How to stop a garnishment by filing a Bankruptcy

A lot of people come to me because they have been sued by a creditor and are worried about their wages being garnished.  Some of these people have wage garnishments already going on.  If you are facing a garnishment you have reason to be concerned. In Oregon, a creditor can garnish up to 25% of your net pay. This can cause huge budget problems, especially for those already living paycheck to paycheck.

If you file Chapter 13 or Chapter 7 bankruptcy it will stop a garnishment in it's tracks.  Keep in mind that your payroll department will likely need a bankruptcy case number at least a few days before your payday.  Most of the time employers process payroll a few days, sometimes even a week before payday.  Also, your attorney will need some time to prepare a bankruptcy case before it can be filed. The time to prepare a case depends on how complex your case is and also how good you are at giving your attorney what they need to prepare a chapter 7 or chapter 13 petition.

The bottom line is that if you have been sued, or are already facing a wage garnishment you need to act fast. You  will want to check with your employer to see when their deadline is to get them a bankruptcy case number by to stop the next garnishment. Then, you will want to let your attorney know that date.  Your attorney should be able to tell you what they need and when they need it to put a stop to a pending garnishment.

For more bankruptcy information please visit www.pacificbankruptcy.com

I have judgments against me - will they go away if I file bankruptcy?

If debt goes unpaid and collectors are after you for a while, often you will get judgments entered against you. These judgments allow the creditor or debt collector to garnish wages, garnish bank accounts and attach liens against your home.

Many people think that once they have a legal judgment against them that they can not file bankruptcy on that debt. This is completely untrue. You can discharge debts that have judgments attached to them.  Once the bankruptcy is filed you can stop the judgment creditor from garnishing your wages, bank accoutns or taking your assets.

Although judgment debts can be discharged in bankruptcy, debtors who are also homeowners should be careful when filing bankruptcy. Although the judgment debt will be discharged with a bankruptcy, any liens that attached to the debtor's home will stick unless they are avoided. So, homeowners with judgments should seek an experienced attorney to represent them in the bankruptcy. The bankruptcy attorney can file motions in most cases to avoid judgment liens on the home. If this is not done the judgment lien will remain stuck against the home, even years later.  It is very important to avoid these judgment liens while the bankruptcy is still open.  Our firm has experience avoiding these type of liens in both Chapter 7 and Chapter 13 bankruptcy cases. For more information about us, visit our firm.

How redemption helps fix an upside down auto loan in Chapter 7

Debtors have a few options when in comes to keeping a vehicle loan through chapter 7. The most common options are to simply keep paying on the loan and the lender accepts the payments and lets the debtor keep the car. Once the loan is paid off, the lender will have to turn over the title. This is known as the "retain and pay" option. Some lenders will not allow this and will require the second option known as "reaffirmation". A reaffirmation requires a debtor to assume personal liability on the loan after the bankruptcy by signing a new agreement. This means that if the loan defaults in the future and the car is repossessed the lender has the right to pursue the debtor for the deficiency balance, despite the bankruptcy discharge.

A lesser used option is called "redemption".  Under bankruptcy law a debtor may pay the lender the value of the collateral and the lender must release the title. This can help when a car is underwater (debtor owes more than the value of the car).  For example, if the debtor has a vehicle worth $10,000 and owes their bank $15,000, they are underwater on the loan by $5,000.  In this example if a debtor would be able to pay the bank $10,000 in a lump sum they could "redeem" the car and get the title. This essentially strips off the negative equity and also saves the debtor lots of money in future interest that would be paid on the loan.

Obviously it is difficult for many debtors to come up with that sort of money to redeem a car.  I have had clients lucky enough to borrow money from friends or family to redeem vehicles.  Another option is to get a redemption loan. This would be a new loan given to the debtor to pay off the value of their car on the current loan. The debtor would then pay the new loan. This really only makes sense if the new loan pencils out to save the debtor money in the future. It can help when there is significant negative equity in the car because the new loan will be based on the value of the car, not the balance on the existing loan.  One prominent company offering redemption loans is 722 Redemption Funding, a branch of US Bank. They can be found at http://www.722redemption.com/home.php

When weighing options for keeping a vehicle in chapter 7 it usually helps to discuss all facets of the decision with your attorney. A good bankruptcy attorney will be able to let you know what options makes the most sense.

For more bankruptcy information, or to learn more about our firm visit www.pacificbankruptcy.com