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Will a Bankruptcy Filing Stop the Enforcement of a Judgment Lien

By Jonathan on September 14, 2007

First – I LOVE your blog – you have great info!! Little background. Discover card sued us for around $15,000 on cc debt, we disputed etc and after going back and for in court the attorney who BOUGHT the debt filed for summary judgment, we filed for a motion to reconsider. Judgment was granted on 8/13 and our motion to reconsider was heard on 9/4. The judge denied the motion to reconsider and at that time I informed him we signed papers and paid/hired an attorney to file bankruptcy.

They judge did not say anything about re-affirming the summary judgment he just said he denied our motion to reconsider and right after that I gave him the paperwork where we hired attorney and paid to start BK proceedings. We are pretty sure we are going to have to file chapter 13. My question is this – we received paperwork today – 9/13 that since the court entered judgment against us on 8/13 they were filing a judgment lien- it did not specify on what.
My question is can this be enforced or will the BK stay or stop the judgment/lien?

Jonathan Ginsberg’s response: First, thank you for the kind words about my blog. I can already tell that you are a perceptive and intelligent reader.

You did not say where you live, so I’ll answer as if you were in Georgia, where I practice. If you live outside of Georgia, my observations may not be correct.

A judgment lien in Georgia attaches to any and all property you own. It can also be used to garnish your wages. As such a judgment lien is considered a secured debt since all of your property secures it.

If you file a bankruptcy, all action to enforce or perfect the lien would stop immediately pursuant to the automatic stay. During the course of your bankruptcy you and your counsel should consider filing a Motion to Avoid the Judicial Lien pursuant to Section 522 of the Bankruptcy Code. If the judicial lien is avoided the secured judgment lien becomes an unsecured debt paid at the same percentage as your other unsecured debts. If you don’t avoid the lien, the judgment lien will be paid in full by the trustee as a secured claim.

Should Divorcing Spouses File a Joint Bankruptcy Case?

By Jonathan on September 10, 2007

I received an interesting question from a divorce lawyer:

I just filed a divorce complaint for a client. Her husband is talking to a bankruptcy attorney about filing for bankruptcy. He probably will not fit into a Chapter 7. Is there any reason that my client should file jointly with him or hold off the divorce? Thanks.

Here is my response: Sometimes it does make sense for a divorcing couple to file a joint bankruptcy. If there is a lot of joint debt, a joint case can allow them to get rid of debt, surrender a house or motor vehicles, and cancel leases and other executory contracts.

In a Chapter 13, the divorcing couple would have to demonstrate that even with two households the proposed budget would allow for a trustee payment. Further, if one spouse or the other is keeping certain property, the Chapter 13 payment would have to be allocated and both parties agree to a division of the trustee payment obligation. As you might imagine keeping a joint 13 alive months or years after a divorce can be difficult.

I would also look at this case in terms of what might happen if the parties go ahead with the divorce and your client’s ex-spouse files his own bankruptcy. Would your client get stuck with joint credit card bills, a vehicle, tax debt?

In general I am not a big fan of a jointly filed case by divorcing spouses. However, I do think that it might be worthwhile for your client to consult with a bankruptcy lawyer to run through the different scenarios. You, as the wife’s lawyer, would benefit from knowing what might happen if the husband files his own case down the road so that you can include provisions in the divorce agreement that would protect her interests.

[tags] divorce and bankruptcy, joint bankruptcy filing by divorcing spouses [/tags]

Unfiled Tax Returns and Chapter 13

By Jonathan on September 6, 2007

Recently I have had problems with several of my Chapter 13 cases where the Chapter 13 trustee has objected to confirmation on the grounds that the debtor (my client) has one or more years of unfiled tax returns.

Because Chapter 13 cases must pay out in five years, unknown tax debt is a big problem. If your tax debt is unknown, it is impossible to create a repayment plan that pays out in five years since we don’t know exactly how much debt is involved in the case.

My client intake questionnaire specifically asks if there are any years where tax returns have not been filed. In each of these cases, my clients (three cases total) did not reveal any information about unfiled tax returns.,

If you have not filed tax returns, your Chapter 13 case can never be confirmed. Rather than misleading your lawyer, a better option is to acknowledge this issue and get working immediately on solving the problem. The IRS will provide you with W-2’s and 1099’s that you can use to prepare tax returns from previous years. IRS and Georgia DOR forms for previous years are widely available on the Interent and most tax preparers can prepare tax returns for previous years.

Five Years is a Long Time for Rice and Beans

By Jonathan on August 22, 2007

The October, 2005 changes to the Bankruptcy Law have forced many debtors into five year Chapter 13 plans. Chapter 13 trustees are demanding that every penny not specifically accounted for in your budget be paid to the trustee, resulting in "rice and beans" budgets for five years.

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Will Parents Be Responsible if Adult Daughter Incurs Medical Costs in Excess of Insurance Coverage?

By Jonathan on August 22, 2007

Jonathan, our adult daughter has developed terrible spending and debt habits. We have bailed her out many times financially and have managed to avoid cosigning loans etc in attempts to separate her consumer debt from our household. However, she remains on our health insurance plan and due to lifestyle choices, has multiple health problems and physician visits at least twice a month.

What risks our we taking to continue to carry her on our plan? Would we be responsible for debt incurred if she was to have a hospitalization or worsening of the health problems? She is working but would have to pay if changing to their insurance plan.

Jonathan Ginsberg responds: My initial reaction to your question is that you would not have any financial responsibility for medical expenses that exceed the limits of your insurance coverage. That is how insurance works – you pay a certain premium for certain coverage. If you exceed the coverage, then you become responsible for costs beyond the policy limits.

I would note, however, that if a covered person under your policy approaches or exceeds policy limits, you could find yourself with a hefty hike in your premium. Insurance companies are in business to make money. Your situation is no different from a car insurance company raising the premium or canceling the policy after several accidents.

You should speak with your agent about whether you and your husband are at risk for policy cancelation or premium hikes because of your daughter’s use of the policy benefits. Your agent can probably also give you advice about whether to separate yourselves from your adult daughter with regard to your health insurance plan.

You are wise not to co-sign any loans or take responsibility for your adult daughter’s debts. Nothing good would come of that. You also need to make sure that her doctor and/or hospital she visits does not show you and your husband as payment guarantors. Sometimes when someone is admitted to a hospital or starts new treatment with a doctor, they are given forms to fill out. You need to make sure that you never signed any form – recently or years ago – that put you on the hook for unpaid bills. If you did sign such an authorization or think you might have, you will need to revoke said authorization. This type of contract issue is beyond the scope of my practice – I would defer to my estate planning colleagues from the Georgia ElderCare Network for advice about how to revoke an authorization to guarantee payments.

[tags] health insurance and medical costs, medical costs and bankruptcy [/tags]

When Should You Allow a Third Party to Automatically Tap Your Checking Acccount?

By Jonathan on August 20, 2007

My colleague, Kevin Gipson, a bankruptcy lawyer in the New Orleans area, has written an important blog post on the Bankruptcy Law Network blog called “When is it Alright to Give a Debt Reduction Company your Bank Account Number?” Not surprisingly, the answer to this question is “never.” Let me repeat – you should never give a debt reduction company your checking or savings account number and authorization to deduct anything from your bank account.

Once authorization is given, it becomes your problem to revoke the authorization. Your bank will tell you that any dispute about authorization is a matter between you and the debt negotiation company. In just about every situation where my clients have tried to stop the automatic withdrawals there has been a delay and a problem.

If you find yourself trying to stop an automatic deduction, you should do so in writing by registered mail, return receipt requested. Send your revocation notice to both your bank and to the company you had authorized. You may need to get on the phone with your bank to find out exactly where and to whom your notice needs to go.

I would also like to expand on Kevin’s message. Not only should you never authorize a debt reduction company to tap your bank account but you should never, ever authorize a creditor to do so. I regularly meet with clients who have authorized a collection agency for a credit card or other lender to automatically withdraw funds from their checking accounts. Inevitably the collection agency draws too much or too frequently.

Finally, you should be aware that if you have a credit card account with the same bank or credit union that holds your checking or savings account, there is a possiblity that the fine print in the loan agreement includes an authorization for the lender to access your checking/savings account if your credit card account becomes delinquent. My advice, therefore, is to keep your main checking account at a different bank from your credit card issuing bank.

The bottom line here: you and you alone have to maintain control of your money. If you permit third parties to access your account bad things will likely happen.