November 24, 2017

How to Stop a Wage Garnishment in Georgia and Get Your Money Back

judgment creditorAlmost without exception my clients who are subject to wage garnishment in Georgia report that they feel “violated” or “horrified” by discovering that 25% of their take home pay 1 has been seized by a creditor.  I can certainly understand this emotion – especially if you depend on every penny of your paycheck to cover monthly expenses like rent, utilities, car payments and insurance costs.

How Wage Garnishment Happens in Georgia

With limited exceptions, you can only be wage garnished in Georgia if your creditor has first filed a lawsuit and obtained a judgment.  More than a few of my garnishment clients claim that they do not remember being sued – this is an issue for another blog post but anytime you find out that a sheriff’s deputy or process server is looking for you, it is time to take action because this means that you have been sued. [Read more…]

  1. Click here to review the details about wage garnishment in Georgia.

Are You Responsible for Debt Incurred by Your Failed Business

In difficult economic times, I regularly hear from small business owners who have been forced to shut down because of low sales. I recently heard from a blog reader named Evan who writes as follows:

Hello Jonathan!
Of all the info I have found on line yours is the best. I have 2 questions if you don’t mind answering.

I live in CA and have a judgment against me already for 24K for not paying the remainder of a commercial building lease after I went out of business.

1)Will bankruptcy stop them from getting this money?

2) I don’t mind paying them some of the money to be fair. If I paid them 10K and then filed bankruptcy for numerous other bad business debt would the bankruptcy then ask for the 10K back from them?

Here is my response: First of all, thanks for the kind words about my blog. I am glad you found my info helpful.

Secondly, I can only speak to how Georgia law works. California may have different rules. [Read more…]

Should You Pay Back Your Parents or Siblings Before Filing Bankruptcy

Should you pay back your parents, siblings, friends or other relatives before filing bankruptcy?  I get this question frequently as many of the potential clients I see have borrowed money from private sources in an effort to avoid bankruptcy.

My Bankruptcy Law Network collegue Susanne Robicsek answers this question clearly and consisely in a 2007 post on the BLN blog.  Susanne’s advice remains valid – do NOT pay back a personal loan prior to filing bankruptcy without first talking to a bankruptcy lawyer.

There are two potential issues if you pay back mom or dad, or the next door neighbor.  First, there is the problem of “preferences.”   Congress recognized that debtors would be tempted to favor certain creditors in a pre-bankruptcy setting.   The bankruptcy code contains a section that addresses so called “preferential” payments on old debts. [Read more…]

Credit Card Balance Transfer Issues

Back in April, I wrote a post about the issue of balance transfers and Chapter 7 bankruptcy.  In this post I note that balance transfers were dangerous because from the perspective of the new credit card issuer, the transfer was new debt.  In other words, if you have been carrying a $10,000 balance on your Discover account, for 5 years, and two weeks ago you transferred this balance to a new Citibank account to get a better interest rate,  that $10,000 debt is new debt as far as Citibank is concerned.

Because credit card lenders are particularly sensitive to unusual patterns of debt and access to credit shortly before bankruptcy, there is a good chance that this $10,000 new debt in my example would generate an objection and discharge challenge.

One of the Chapter 7 trustees on the panel in the Northern District of Georgia emailed me to note an additional issue.  Remaining with our example, the act of tranferring the $10,000 debt to Citibank would serve as a payoff to Discover.  Under the preference rules, the payment of an antecedent (old) debt to Discover within 3 months of filing would be considered a preferential transfer.  The Chapter 7 trustee would then have the right to demand that the recently paid off creditor – Discover – remit the $10,000 to the trustee for distribution as part of the bankruptcy estate.

In this scenario would the debtor end up facing both a discharge complaint from Citibank because of the new debt and as well as a discharge complaint from Discover since the the $10,000 had to be forfeited to the trustee?

The Chapter 7 trustee who wrote me says that she is not aware of any examples where the paid off creditor (Discover in our example) came after the debtor to recoup its loss.  But such a scenario is certainly possible.

If you are a debtor or debtor’s lawyer and have been faced with this situation, please let me know what happened in your case.

[tags] credit card balance transfers, preference issues, Chapter 7 trustees, bankruptcy estate [/tags]

Are Personal Debts Owed to Family or Friends Included in Bankruptcy?

I loan a family member a large sum of money a year ago. Now this family member is filing for bankruptcy and has ask for my name and address and the amount borrowed from me. According to the family member the courts can list this as a debt owed and I would be included in this repayment plan. Is this true? I did not think personal debt owed to family and friends could be file under bankruptcy.
— Alice

Jonathan Ginsberg responds:  Alice, when someone files bankruptcy, he must list and include all debts, including debts owed to family members. There is no exception for family members.

In fact, if your relative had paid you back within a year of filing, there is a good chance that the bankruptcy trustee would demand that you return the money as a "preference."

If your relative is filing a "repayment plan," it means that he is in a Chapter 13 bankruptcy. Assuming that the loan you made was a "handshake" loan, then your claim would be unsecured. In Chapter 13 case, unsecured debts are paid after priority (taxes, child support) debts and after secured (cars, houses, furniture) debts. You may not get a check from the Chapter 13 trustee for two or three years. You also may not get paid at 100% as many Chapter 13 cases call for less than 100% payouts to unsecured creditors.

When you get the bankruptcy notice, you will see a Proof of Claim form included in the letter. If you want to get paid something, even if you won’t see any money for a few years, you need to fill out this proof of claim and send it to the Clerk of Bankruptcy Court.

Finally, be aware that the automatic stay of bankruptcy prohibits you from trying to collect your money outside the bankruptcy process. You do not, however, have to send this relative Christmas cards or invite him over for dinner!

[tags] debt owed to family or friends in bankruptcy, proof of claim, unsecured claims in Chapter 13 [/tags]

 

Full Disclosure on Bankruptcy Petitions a Must

My colleague attorney Scott Riddle recently posted on his Georgia Bankruptcy Blog an important reminder to both debtors and their counsel about the importance of full and complete disclosure of assets and debts in bankruptcy petitions.

The last paragraph of Scott’s post merits repeating:

The lesson to debtors is, obviously, disclose all of your assets and answer all questions truthfully (truth + fully).  You cannot over-disclose to your lawyer or on the schedules.  For debtors’ counsel, explain the criminal and civil (bankruptcy) penalties for false schedules, and get a signed statement that it has been explained.  It can’t be good marketing when a client is denied a discharge and gets indicted, especially if the client defends by claiming he/she didn’t understand what is supposed to be disclosed.

All of us who represent stressed out and anxious debtors have heard a request that “let’s just keep this between the two of us” and a confession about some hidden asset or loan repayment (in cash) to a relative.  My response, as would be the response of most of my colleagues in the consumer bankruptcy bar, is to the effect that (1) I am an officer of the Court and I will not participate in a scheme to mislead the bankruptcy court and (2) I am not going to put my livelihood in jeopardy for any client, ever.

In the case discussed in Scott’s blog entry, the omitted assets would not have created a problem for the debtor, but the judge or trustee in that case sent the file to the U.S. Attorney for criminal prosecution for Bankruptcy Fraud.  Because the debtor intended harm, he committed a crime – and ended up serving time in federal prison.

So, if you are considering bankruptcy, keep in mind this requirement of total and complete disclosure of all information, good, bad or indifferent.

What is the difference between a preference and a fraudulent transfer?

I see a possible trap for the unwary in one of the October 17, 2005 changes to the Bankruptcy Code. I do not have a firm answer to this and I welcome any suggestions or thoughts.

Bankruptcy Code Section 547 empowers the trustee to avoid a transfer (preference) between the debtor and an insider on account of an antecedant (pre-existing) debt if the payment was for a debt incurred within one year of the bankruptcy filing.

Bankruptcy Code Section 548 empowers the trustee to avoid a “fraudulent” transfer to any party within two (2) years of the bankruptcy filing – fraudulent being defined in the Code Section as essentially a transfer made with actual intent to hinder a creditor or for less than full value and made when the debtor was insolvent. Prior to October 17, the lookback period in this section was one year, not two years.

Finally, Bankruptcy Code Section 727 authorizes the Court to deny a discharge to a debtor who, with the intent of defrauding creditors or the estate, has transferred property within one year of filing.

I have a case where my potential client had borrowed assets from an insider to use as security for a bank loan. He never took out the bank loan and therefore never made use of the loan of the assets. When it became obvious that he would not need the bank loan, he then transferred that property back to the insider a year and two months ago.

The insider had requested the return of the assets once it became clear that my client would not need them. The transfer was made when the debtor was insolvent.

Does it make a difference that the debtor’s transfer was in the form of a debt repayment (vs. an outright transfer)? Is there a different standard of review if a “preferential” transfer is outside the preference period but within the fraudulent transfer period? Would this return of assets be considered “ordinary course of business.” Should I list it on Question 10 of the Statement of Financial Affairs?

Thoughts?

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