23 Feb Will Bankruptcy Get My $15,000 Back?
You’re avoiding bankruptcy, just barely getting by.
You fall behind in payments.
Then the bomb hits.
It happens quite frequently.
A lawsuit is filed, supposedly served on the debtor, no response is filed by the debtor in court (since the server services may not have notified the debtor in the first place), a default judgment gets entered, and then the real consequences: wage garnishments, bank levies, real estate liens.
Does bankruptcy help?
As the lawyers always loves to say, it depends!
Generally speaking, if the taking of money, property or lien took place within 90 days of filing a bankruptcy petition, and if it was involuntary, and if it could have been exempted(protected) in bankruptcy, then the property might be recovered as a preference.
So, if 2 months ago you woke up one morning to find that your bank transferred $15,000 to some creditor who got a judgment against you, it may very well be possible to get that money back with a fast bankruptcy filing, followed by a preference lawsuit proceeding.
Moreover, if the transfer was to an insider, the look back period goes from 3 months to a year.
Under 11 USC 547 of the Bankruptcy Code is the Preference statute. The purpose of the statute is to create an even playing field and avoid some creditors from getting an unfair share of distributions over other creditors, and prevent debtors from moving and hiding certain property the night before filing bankruptcy.
Likewise, it’s there to protect the innocent debtor to allow recovery of certain recent takings to further the fresh start. So essentially, certain transfers prior to filing a bankruptcy are able to be undone to level the playing field.
The state I practice in allows wage garnishments. (Some states do not.) Frequently we have clients coming in with wage garnishments and judgment liens.
One of the first things we do is check to see if any monies have been taken. It’s not uncommon for someone to come into my office and finally decide to file bankruptcy after being garnished for a year or longer.
In California, a 25% garnishment on a $48,000 salary translates into about $1000 per month. Since three months is usually about $3000, my clients are very pleased when I tell them the bankruptcy is free provided they agree to split the money I get back for them!
Written by Michael Doan
Bankruptcy Law Network (BLN)
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