June 25, 2018

Is it Legal for a Judgment to Survive Bankruptcy?

For bankruptcy lawyers, the word “judgment” raises red flags. This is especially true when the judgment comes from another State. He is a question I received from a non-Georgia resident that raises a lot of questions about judgments.

My question is this-my father has a judgment against him by Bank of New York due to an unpaid debt. The debt was discharged in bankruptcy however, the judgment is still on the public records in New York. My father is now trying to buy a home, however, the title company wants the judgment released from the public records or at least subordinate to them. How can I make the Bank of New York relase their judgment from the public records?

Here is how I would analyze this situation: first, you say that “the debt was discharged in bankruptcy.” If the debt was discharged prior to a judgment being entered, the judgment is void and the creditor’s act of obtaining the judgment is a violation of the automatic stay. If this is the case I would contact the New York bank and demand that the judgment be vacated post haste. If this creditor was included in your father’s petition, I would ask for damages as well.
If the judgment was rendered prior to the bankruptcy, I would look to see if the debtor’s attorney filed a Motion to Avoid Lien. These motions are fairly common in the Northern District of Georgia, where I practice, but may not be as common in different filing districts. If a Motion to Avoid Judicial Lien was filed, the Order avoiding the lien should be filed in the appropriate New York public record, and a copy of the Order along with proof of county record filing sent to the creditor with a demand that the judgment be vacated.
If the judgment was rendered prior to the bankruptcy and no Motion to Avoid Lien was filed, I would take the position that any personal (in personam) liability for the debt has been extinguished. However the in rem part of the judgment (against property) may remain viable. Is this in rem judgment enforceable, and, if so, in what amount are questions of law for a New York attorney. Might the bankruptcy angle give you leverage for settlement? Perhaps.
Sometimes a strongly worded demand along with a reference to the bankruptcy and the unpleasant consequences of a discharge violation action may be enough to encourage the creditor and/or its lawyers to vacate the judgment. This is probably a situation where you should contact a consumer protection lawyer in New York. My friend and colleague, Jay Fleischman, a bankruptcy and consumer protection lawyer in New York, might be a good resource to contact about this.

Financial Managment Course Requirement – Filing Deadline

The bankruptcy law requires debtors to attend two educational courses.  The first requirement calls for a "debt management course" and must be completed prior to filing – your certificate of completion is your "ticket in" to the bankruptcy process.

The second course, which is the subject of this post, is the "ticket out."  Known as the "financial management course," this educational requirement involves education about budgeting, interest rates and other financial managment tools that will, hopefully, keep you out of bankrutpcy in the future.

In a Chapter 7 case, you are supposed to complete your financial  management course within 45 days from the 1st date set for your  Section 341 meeting of creditors hearing.  In a Chapter 13 case, you must complete the financial managment course prior to making your last Chapter 13 payment or prior to the closing of your case.

If you do not complete your financial managment course requirment and file your certificate of completion (your attorney will file this for you), you will not be eligible for a discharge.

In my practice I recently represented a Chapter 7 debtor who did not complete her course prior to her case being closed and we had to reopen her case for the sole purpose of filing the financial  management course certificate.  So far, it appears that most bankruptcy judges will permit such reopenings, but be aware that there is a filing fee to do this as well as an attorney’s fee for the time involved.

Most of the vendors who provide pre-filing debt counseling will also provide financial managment courses as well.  The list of vendors that I provide to my clients can be found on my BankruptcyWorksheet web site.

I always advise my clients to get the Financial Management course out of the way.  You are not likely to think about this requirement 4 years into your Chapter 13 and the only notice set out by the clerks’ office is done a couple of months into your case.

The Financial  Managment course can be taken by phone or over the Internet and it will last only a few hours.  I would be interested to hear from anyone who has taken this course to get your observations and thoughts about its value.

“How Do I Recover from Bankruptcy” – Some Thoughts from the Trenches

"How do I recover from bankruptcy?"  This question comes up in every new client interview or client meeting that I conduct.  There is no no universal answer to this question, but here are a few thoughts:

  1. Become a more educated consumer.  Bad financial decisions often lead to debt problems that can overwhelm you, thereby leading to a bankruptcy filing.  If you are filing or if you are close to filing, take a few minutes to step back and think about how you ended up in your financial predicament.  What would you have done differently?  Moving forward take advantage of the financial resources on the Internet, most of which are free. Examples of helpful sites include
    NADA – shows car prices
    Consumer Feedback Central – a blog post with 100 feedback sources
    Bankrate.com – comprehensive financial resource
    The Motley Fool – easy to understand investment advice
    Clark Howard’s web site – consumer guru Clark Howard offers advice about living on the chap and avoiding ripoffs.
  2. Resolve to cut your overhead.  Start by creating a household budget.  Include a "rainy day" saving account in your budget and avoid major purchases that strain your budget.  Obviously, houses and car purchases are the two biggest areas that you can control.  Work towards a goal of having a paid off car and a paid off house.  Monthly overhead that you cannot change will eat you up, both financially and mentally.
  3. Avoid unnecessary purchases and learn to spot sales pitches.  Good salespeople train themselves to sell to you by allowing you to convince yourself to make a purchase.  A very useful book that describes many of these techniques is called Influence by a social psychologist named Robert Cialdini.  If you understand how you are being influenced you may be less likely to fall prey to sales pitches for unnecessary purchases.  Some of the types of unneeded purchases that I see a lot in bankruptcy court include:
    • time shares – almost always a bad deal
    • large furniture purchases – if you are on a budget, you will pay 10 cents on the dollar for used furniture
    • fancy vacuum cleaners – almost always a wasteful purchase
    • expensive new computers – if you use your computer for school homework or to email, a one or two year old computer will serve your purchases.  You will pay $200 to $300 instead of $1,500 to $2,000
    • big screen televisions – personally, I watch very little television – perhaps a baseball or football game on occasion and the news every once in a while.  My children are only allow to watch tv on weekends. Most successful people I know watch very little television.  If you find yourself watching hour after hour during the week, consider alternatives like reading a book, taking a walk or finding a part time job.  There is nothing positive that will happen in your financial life if you watch four or five hours of TV every day

    Got any other ideas or helpful resources?  Let me know.

Top Time Wasters in the Bankruptcy Process

If you have read my blog at all, you know that I have been quite critical of many of the changes brought about by the BAPCPA changes to the bankruptcy law.  In general these changes have make the process of filing bankruptcy more complicated and more expensive.  Sometimes, I have to decline representation in cases with complications because the potential client cannot afford to pay me for the time it would take to untangle his/her mess.

Lest you think that I am alone in my attitude about the current bankruptcy law, take a look at this blog post by South Carolina bankruptcy lawyer Däna Wilkinson on the Bankruptcy Law Network blog.  Däna entitles her post "Top Ten Wastes of Time After BAPCPA" and she discusses the wastes of time for both debtors and their lawyers.

In my view the whole median income/means test income calculation using gross income numbers from the six months prior to filing is the biggest waste of time.  Why should your eligibility for Chapter 7 today be a function of your income over the past six months.  At least in the Northern District of Georgia, bankruptcy judges have been open to the idea of tossing out the six month lookback if your current income situation has changed.

These medican income/means test calcuations can take several hours and, at the end of the day, the results tell us nothing about the debtor’s current capacity to pay creditors.  But, because I have to spend my time processing the numbers, my fees have gone up.  What a waste of time for no good purposes.

Close behind the median income/means test requirement are the credit counseling/financial managment course requirements.  Basically these required education courses offer very little useful information to a bankruptcy filer, but they do add around $100 to the cost of filing – $50 for the certificate to get in and $50 for the certificate to get out.   If there is a point to this surcharge, it escapes me.

Take a look at Däna’s article – it would be interesting to hear from both debtors and debtor’s lawyers – what do you think?

[tags] credit briefing, financial management, means test, median income test, bankruptcy law network [/tags]

Let Bankruptcy Be Your First Step to a Positive Financial Future

I often advise my clients that if they are sitting my office discussing their financial problems with a bankruptcy lawyer, then everything needs to be on the table.  The house, the cars, the big screen tv, the  electronics, and even the time share (!).   My job, as the bankrutpcy lawyer is to help my client chart a course of living within one’s means and getting rid of debts that are not necessary for survival.  Bankruptcy is about what you need, not what you want.

To this end, my colleage Cathy Moran from the Bankruptcy Law Network, forwarded to me a link to a web page entitled "10 Financial Lies We Tell Ourselves."   I recommend that you take a look at this web site, not as a means to chastise yourself, but as a tool for moving forward.  Resolve that starting today, you will not make the mistakes of the past that have brought you to the brink of bankruptcy.  Recognize that financial hardship can happen to anyone and that you should always prepare yourself for tough times.  Whether you end up filing bankruptcy or not, use the experience of financial distress to clear away bad habits and bad decisions.

[tags] rebuilding credit after bankruptcy, avoiding financial mistakes [/tags]

Can I Begin to Restore My Credit While I am in an Active Chapter 13?

I’ve filed a chapter 13 due to divorce (no previous credit issues) and am paying rightly on my repayment plan having several years to go. I’m trying to learn ways to re-establish my credit and raise my credit score so that when done I’ll be in a strong position. Long before filing my 13, I’d bought a car and am making on-time payments. I think that will help, but since I can’t use new credit until the payment plan is over, do you have other suggestions or references (other than keep paying on time) that I can use or do? I’d be interested in books, websites, blogs, councilors, anything…

Regarding my creditors, I believe my accounts are still open. What should be done regarding those accounts and what the creditors are or are not telling the credit reporting agencies? Can I and should I close the old accounts? Also, I’ve not taken a recent look at my credit report so I don’t know what each debtor is showing? I’d appreciate your comments. There isn’t a good source for information and advice on these subjects and attorney’s are charging over $200 per hour for half baked advice that usually take the most cautious approach, even when not necessary.


Jonathan Ginsberg responds:  Since you are still in your Chapter 13, you can’t really do too much in terms of new credit, but you can take several steps to improve what you currently have.

1. pull your credit reports from all three credit bureaus.  All open accounts should show that they are being paid thru your Chapter 13.  If you have any showing a charge off or an unpaid delinquency, you should challenge these erroneous entries pursuant to the Fair Credit Reporting Act.  Write letters (return receipt requested) to the particular credit bureau and request that the erroneous reporting be corrected.  Debts in Chapter 13 are in payment status and should be reflected accordingly.

2. Most credit gurus advise against closing old accounts.  Credit reports are basically historical records and any good credit you have, even if it is old, will help you.
3. As far as references, the best credit related information that I see regularly is at Clark Howard’s web site, Ilyce Glink’s web site and Dave Ramsey’s web site

4. Once you are out of your Chapter 13, you should wait about two months, then request copies of all 3 credit bureau reports.  All of the accounts paid in the Chapter 13 (such as credit cards and other non-pay direct accounts) should show zero balances.  Frequently, I see credit reports post bankruptcy showing outstanding balances.  Once you receive your Chapter 13 discharge, these balances should be zero.

[tags] restore credit after bankruptcy, Clark Howard, credit reports, challenge inaccurate credit report [/tags]

Myths About New Bankruptcy Law

Although bankruptcy filing numbers are still down in Atlanta, I am starting to see more and more activity on my web site and in email inquiries from potential clients.  Nevertheless, there is still a great deal of misinformation in the general public about bankruptcy.

Yesterday, I was speaking to a potential Social Security disability client who was telling me about the debt she had incurred after she stopped working.  When I suggested that bankruptcy might be an option, she responded with the statement "I thought that they changed the bankruptcy law and made it illegal to file."

My colleague, Maryland bankruptcy attorney Brett Weiss, has written an excellent article for his firm’s web site entitled "Top 15 Myths About The New Bankruptcy Law," which you can read by clicking the link.   In this article, Brett sets the record straight about all the false rumors about bankruptcy. 

Now that we have a new Congress, it will be interesting to see if there are any efforts to modify some of the sillier provisions of the new law (such as credit counseling or the debt relief agency disclosure requirements).  My experience over the past twenty years has been that very, very few bankruptcy debtors use the bankruptcy process to manipulate the system.

Hopefully as the myths about bankruptcy are dispelled over time, those "honest but unfortunate" debtors who truly need a fresh start will again realize that bankruptcy relief still exists.

[tags] myths about new bankruptcy law, Brett Weiss, illegal to file bankruptcy, BAPCPA [/tags]

Bad Credit Score Results in Higher Insurance Rates

This past week the U.S. Supreme Court heard oral argument on an interesting Fair Credit Reporting Act issue.  In the case of Geico vs. Edo, the Supreme Court will be deciding whether insurance companies can be liable for punitive damages if they fail to notify customers that the customer’s credit score has led to higher rates.

Regardless of what the Supreme Court does, I think that the bigger issue for consumers relates to how insurance companies use your credit history in setting the price that a consumer pays for auto or homeowner’s insurance.

According to  the AJC, drivers with the worst credit histories will pay almost double the price paid by a driver with very good credit.  However, Georgia law permits the insurance companies to keep secret the formulas they use to decide what credit factors impact insurance premiums.

All of this begs the question of what relevance bad credit has on a driver’s likelihood to be involved in an accident.

If you thought that a bad credit score only affected your ability to finance a house or a car, think again.  Even if you are not using credit, your cost of insurance will be affected by a bad credit history.

This credit score/insurance cost link serves as yet another reason for you to check your credit reports at least once a year.   Since most credit reports have some errors, there is a good chance that you can improve your score simply by challenging these errors and demanding that the credit reporting agency remove the mistakes from your report.

Credit Reporting Agencies Deleting Positive Information?

One of my recent Chapter 7 clients (case successfully discharged) wrote me to say that he has noticed a disturbing occurrence on his credit reports.  He advises that positive credit information (a paid off home mortgage and five other paid in full accounts) are no longer showing up on his credit report.  Positive credit, of course, helps your credit score go up.

I did some research on this issue and found the Federal Trade Commission’s Official Staff Commentary Section 607 item 7, which reads:

Consumer reporting agencies are not required to include all existing derogatory or favorable information about a consumer in their reports. (See, however, discussion in section 611, item 14, infra, concerning conveying consumer dispute statements.) However, a consumer reporting agency may not mislead its subscribers as to the completeness of its reports by deleting nonderogatory information and not disclosing its policy of making such deletions.

I read this as meaning that credit reporting agencies may delete favorable information as they wish, just as they may delete unfavorable information before the 7 year maximum reporting time for unfavorable information.  Presumably, however, it is misleading for a credit reporting agency to purge your file of positive information before the 7 years period but retain adverse information without disclosing its policy about how it retains and deletes information.

My client indicates that he has written a challenge letter to the credit bureau in his case – I would suggest to him that he include in his challenge a request for a copy of the policy statement about how the credit reporting agency purges data that was sent to the credit bureau’s members.

Post Bankruptcy Credit Rebuilding Meeting With Jonathan

This morning, I met with one of my former bankruptcy clients who wanted to discuss credit restoration. I thought it might be relevant to this blog to discuss what we found on her credit report and what I advised her to do.

My client brought me a copy of her Equifax report for review. The credit report showed that most of the debts included in her Chapter 7 had the indicia “included in bankruptcy” with a zero balance and no reference to any late pays. So, it appears that in most cases, bankruptcy has the effect of wiping out credit report references to outstanding debt as well as references to late pays. This is important because late pays are a major cause of credit damage. I was actually somewhat surprised to see that the late pays were deleted.

There was one account that we had included in the Chapter 7 that was still showing as an outstanding debt. This is obviously a mistake and I drafted a “challenge letter” disputing this account balance and the associated late pay.

There was one account that had the “included in bankruptcy” indicia but had the late pay information. I drafted a “challenge letter” disputing the late pays.

There were three student loans that had late pay references. There was one 60 day late and two 30 day late pays. I encouraged my client to make every effort to tender all student loan payments timely. I also drafted a “challenge letter” disputing the late pays.

My client wanted to know what she could do to re-establish credit. I suggested that she look into getting a gasoline credit card or a department store card. Unsecured credit that is properly managed is the quickest way to improve one’s credit score.

Finally, I noted to my client that we only had the Equifax report on hand and that she needed to request credit reports from Experian and Trans Union.

My client advised me that she and her husband hoped to be able to qualify for a house within the next year. I suggested that she contact a mortgage broker for more information about rates and credit scores in the current market.

Interestingly, my client advised me that her husband, who did not file bankruptcy, but participated in a payment plan with his creditors, actually had a lower credit score than she (the bankruptcy client) had. Interesting.

The bottom line is that we found one definite error and several areas ripe for challenge.  I hope and expect that we can increase her credit score by 100 points within the next few months.

I will update this blog entry as we see what effect the challenge letters and my advice will have.


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