13 Jun Bankruptcy Has Many Points Including Dealing With Judgments
Bankruptcy has a point, even if the editorial writerfor Forbes,Steven Dunn, doesn’t see it. His wrote a statement in his article entitled Consumer Bankruptcies do More Harm than Good that “Most consumer bankruptcies arepointless“. In my opinionthis is aninaccurate and an irresponsible thing for a lawyer to say, especially one who doesn’t practice consumer bankruptcy law, neither representing consumers or creditors. I don”t recommend filing to everyone, and I welcome theopportunity to discuss alternatives to bankruptcy, but for manypeople it is the right decision. It isimportant that thedecision to file be determined on a case by case basis,and for those with the appropriate situation, the point of bankruptcy is help and relief from financial trouble that they can’t otherwise solve and a fresh start free of burdensome debts.
Fellow BLN memberJonathan Ginsberg, Atlanta Bankruptcy Attorney commented on the Forbes editorial in his article Another Ivory Tower Intellectual Gets Consumer Bankruptcy Wrong and it was taken on by another Forbes article Consumer Bankruptcies Get Bad Rap, Do More Good Than Harm written by Gerri Detweiler .I felt compelled to comment onDunn’s article as well.
Mr. Dunn illustrates the general ignorance of those who do not see first hand the problems ordinary people face with their financial problems and the relief provided by the law. Nor does he understand the anguish and great lengths many people go to trying to pay their debts. He also demonstrates aspecific professional ignorancewhich publishesbad advice which if followed,isoften to the detriment of the reader.
Each of the points that Mr. Dunn used to illustrate why consumers should ignore their financial problems is bad advice to give in a general manner, though it can certainly apply to a particular situation. In this article, I shall address one of those points, which is to ignore a lawsuit and judgment.
In a rare case, an individual may find ignoring a judgment the right choice, but for many people this is terrible advice.
Consumer bankruptcy petitioners want to get rid of debt. But why not just leave the debt there? Under the Fair Debt Collection Practices Act, a creditor must, at the request of a consumer, stop contacting the consumer about a debt. Under the Fair Credit Reporting Act, the placement of a consumer debt for collection, or the filing of a suit to collect such a debt, or the entry of a judgment in such a suit, can remain on the debtorâ€™s credit report for seven years, whereas the filing of a bankruptcy case can remain on the debtorâ€™s credit report for ten years.
In NC, a judgment is granted for 10 years,and may be renewed for another10 years.Propertyacquiredduring that periodis subject to seizure and saleby the judgment creditor. Other states may vary the time periods/renewals, but for as long asa judgment is valid, the debtor has to worry about execution on that judgment. The debtor must be sure to keep up with any paperwork from the creditor claiming exemptions, because one missed form may put any property they own injeopardy.Judgments are not alwaystaken for what a creditor can get immediately, but will remain in place to take property aquired later.
If someone were to inherit a lot of money or otherwise find themselves wealthy, one may argue that requiring them to repay debt is fair, but for a typical person, what is at risk is modest savings, cars and homes. This is a problem for the middle class, not for the wealthy.
For those who have no assets now, they can safely ignore a judgmentif theyknow they won’t have anythingduring the time period the judgment is alive. Alternatively, they can learn to protect their assets to keep them out of reach of creditors. That means no ordinary savings for emergencies, because cash is a key target. One must be sure as they pay off a car or other property, that they are aware of whether or notit exceedstheir state exemption,as well as when theybuy any other property.It is quite a shock when the vehicle you worked for five years to pay off and you need to get to work is taken and sold to satisfy debts. A family can be devistated when moneycarefully savedfor a familyemergency such as medical issues or house repairs istaken by a judgment creditor.
Anyone who already has assets, particularly real estate, should be deeply disturbed by this advice. Judgments are liens on the property owned by the judgment debtor so if/when they want to sell the property, judgments lay in wait for payment from the equity that the homeowner may have expected to receive from sale.It can prevent a sale from occurring if the proceeds won’t clear out the judgment lien, plus any accumulated interest. Worse, if and when home equity exceeds the protected amount, a judgment creditor may force the sale of the home to satisfy the judgment. Filing for bankruptcy while your home is protected may be the best way and possibly the only way to protectyour home from judgment creditors, short of paying off the judgment.
In states that allow garnishment of wages, judgments can lead to garnishment of a percent of wages, often 25%. Once garnishment is in place, it canfrustratea family’s ability to hire legal helpand leave them without the means to evencover expenses.
The last consideration about a judgment should be it’s affect on a credit report, and that seemed to be Mr. Dunn’smain consideration. While a judgment may remain on a credit report for 7 years only, the effects can go much longer. Additionally, while a bankruptcy remains on a credit report for 10 years, a credit rating can be rehabilitated and even living with a lower credit rating, but being debt free is not such a bad position to be in. Living without having to worry about old debts sneaking up and taking everything away for up to 20 years is even better.
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