Legal Articles, Bankruptcy & Debt

Court Judgments: Difficult, But Not the End of the World!

Replying to a collections lawsuit is in your best interest; if you don't, a default judgment can be granted against you almost automatically, bringing with it the threat of wage garnishments, property seizure, and bank levies.

Collections Lawsuits: Don’t Let the Creditor Turn You into a Victim

A reply to a collection lawsuit is necessary unless you have nothing to lose. Do not feel so intimidated by the creditor, a debt collections agency, or the court process overall that you fall victim and end up with a default judgment against you.

No Assets: Why is the Creditor Wasting Time Suing Me in a Collections Lawsuit?

While there may be no rhyme or reason as to why some creditors or collections agencies will decide to sue you, it is in your best interest to consult with a collections lawsuit attorney as soon as you receive a summons and complaint.

Cumulative Student Loan Debt Reaches $1.53 Trillion

Defaults on student loans can have severe repercussions for borrowers of any age. Private servicers may sue upon default, while the federal government may garnish wages or intercept tax refunds.

Preference suits and the earmarking doctrine

If before bankruptcy is filed the debtor pays some debts and not others, ie 'prefers' some creditors, the court may be able to get back those payments from the person or entity that received the funds. For insiders (relatives, business partners, others with a special relationship to the debtor) the court looks back at least one year for such payments, and may be able to look back over a much longer period to determine if the payment qualifies for recovery. One of the defenses to this doctrine is called the earmarking doctrine, if funds were specifically provided to the debtor conditioned on paying a specific debt.

Default Judgment: The Automatic Stay Could Help at the Last Minute

The automatic stay is an extremely helpful injunction, and your creditors will be alerted to your bankruptcy filing; however, even if they are not, the automatic stay still prohibits them from collecting on any debts.

Notice to creditors is critical to eliminate debts. Sending a notice to too old an address may not work.

If a creditor does not receive notice of a bankruptcy, their debt may not be eliminated by the bankruptcy case, even if the case is successful. If addresses are not quickly corrected, or a creditor added soon after filing, it may not be possible to add the creditor later. If an address is incorrect or outdated, the debt may not be eliminated. In one recent decision, the debtor sent a notice to an attorney that had represented the creditor four years earlier instead of to an address shown on the judgment to the creditor itself. While the debtor 'got away with it' in this particular case (though incurring substantial additional fees in the process), under very slightly different circumstances the debt would not have been eliminated.

Courts may disallow homestead exemption if property is put up for sale during case or within a year after

A number of states may limit whether a homestead remains exempt if the debtor has it for sale when the case is filed, or puts it up for sale between the filing and the date the case is completed, or, in some cases, if it is sold within a year after filing. If the home is sold during a case, it is often critical to put all funds in a segregated bank account where they are never mixed with any other funds, not to use any of the funds for anything other than purchase of a new homestead in the same state, and to use the funds within a reasonable time (which may be one year or less) to purchase a new home.

Means Test in chapter 13 and interest to unsecured creditors

The 2005 Bankruptcy Abuse and Consumer Protection Act added a new budget test, called the means test, to determine whether debtors can file chapter 7, and if they file chapter 13, how much needs to be paid to unsecured creditors. One ancillary issue arising from this test is whether interest needs to be paid to unsecured creditors when debtors are paying unsecured creditors in full during the plan but not paying the full amount shown as available in the means test. Courts give conflicting answers on this. One recent decision ruled no interest is required.

Consumer Debt Can Cause Stress, Depression, Divorce

Discussing numbers and statistics on the national scale is important, but if you have fallen heavily into debt, you may not feel like that information helps you out much in terms of your own financial distress.

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