However, even if they cannot be discharged in a Chapter 7, they can be consolidated in a Court approved repayment plan under Chapter 13 rules, which will still give you the normal bankruptcy protection against harassment, liens and garnishment.
You can also file a Chapter 13 repayment plan, that discharges all debt that would normally be discharged in Chapter 7, but includes the non-dischargable debts in the payment plan. So even if the bulk of your debt may be non-dishargable, you can still be protected by the bankruptcy Court.
So if you have too many debts, and not enough money, call and schedule a free consultation with the Law Offices of Paul M. Allen. We have what it takes to get you the fresh start you deserve. Call today. Glendale office: (818) 552-4500 or Cerritos office: (562) 865-4480
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