The United States Supreme Court rarely accepts cases that affect consumer bankruptcy debtors. Recently, however, the Court considered an issue that potentially impacts all debtors – the treatment of exemptions.
The term "exemptions" refers to property you own that is protected from the reach of the trustee or creditors. For example, every state provides for exemptions that include your clothes, a certain amount of household goods, a certain amount of equity your car, and a certain amount of equity in your home. Georgia has fairly stingy exemptions – you can read the Georgia exemption law by clicking on the link.
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Not surprisingly, I get calls from small business owners who are contemplating personal bankruptcy when their businesses fail. There are many issues that arise in these types of cases but I would like to focus on one problem that, more than any other, can force the business owner into bankruptcy.
More on Does Your Landlord have any Obligations to Mitigate Damages if You Breach Your Lease?
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With a sluggish economy, I have met with an increasing number of small business owners who are considering personal bankruptcy to deal with credit card debt and personal loans, but who want to keep their business assets and credits separate. Is this possible.
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Last week I wrote a post about car titles. Specifically, I discussed the issues that arise when a bankruptcy debtor's name appears on vehicle titles when theose vehicles are actually used, maintained and kept by the debtor's parents. Now comes a similar related question about inherited money.
More on Can Mother's Inheritance Be Designated for Kids' Education if Mother Files Bankruptcy
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If you are financing your home purchase with a large mortgage company, there is a good chance that your lender has set up an escrow account to collect and pay your county real estate taxes. Mortgage companies escrow taxes and insurance to protect their interests – a lapse of insurance coupled with a fire or flood could destroy the loan collateral (your home) and a lapse of tax payments could lead to a tax sale.
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If you plan on filing bankruptcy after January 1 of next year or of any year, you need to speak with your lawyer regarding whether your income tax refund can be protected. If you overpaid your taxes and are due a refund, that refund becomes your property on January 1, even if you have not yet filed your return.
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What happens if you forget to tell your bankruptcy lawyer about a pending lawsuit or even a pending claim? Nothing good – there is a very strong chance that the defendant can use your omission as a defense to your claim.
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My question is if someone comes to you to file BK individually, but she is due a tax refund that is in her name as well as her husband's, could the bank trustee only take 1/2 of the refund since the other 1/2 is considered an asset of her husband who is not filing?
–Jennifer
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Attorney Rachel Foley has written a very helpful article in the Bankruptcy Law Network blog about how to determine your vehicle's value for bankruptcy purposes. I agree wholeheartedly with her recommendation that you take your vehicle to CarMax for a written valuation.
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p>My husband has been given benefits but we are being advise a judgement will be placed for medical procedures that insurance should have covered but didn't. The facilty was subcontracted out by the doctor and was never given our insurance information to file on. Upon calling that insurance company, they have said that the claims is now too old for them to pay on. Can the attorney take my husbands social security benefits for the judgement.
Jonathan Ginsberg responds: Social Security benefits cannot be garnished by this type of civil judgment creditor. However, if you are using direct deposit and the Social Security funds are going into an account where you keep other money, your bank may inadvertantly honor a fi fa on the judgment.
I would consider sending a letter to the lawyer who is representing the judgment creditor to advise him that your husband's sole source of income is Social Security and therefore exempt from garnishment.
Be aware, however, that other assets – his house, other bank accounts, other assets – can still be at risk.
Another point to consider – does this creditor have a legal right to sue? Claims for breach of contract are subject to statutes of limitations. If this debt is ten years old, for example, it may be "stale" and no longer actionable. Recently, I have heard about a number of lawsuits filed on stale debt – if the defendant does not raise this issue, you could be stuck with judgments even when the underlying claim is bogus. There is a remedy to challenge this type of judgment called a "collateral attack on the judgment" but collateral attacks are expensive and time consuming.
If you receive a lawsuit on a debt that seems unusually old, it would probably be worth the time to run the case by a lawyer. My colleague Bill McLeod of Boston, regularly writes about Fair Debt Collection Practice horror stories. If you are under any illusion that collection agencies are trustworthy entities, some of the examples Bill cites of egregious actions by bill collectors will open your eyes.
If you have other assets at risk, and the judgment is large enough, a bankruptcy might be something to consider. As a rule, you are better off filing bankruptcy before a judgment is issued, but there is a procedure in bankruptcy practice called "avoiding the lien" where a judgment lien can be stripped and made into an unsecured debt.
Technorati Tags: Social Security benefits and judgments, garnishment + Social Security, stale debts, FDCPA, motion to avoid lien
More on Social Security Benefit Checks are Exempt from Garnishment, but….
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