November 24, 2017

Beware Judgments

Do you know what it means to have a judgment entered against you?  Judgments arise from lawsuits – often collection lawsuits – and they happen when a state court judge decides in favor of the other party.

In collection lawsuits, this means that the judge has ruled in favor of the plaintiff – usually a credit card company, finance company or other person or company who is suing you for money damages.  Sometimes a judgment is entered after trial but most of the time, a default judgment is issued when the defendant (i.e., you) does not answer the lawsuit.

In Georgia, if you are sued, you must file a written “answer” with the clerk of court, within 30 days after you are served with a lawsuit.  If you do not file an answer in a timely manner, the plaintiff can go to court and ask the judge to issue a default judgment.

Unfortunately you will not know when or if this default judgment is entered.  If you choose not to participate in the litigation, you may not receive notice about the status of that litigation.

Here at Ginsberg Law Offices we often speak to clients who only found out about a judgment when they opened their pay stub only to discover that 25% of their take home pay was seized, or when their savings or checking accounts were seized by the judgment creditor.

The take away from all this is clear – if a sheriff’s deputy or process server knocks on your door and hands you a lawsuit, your next move should be to call a lawyer for guidance.  If you hear a rumor that someone has sued you (perhaps out of state or in the county where you used to live), don’t ignore the problem hoping it will go away. Instead, call a lawyer.  Lawsuits usually do not go away, and, as discussed above, bad things can happen if a judgment is issued.

How to Create a Trustee Friendly Bankruptcy Budget

How to Avoid Problems When Filing a Bankruptcy Case Budget from Jonathan Ginsberg on Vimeo.

One of the most important tasks you will be asked to complete relates to the budget you file in your bankruptcy case.   Your bankruptcy trustee (and creditors) will expect a budget that accurately reflects your income as well as all “reasonable and necessary” expenses.  The problem:  what is reasonable and necessary and who decides what that means?

Furthermore, the budget you file most account for expenses that you are currently incurring as well as likely expenses that you will face in the near future.

Experienced bankruptcy lawyers understand that creating a bankruptcy budget can require many judgment calls.  In this video, I discuss some of the considerations I bring to the process as well as some suggestions about you can protect yourself from possible challenges.

Hiring Has Not Picked Up: A Look at Unemployment Claims Stats

The number of newly laid-off workers seeking unemployment benefits unexpectedly rose last week, further evidence that the job market recovers at a very slow and bumpy pace. California, Texas, Florida, Pennsylvania, and even Georgia have experienced the highest recent increases in unemployment claims.

Wall Street economists had expected a small drop, but according to the Labor Department, initial claims for unemployment insurance actually rose by 36,000. An analyst from the Labor Department said that much of the increase is due to the administrative backlogs left over from the holiday season in the state agencies that process the claims.

Regardless of the ups and downs shown week to week, the economy is not consistently generating net increases in jobs. After adding only 4,000 jobs in November, which was the first increase in nearly two years, in December employers cut 85,000 jobs. Many economists say the four-week average of claims will need to fall to below 425,000 to signal that the economy is close to generating net job gains. Unfortunately, the four-week average rose for the first time since August to 448,250.

The number of people continuing to claim regular benefits dropped slightly to just under 4.6 million. However, this data does not include millions of people who have used up the regular 26 weeks of benefits customarily provided by states and are now receiving extended benefits for up to 73 additional weeks, which is paid for by the federal government. Over 5.9 million are receiving extended benefits in the week ended Jan. 2, which is an increase of more than 600,000 from the previous week.

These numbers demonstrate that even as layoffs are declining, hiring has not picked up, leaving people out of work for extended periods of time.

California has had the largest increase in claims, with 16,160. Texas, Florida, Pennsylvania and Georgia have the next largest increase. Oregon has had the biggest drop in claims, of 5,784, followed by Iowa, Kentucky, Michigan and Massachusetts.

There are positive forecasts out there as well. Because unemployment claims have been on a steady drop since last fall as companies cut fewer jobs, some economists hope that hiring will soon increase. Another report suggests that economic growth could pick up this spring.

Other economists, however, have been worrying that growth in the economy will stagnate this year as government support programs wind down and unemployment remains high.

Can Long Term Unemployment Support a Claim for Hardship Discharge of a Student Loan

With the economy headed south, I am hearing from more and more people who have either lost their jobs or who have been unemployed for a while with little hope of finding employment soon.  Some of these folks have outstanding student loans and they are not happy at all when the U.S. Department of Education or other student loan servicer grabs their tax refund to pay all or part of an outstanding student loan.

Unlike other creditors, student loan creditors do no have to sue you and obtain a judgment in order to collect from you.  Blog reader Nancy describes a disheartening scenario:

I am dealing with a student loan that’s 25,000.00 and the Department of Education took my tax return from me. I am a single mother with a special needs child and needed every bit of that money. I have been on unemployment since Jan of 08.  Things are not looking up for me in finding employment in my area. I am roommateing with a friend just to make ends meat here and I was told that maybe filing for a chapter 7 would be good for me. I have no credit card debt but I do have some hospital bills. Not sure what I need to do, I know that I can not afford this 25,000 student loans which by the way started out only 15,000. Interest has taken over and made it an impossible dept to pay off.  Please tell me what I should do. I also cant afford to have my taxes taken away every year from something that will never be paid off due to those interest rates.

Here is my response: As a general rule, bankruptcy is not a good tool to reduce or eliminate student loans.  [Read more…]

Please Vote for “Best Niche Blawg” – Today!!!

Bankruptcy Law Network’s blog, where I write with 25 other premier consumer bankruptcy lawyers,  was recently voted one of the 100 best blawgs by the American Bar Association.  They’ve opened the voting among their 100 best up to the public.

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Don’t Assume You Can File Chapter 7 and “Start Over”

Over the past few days, I have received several calls and emails from potential clients who comprise a very different profile from my traditional client base.  These folks are solidly middle class to upper middle class families, often earning $100,000+ and living in $400,000 houses.   Here is an example of the type of correspondence I have been getting and my response thereto:

Jonathan:  I desperately need your advice.  I work in sales at XYZ company and last year I earned more than $200,000.  I am married with 2 kids.  This year I’m on track to earn about $120,000.  My house is worth $425,000, but the first and second mortgage combined equal to about $435,000.  I am also financing a Mercedes – the monthly payment is $725 per month and the payoff is $37,500.  I also have $35,000 in credit card debt.  I am not behind on anything and I have borrowed twice against my 401(k) to keep afloat.  My wife and I have made the decision that we are prepared to give up the house and the car and move into an apartment.  I would like to file Chapter 7 and walk away from everything – when can I schedule an appointment? –Fred

Here is my response: Dear Fred – unfortunately I don’t think you can file a Chapter 7.  Under the bankruptcy law, you cannot qualify to file a Chapter 7 unless your income falls below a certain threshhold called the “median income.”   As part of my analysis, I will compare your household income with the median household income for a family of 4 in Georgia (currently $68,908.00).  As your household income exceeds the median by over $50,000, a median income evaluation in your case would create something called a “presumption of abuse.”  This presumption is rebuttable in theory, but as a practical matter, I think is unlikely that you would be able to squeeze into a Chapter 7.

Instead, the “means test” of personal bankruptcy would dictate that you would have to file a Chapter 13 repayment plan.  Assuming that you did give up your house and your expensive vehicle, the bankruptcy trustee would expect you to downsize your lifestyle substantially in a Chapter 13 – at least to the point where you would have sufficient disposable income to pay back all of your creditors in full in a Chapter 13 case that will last 3 to 5 years.

Given that you are in sales, you also run the risk of committing to a Chapter 13 that provides for a payment based on current income.  Chapter 13 is not a flexible vehicle so you should not go into a Chapter 13 expecting that your plan payment would change if your commission income goes down.

So, for folks like Fred, the alternatives are – maintain your lifestyle and struggle to keep your head above water until you find a way to earn more money, or walk away from the expensive big ticket items, reduce your lifestyle, and commit every penny of disposable income to a 3 to 5 year payment plan.

I Went to a Chapter 7 Bankruptcy Auction

[mc src=”http://www.thebklawyer.com/thebkblog/media/2008/06/22/i-went-to-a-chapter-7-bankruptcy-auction/Ch7auction.flv” width=”320″ type=”video”/] This past Saturday, June 21, 2008, I went to a bankruptcy auction of a Chapter 7 debtor’s property.  The sale arose from the bankruptcy of a business promoter who filed bankruptcy after his project failed.  I recorded a short video describing the type of property that was being auctioned, which is at the top of this post.

The business was a media company that was going to stream on-line videos to individuals – kind of a self-help program delivered by video.  The promoter apparently solicited investments from dozens of people, but apparently the money ran out before subscription income could sustain the business.

Originally the promoter filed a Chapter 11, reorganization, but it was converted to Chapter 7 because there were insufficient income streams to reorganize.

This case was set up as an “asset case” as the debtor owned personal assets beyond what he could claim as exempt property that could be liquidated for the benefit of creditors.  The trustee hired an auction company and the auction was scheduled for 9:00 am on June 21 at the debtor’s house.

I found out about this because a good friend of mine lives in the same neighborhood as the debtor and he had heard rumours about what might be inside.  I decided to join him at the auction.

We arrived at the debtor’s house around 8:30 AM and there was a line of about 30 people in front of us.  Some were from the neighborhood, but most were not.  Cars were lining the streets in the subdivision, and security was present.

Right at 9am, the doors opened and people streamed in.   The first thing I noticed upon entering was that all of the items for sale were tagged.  This was not an auction in the traditional sense – basically the auctioneer had priced the various items and if you got there first, you could buy the item.  I suspect that as the week goes on, the liquidator would be open to offers, but I wonder how much stuff will be left at that point.

While there was plenty of stuff left by the time I got in, there were people there who obviously knew what they wanted.

Because the proceeds of the auction go to the bankruptcy estate (to pay creditors and the Chapter 7 trustee), the liquidator was not giving anything away, but I suspect that there were some decent deals if you knew what you wanted.  If I had to guess, I would say that most of the small items were going for 60 to 70 cents on the dollar.

The second thing I noticed – the debtor’s house was pretty much left as it was found when the trustee seized possession.  There was food in the refrigerator, dirty clothes in the hamper, etc.  It was a little creepy, to be honest.

I walked around for about 30 minutes, but did not buy anything.  There were a couple of items that seemed like good deals, but nothing that was worth standing in a 30 minute line to pay.

I would like to stress that this type of situation – an auction of personal belongings at one’s house – is fairly unusual.  Firstly, most Chapter 7 cases are “no-asset” cases, meaning that all of the debtor’s personal property is exempt.  Secondly, this case involved an investment promotion failure (the Chapter 7 trustee refers to it as a Ponzi scheme in his pleadings), and the trustee in this case may have been trying to send a message.

A Corned Beef Sandwich at the Carnegie

Corned beef sandwich at Carnegie DeliEven bankruptcy lawyers have to eat.  Yes, last week, I was in New York for the Thanksgiving break and no visit to New York would be complete without a pilgrimage to the world famous Carnegie Deli for a small snack.  I finished off one of these corned beef beauties and my 13 year old son made quick work of the other.  My wife and daughter were, for once, speechless.

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