Tel: 610-380-7969 Email: cccarresq@aol.com Web: christopherccarrlaw.com

 age garnishment is not legal in Pennsylvania. So your paycheck is good and safe, right?

Your employer has just deposited your paycheck into your bank account and you write a check to pay your mortgage, “knowing” there is now plenty of money in there to cover it and nobody can get it. But the check comes back “NSF”. It bounced and for the life of you, you cannot figure out why!  But then there’s that innocent little check you cashed a while back for $1.19 and now it’s coming back to haunt you. Read on to see what happened…

Well, while your wages may be safe from direct garnishment this may be cold comfort indeed because, your bank accounts are not protected in this way.  In Pennsylvania, a bank account levy is allowed under Section 9607 – Title 13 – COMMERCIAL CODE  only after judgment is awarded.  But once armed with a judgment your creditors can take your entire bank account – if they can find it. If a legal judgment has been entered against you in Pennsylvania, the holder of that judgment can satisfy it in whole or in part with money in your bank accounts simply by obtaining a court order against your bank.

And how can creditors gain access to this information in this day and age of “privacy protection”? Well one way is through you via what is called “discovery in aid of execution”.  That is, under the PA Rules of Civil Procedure you can be required by subpoena to submit to questioning under oath regarding your assets and accounts.

But most collectors cannot be bothered to go through proper legal channels…that costs legal time and money. Instead they will resort to various underhanded schemes to find your accounts. One of the most successful routines they use is to trick debtors into cashing small checks they send them, say, for $1.19 (see above).  Accompanying the check will be a fake letter saying “we made an error in your account in your favor and so here’s $1.19 back”. When you cash the check the collector will see a copy of it in his bank statement and he can tell exactly where you do your banking.  That is enough to allow him to get what is called a “Seizure Order” against that bank. You may never even figure out how he got you but for a mere $1.19 (which he just tacks back onto your account) he typically seizes several hundred dollars. (The typical collector’s commission is between 40-50% of every dollar he collects.) The lesson is simple – don’t cash small checks your creditors send you.

Here is another far more important lesson: If you get served with a debt complaint, you definitely want to get a lawyer involved right away not only because not only can he defend you against it (either with a bankruptcy filing or outside bankruptcy) but also because a creditor judgment (that’s the key word of this blog if you haven’t guessed) can ALSO result in a lien against your home which will have to be satisfied before you can sell, whether or not you later go bankrupt. See my blog on the complex topic of Liens.

Now back to the exciting conclusion of this blog: except for a few minor exceptions such as the Commonwealth’s  statutory exemptions and payments received from Social Security, the entirety of all of your bank accounts may be subject to garnishment by a creditor who has obtained a judgment against you. And this applies to your hard earned wages as well, once they have been paid to you, as they become available to garnishment once they are on deposit in your personal checking account.It is important to recognize (i) that this is not a one shot deal, it can happen again and again until the debt is satisfied and (ii) that the one sure way to protect your bank accounts and the wages on deposit in them is to avail oneself of the automatic stay in bankruptcy to protect your assets. The stay is one really important reason why people in financial distress opt to seek the protection of the bankruptcy court!

If you live in the Suburban Philadelphia area, including the counties of Berks, Bucks, Chester, Delaware, Lancaster, or Montgomery and are seeking a competent and compassionate bankruptcy lawyer to help you explore your options and find the optimum financial solution for you and your family,  please call Attorney Christopher C. Carr, MBA (Finance) at 610-380-7969 (Offices in Paoli and Coatesville) TODA Y for a FREE DEBT RELIEF EVALUATION. Or visit my web site at christopherccarrlaw.com and fill out the contact sheet. I also provide Debt Settlement; IRS Tax Settlement & Mortgage Mod Services NATIONALLY.

©Christopher C. Carr, Attorney at Law, 2012, All Rights Reserved.  See Disclaimers.

This article deals with situations where debt repayment extends beyond the 3-5 year period allowed in a Chapter 13 and the end of the automatic stay in bankruptcy and some things that can be done about it.

The typical scenario would be where a homeowner uses a Chapter 13 to repay the arrears on their mortgage. The law states that while the arrears must be paid 100% over the course of the plan, payments on the mortgage may extend beyond that time. How could it be otherwise because almost all mortgages have a life of 30, 40 even 50 years, far longer than the maximum bankruptcy plan?

But what about a homeowner who also has non dischargeable taxes? They too can be “scheduled” and payments made over the course of the plan…but when the plan ends so does the “automatic stay” and the tax creditors will STILL be there waiting to get their money. And the IRS has an array of weapons at its disposal. For example, unlike common creditors, it can slap a lien on your home without even having to file suit to do so. And such liens can be more than just a nuisance, especially when it comes time to sell because then the title company will not issue a policy of title insurance until the lien has been paid thus in effect giving the IRS a second bite at the apple. You can try negotiating a lower tax with the Service by submitting what is called an Offer in Compromise after the bankruptcy is discharged but not everyone can qualify and a 20% nonrefundable down payment must be submitted with your offer on IRS form 656. If the IRS accepts the offer, it will want the remainder in 5 or fewer monthly installments.

But luckily there are other alternatives. The law allows a tax debtor to file under more than one chapter in bankruptcy in sequence. Many people wrongly believe that there is a waiting period after a discharge before another bankruptcy can be filed whereas the law actually reads only that you cannot receive a discharge in the second bankruptcy. However, as to non dischargeable debt, it really does not matter.

There are 2 scenarios where this strategy can be used with good effect. Suppose you file Chapter 7 to wipe out all your qualifying dischargeable debts and taxes. When the Chapter 7 is completed, some non-dischargeable taxes remain, but you could file under Chapter 13 for a repayment plan to deal with the balance. This strategy is called: “Chapter 20″ (7 + 13). This stops interest and penalties.

Likewise, a “Chapter 26″ (13+13) may be a way to spread paying a tax debt over a longer period– up to ten years (i.e. 2 5 year plans). This means filing one Chapter 13 and completing it, and then filing a second Chapter 13 for remaining debts. This also stops interest and penalties and most importantly liens will not attach to your property because of the automatic stay. If done quickly enough, this can be accomplished before the IRS starts up collection activity again.

As always, it is best to seek the advice of a competent bankruptcy attorney as this is a complex timing sensitive legal area.

©Christopher C. Carr, Attorney at Law 2009, All Rights Reserved. Photo by Chrisinplymouth.

If you live in the Suburban Philadelphia area, including the counties of Berks, Bucks, Chester, Delaware, Lancaster, or Montgomery, and are seeking a competent and compassionate bankruptcy lawyer to help you explore your options and find the optimum solution, please call Attorney Christopher C. Carr, MBA (Finance) at 610-380-7969 (Offices in Paoli and Coatesville) for a FREE DEBT RELIEF EVALUATION. Or visit my web site at christopherccarrlaw.com and fill out the contact sheet. I also provide Debt Settlement; IRS Tax Settlement & Mortgage Mod Services NATIONALLY.

Others who have actually reached the letter L in the Bankruptcy Alphabet include:

St. Clair Shores MI attorney, Kurt OKeefe, who speaks the truth when he says that L is for Lie, the Big Mortgage Industry

Cleveland Attorney ( oh how I miss beautiful Cleveland on the shores of lake Erie where once I lived), Bill Balena ensures us that L is for Life Insurance

New York & California Bankruptcy Lawyer, Jay S. Fleischman who attaches great relevance to L is for Lien

Omaha and Lincoln, Nebraska Bankruptcy Attorney, Ryan D. Caldwell who lays it all bare for us in L is for Lien Stripping

Honolulu Bankruptcy Attorney Stuart T. Ing also peels back the layers in L is for Lien Stripping

Marin County Attorney, Catherine Eranthe enlightens us in L is for Lift the Stay

Colorado Springs Attorney Bob Doig has gems of wisdom on why L is for Luxuries

Metro Richmond Consumer Attorney, Mitchell Goldstein who is solidly behind L is for Liquidated

Allen Park, Michigan Bankruptcy Lawyer, Christopher McAvoy enumerates how L is for List It Or Lose It

Tel: 610-380-7969 Email: cccarresq@aol.com Web: christopherccarrlaw.com

1.      What Is a Judgment vs. a Lien and how do they arise in Real Estate?

When you owe money and are unable to pay, the creditor, unless it is the IRS, must take you to court before levying upon your back accounts or garnishing your wages. Typically the creditor will sue you in municipal court or in common pleas court in Pennsylvania if the amount of the claim is larger than $8,000 (up to 15,000 for Philadelphia County real estate matters). When a lawsuit is initiated against you, you will be served with a Complaint. If you do not respond (by answer or other responsive pleading) within a set period of time or appear at the hearing set for your case, a default judgment will be issued against you. This judgment will be recorded by the court.

In Pennsylvania, a judgment is an automatic lien on real property owned by the defendant in the county in which the judgment is located. The lien of a judgment lasts for 5 years, 42 Pa. C.S.A. Sec. 5526, and execution must be issued against personal property within 20 years after entry of the judgment, 42 Pa. C.S.A. Sec. 5529. In addition, via a mechanism called a writ of execution liens can be transferred to other counties in Pennsylvania where the debtor owns property. A lien on real property means that the debtor cannot sell the property until all liens are paid. However, a judgment lien can only be arise in real property. If the debtor does not own real property within the applicable jurisdictional limits, the judgment lien cannot attach to anything and all the creditor has is a recorded judgment. What is the use of this?  Well, the creditor can then use this judgment to pursue garnishment where available or levy upon your Pennsylvania bank accounts. However, wage garnishment is prohibited in Pennsylvania except for certain obligations such as support.  It is critical for homeowners to respond to all lawsuits by bringing them immediately to the attention of their attorney as in this way an ordinary unsecured debt such as a unpaid credit card debt can become a lien against your home. (See final comment below.)

The filing of a bankruptcy will stay a foreclosure and the underlying debt will be discharged in a bankruptcy except for certain obligations such as domestic support obligations (DSO’s) which are non-dischargeable under Section 11 USC. 523(a) (5) of the Bankruptcy Code. (But see my blog on the effects of a Chapter 13 bankruptcy on DSO’s for further valuable information for homeowners facing support issues.) Even if these steps are taken the lien of the prior judgment will typically continue (in some some cases they can however be completely or partially removed as discussed below) and may cause difficulties for homeowners. To avoid the continuing negative financial consequences they can create, the judgment will need to be removed where possible.

2.      REASONS TO HAVE A LIEN/JUDGMENT REMOVED:

When a creditor who has obtained a judgment but the debtor subsequently files a bankruptcy, the debt underlying the judgment is discharged through the bankruptcy. However, the lien of the judgment itself will remain and will be effective against any real property in the county and will interfere with the sale of the property. A lien on real property means that the debtor cannot sell the property until all liens are paid. Understandably, a title company will refuse to clear the title for a home when the property has a judgment lien against it until the title insurer receives proof that the lien has been satisfied or discharged and this can defeat or delay a sale of the property. A lien can of course be satisfied through payment but a typical homeowner files bankruptcy precisely because they can no longer pay their mortgage.

Even if you do not own real estate, while no creditor can collect upon the judgment, it will still continue to exist on the county record. The judgment will be reported to credit bureaus as active, thus continuing to impair your credit for up to 7 years, which is the length of time a judgment can remain on your credit.

3.      WHICH JUDGEMENTS AND LIENS IN REAL ESTATE MAY/MAY NOT BE DISCHARGED BY BANKRUPTCY AND HOW IS THIS DONE?

Certain types of debt cannot be discharged through a bankruptcy. For example, back child support cannot be discharged through a bankruptcy.

The lien of a judgment which was entered before the bankruptcy was filed will appertain against real property of the debtor for at least 5 years after entry of the judgment in the county. (See above).  However, to the extent the lien impairs an exemption the lien will be subject to removal once the debt has been discharged.

The homestead exemption in bankruptcy applies to property used as your residence. As of early 2012, the federal homestead exemption is $21,625 (if both spouses file, this is doubled). State homestead exemptions vary a great deal. In some states, like Florida, there’s no limit, while in other states, like New York, the limit is $50,000 to $150,000, depending on where in the Empire State you reside.  In Pennsylvania, for example, the federal exemption may be elected. So, if you have a house with $50,000 worth of equity you are entitled to a federal exemption with your spouse of $43,250.00. If you only owe $50,000 on the property, you can petition the court and have the judicial lien removed up to the exemption amount.  The lien for the remaining $6,750 will remain on the books. Unfortunately however, few homeowners in this day and age of declining home values have sufficient equity in their homes to claim equity impairment sufficient to remove liens following bankruptcy. (See final comment below.)

This process only works when you have claimed a valid exemption relating to your principal residence in the bankruptcy proceeding and the underlying debt has been discharged. If these conditions are met, the bankruptcy court will, upon motion made by your attorney, remove the lien to the extent it impairs your homestead exemption.

A debt must have however been included in the bankruptcy for it to have been discharged.  If the creditor was not listed and the debt existed before the case was filed, the case may need to be reopened and the creditor added. (This topic will be treated in greater detail in my blog under construction with the working title: “U is for the Unlisted Creditor in the Bankruptcy Alphabet”.)

If you are involved in a Chapter 13 bankruptcy, which is the usual case for homeowners, you cannot receive a discharge until your plan has been completed which can take up to 60 months. A judgment cannot be removed if a discharge has not been issued. You will have to wait until your plan is completed before you will be able to remove any judgments issued against you and begin to clear your credit.

Once the discharge has been obtained, clearing a listed judgment (but not the judicial lien if you have non-exempt real estate in the county: see above) may be as simple as having your lawyer send a notice of discharge in bankruptcy to the clerk of the court of the county in which the judgment was recorded with a copy to the creditor.

Clearing debt off your credit report however can require the additional help of a credit specialist.  Certain lawyers can assist you with credit repair.

4.      CONCLUSION: DO NOT HIDE YOUR HEAD IN THE SAND:

Obviously these rules are very complicated and, while I have illustrated with examples drawn mainly from Pennsylvania where I practice, vary from state to state and even within state boundaries.  There is however one sure fire way to keep a lien from arising on your real property in Pennsylvania and elsewhere.  Never allow a judgment to be entered against you before you have the oportunity to file bankruptcy. Instead, seek the advice of a competent bankruptcy lawyer as soon as you see the first sign of a law suit looming on your horizon and start planning for a bankruptcy filing to preempt the filing of a judgment.

If you live in the Suburban Philadelphia area, including the counties of Berks, Bucks, Chester, Delaware, Lancaster, or Montgomery, and are seeking a competent and compassionate bankruptcy lawyer to help you explore your options and find the optimum solution, please call Attorney Christopher C. Carr, MBA (Finance) at 610-380-7969 (Offices in Paoli and Coatesville) for a FREE DEBT RELIEF EVALUATION. Or visit my web site at christopherccarrlaw.com and fill out the contact sheet. I also provide Debt Settlement; IRS Tax Settlement & Mortgage Mod Services NATIONALLY.

©Christopher C. Carr, Attorney at Law, 2012, All Rights Reserved. See Disclaimers.

 Other bankruptcy attorneys discussing the Letter “J” include:

•  Joint Filing Marin County Bankruptcy Attorney, Catherine Eranthe http://marin-bankruptcy-law.com/2011/11/27/bankruptcy-a-to-z-j-is-for-joint-filing/
•  Judgment Omaha and Lincoln, Nebraska Bankruptcy Attorney, Ryan D. Caldwell http://bankruptcyblog.caldwell-lawfirm.com/2011/11/09/bankruptcy-alphabet-j-is-for-judgment.aspx
• Your Personal Finance Lawyer New York Bankruptcy Lawyer, Jay S. Fleischman http://www.consumerhelpcentral.com/jay-fleischman-personal-finance-lawyer/
• Justify Northern California Bankruptcy Lawyer, Cathy Moran http://moranlaw.net/blog/bankruptcy-alphabet-j-for-justify/
•  Judgment Liens Colorado Springs Bankruptcy Attorney Bob Doig http://springsbankruptcylaw.com/?p=1165
• Joint Debts Hawaii Bankruptcy Attorney, Stuart T. Ing http://www.bankruptcyhi.com/2011/12/j-is-for-joint-debts/ Judicial Lien Cleveland Area Bankruptcy Lawyer, Bill Balena http://ohiobankruptcysource.com/?p=2325

The 2005 amendments to the U.S. Bankruptcy Code added a broad new category of property that may be excluded from bankruptcy to the extent that such funds are deposited by the debtor in a tax exempt fund. As part of an overall initiative by Congress to expand the bankruptcy protection of tax exempt investment vehicles, one can now exempt up to one million dollars in an IRA account and such amount may be increased “if the interests of justice so require”.

Section 522 (d) 12 of the Bankruptcy Code states, in pertinent part:

For assets in individual retirement accounts described in section 408  or 408A  of the Internal Revenue Code of 1986, other than a simplified employee pension under section 408(k) of such Code or a simple retirement account under section 408(p) of such Code, the aggregate value of such assets exempted under this section, without regard to amounts attributable to rollover contributions under section 402(c), 402(e)(6), 403(a)(4), 403(a)(5), and 403(b)(8)  of the Internal Revenue Code of 1986, and earnings thereon, shall not exceed $1,000,000 in a case filed by a debtor who is an individual, except that such amount may be increased if the interests of justice so require.

This new provision of the Bankruptcy Code is important for asset protection and planning purposes. An IRA (other than a “sep” pension or “simple” account) can now be used to shelter funds that would otherwise not be exempt under a state or federal exemption and could thus be eligible for distribution to creditors. Such funds would simply be contributed by the debtor (from say a non-qualified savings account or a tax refund) to a qualified plan, up to the annual aggregate limit imposed by law (for 2011: $5,000 if under 50 years of age and $6,000 if over 50), on or before the date of the bankruptcy filing.

It is important to note as well that this protective coverage is afforded not only for money in qualified funds but also to rollovers from a plan so long as the distribution is again deposited into a qualified plan within sixty days. Thus, perhaps as an unintended byproduct of the rollover provisions, individuals can make emergency IRA withdrawals to meet very short term needs but this strategy should only be pursued in situations where the funds withdrawn are certain to again become available before the sixty day deadline (from say an income tax refund or maturing CD). Otherwise, there will be a “double whammy” effect: not only will such withdrawn funds then be taxable income to the debtor (who may possibly be assessed IRS penalties as well) but the shelter from creditors in bankruptcy discussed above would not be available.

If you live in the Suburban Philadelphia area, including the counties of Berks, Bucks, Chester, Delaware, Lancaster, or Montgomery, and are seeking a competent and compassionate bankruptcy lawyer to help you explore your options and find the optimum solution, please call Attorney Christopher C. Carr, MBA (Finance) at 610-380-7969 (Offices in Paoli and Coatesville) for a FREE DEBT RELIEF EVALUATION. Or visit my web site at christopherccarrlaw.com and fill out the contact sheet. I also provide Debt Settlement; IRS Tax Settlement & Mortgage Mod Services NATIONALLY.

Other lawyers in the bankruptcy alphabet game:

Omaha and Lincoln, Nebraska Bankruptcy Attorney, Ryan D. Caldwell: I is for involuntary petition too.

New York Bankruptcy Lawyer, Jay S. Fleischman : I is for Income.

Marin County Bankruptcy Attorney, Catherine Eranthe claims I is for Income as well.

Northern California Bankruptcy Lawyer, Cathy Moran: I is for IRS.

Colorado Springs Bankruptcy Attorney Bob Doig: I is for In Forma Pauperis (he speaks Latin).

Big Island Bankruptcy Attorney, Stuart T. Ing: I is for Independent Contractor.

Michigan Bankruptcy Lawyer, Christopher McAvoy:I is for income Tax Refunds.

Los Angeles Bankruptcy Attorney, Mark J. Markus: I is for Insiders.

©Christopher C. Carr, Attorney at Law, 2011, 2012, All Rights Reserved

Every potential bankruptcy client must understand that it is in his/her best interest to be entirely honest in their dealings with their lawyer, the trustee and the courts.  Not only may the debtor harm themself by failing to disclose material information but they may also potentially face severe criminal penalties.[1]  The United States bankruptcy laws require the debtor to disclose all income and assets to the bankruptcy court and the court is empowered under applicable federal statutes to uphold the integrity of the system and the participants in it. The theory and practice of these disclosures, is that if accurate and complete, the bankruptcy trustee and the court are able to determine what, if anything, the debtor can afford to repay to the creditors.

The bankruptcy disclosure form which every debtor is required to sign WARNS as follows:

Bankruptcy Crimes and Availability of Bankruptcy Papers to Law Enforcement Officials

A person who knowingly and fraudulently conceals assets or makes a false oath or statement under penalty of perjury, either orally or in writing, in connection with a bankruptcy case is subject to a fine, imprisonment, or both. All information supplied by a debtor in connection with a bankruptcy case is subject to examination by the Attorney General acting through the Office of the United States Trustee, the Office of the United States Attorney, and other components and employees of the Department of Justice.

WARNING: Section 521(a)(1) of the Bankruptcy Code requires that you promptly file detailed information regarding your creditors, assets, liabilities, income, expenses and general financial condition. Your bankruptcy case may be dismissed if this information is not filed with the court within the time deadlines set by the Bankruptcy Code, the Bankruptcy Rules, and the local rules of the court. [2]

Oftentimes the debtor will unintentionally hurt their case by “shading” the truth based upon an inaccurate understanding of the bankruptcy laws.  For example, a debt may not be listed on the petition because the debtor does not wish to reveal it. However, a debt that is not disclosed cannot be discharged in bankruptcy.

One of the great unfounded fears in all of bankruptcy is that the debtor will “lose all their assets in bankruptcy”.   Thus, a debtor may fail to reveal an asset which might have been partially or completely exempt and thus unnecessarily face the complete loss of the asset (see below).   There are generous exemptions available for many assets especially under the federal statutes and the laws of states like Pennsylvania where I practice law allow debtors to elect these, instead of the far less generous state exemptions. Other states like Florida have homestead exemptions which allow a debtor domiciled in Florida to completely shield their primary residence.

One article provides the following example of this temptation in action  and how the result of yielding to it easily can be detected:

“Because cash is difficult to track down, it may be tempting to pile up as  much cash as you can before bankruptcy and then “forget” to include the cash on  your financial  statement that you file with the bankruptcy court. Be forewarned that the  bankruptcy code imposes significant civil and criminal penalties on debtor’s who  intentionally provide false information to the bankruptcy court. Because the  bankruptcy trustee will have access to all your recent history of earnings, bank  statements and other financial records, there is a strong likelihood that the  trustee will be able to tell if you have attempted to siphon off cash before  filing your bankruptcy petition.”

It is thus essential that the debtor reveal all debts, assets and income sources to the lawyer who can then properly advise the debtor on legal protections and issues. If there is any question for example as to whether an item is an asset, the debtor should disclose it and let the lawyer decide how to properly treat it in the petition. Some writers have indicated that such proactivity can help to show that the debtor did not have the requisite intent to commit bankruptcy fraud.

One consequence of failing to disclose income or assets is that the debtor may be denied a bankruptcy discharge and remain liable for all debts under Section 727 of the Bankruptcy Code. Its provisions permit the court to dismiss the debtor’s case for dishonesty on the bankruptcy schedules, hiding assets, failing to maintain financial records, refusing to turn over records, or refusing to cooperate with the trustee. Not only may the court deny the dishonest or uncooperative debtor a discharge under Section 727 but any assets turned over during the case will still be sold by the bankruptcy trustee so that the debtor loses the property without any concomitant bankruptcy benefits.

As is indicated above, the most serious consequence for the debtor of dubious honesty is the prospect of being charged with criminal bankruptcy fraud.  Most bankruptcy fraud first comes to the attention of the bankruptcy trustee during the course of the bankruptcy or as a result of “whistle blowing” by neighbors, creditors, or ex-spouses. The IRS under the Internal Revenue Service Criminal Investigation’s Bankruptcy Fraud Program and the US Trustee are the most active in investigating fraud.  The Department of Justice Trustee Program encourages individuals to report bankruptcy fraud to the US Department of Justice for further potentially criminal action. The IRS also maintains a whistle blower award program.

The IRS appears to use the Bankruptcy Fraud Program to make examples of egregious miscreants, especially where a case also involves tax fraud or evasion, and consequently has an extremely high conviction rate. For example in 2011, 83% of those who had been charged with bankruptcy fraud are now serving time. In virtually all these cases, the individual was also required to make substantial financial restitution and also were required to serve a period of supervised release.

The moral of the story? You are filing bankruptcy to get a fresh start. You have little to fear and everything to gain from the process if you are honest and adopt a policy of full disclosure.

In addition to the obvious monetary loss for the debtor/garnishee, a garnishment can negatively impact employment, because the employer will see that the employee is having credit issues[1] and also is presented with the added administrative burden of complying with periodic court orders. Can you put a stop to it with a bankruptcy?

A.      Garnishment For Ordinary Consumer Debt:

In most states, garnishment for ordinary consumer debt is permitted. Most US states allow wage garnishment for consumer debt with the exception of Pennsylvania, South Carolina, North Carolina and Texas (depending upon the debtor’s circumstances).

The automatic stay in bankruptcy (Section 362 of the U.S. Bankruptcy Code) is a fundamental consumer protection.  It halts most creditor actions against you, including collection proceedings from the moment your case is filed with the bankruptcy court, including wage garnishment for consumer debt.  A garnishment of wages is considered a collection proceeding under the bankruptcy code.  As a result, a creditor that attempts to garnish wages violates the debtor’s rights to an automatic stay under the Bankruptcy Code.

The automatic stay generally protects you against garnishment until the end of your case whether closed, discharged or denied.   If the bankruptcy discharge is granted and the case is closed then the automatic stay becomes permanent in the form of the discharge injunction. Article Source: http://EzineArticles.com/3689006 by Jay Fleishman, Esq.

B.      Garnishment For Unpaid Domestic Support:

However, garnishment for is a creature of a different stripe altogether, All US states allow income garnishment for tax arrearages and child support and in some states even spousal support (alimony) may be garnished as well. These are termed domestic support obligations (DSO’s).  DSO’s cannot be discharged or modified in either a Chapter 7 or Chapter 13 bankruptcy, pursuant to 11 USC. 523(a)(5). However, the impact a bankruptcy will have on support payments differs as between a Chapter 7 or a Chapter 13.

A Chapter 7 bankruptcy filing is useless against the collection, enforcement, or payment of DSO’s. Thus the automatic stay in effect does not exist in a Chapter 7.

However, in contrast, a Chapter 13 proceeding can actually work to protect the debtor against DSO enforcement actions, including wage garnishments, because all property acquired by the debtor is property of the bankruptcy estate. Thus, all actions to collect or enforce DSO’s usually will be halted by the filing of a Chapter 13 bankruptcy. Support payments may be temporarily stopped until the plan payment details are worked out as well. For more information on DSO’s and how they are impacted by bankruptcy, see my article “D” is for Domestic Support Obligation.

]If you live in the Suburban Philadelphia area, including the counties of Berks, Bucks, Chester, Delaware, Lancaster, or Montgomery, and are seeking a competent and compassionate bankruptcy lawyer to help you explore your options and find the optimum solution, please call Attorney Christopher C. Carr, MBA (Finance) at 610-380-7969 (Offices in Paoli and Coatesville) for a FREE DEBT RELIEF EVALUATION. Or visit my web site at christopherccarrlaw.com and fill out the contact sheet. I also provide Debt Settlement; IRS Tax Settlement & Mortgage Mod Services NATIONALLY.

©Christopher C. Carr, Attorney at Law, 2011, 2012, All Rights Reserved

Visit the sites of these other lawyers for their pespectives on the letter G:

If you are behind on bills or can’t afford your mortgage payments, filing a consumer bankruptcy is certainly one option to consider. You can read my RocketLawyer blog:  Filing Bankruptcy: Pros and Cons to learn more about the types of bankruptcies. However, some people do not wish to file bankruptcy for a variety of reasons and there are certainly circumstances under which filing a consumenr bankruptcy is NOT advisable. Supra Lawyer lists 7 such reasons.   For those clients who cannot or will not declare bankruptcy,  there are alternatives not requiring a bankruptcy filing , including:

• Debt Settlement (AKA Debt Management): Debt Settlement offers a structured debt repayment plan, whereby you pay only a portion of the original debt. This is not the same as debt consolidation where one big debt simply replaces a lot of little ones. Oftentimes, you pay a budgetable fixed sum every month for from 3-5 years and the servicer uses that fund to settle with the creditors as it builds up. It is important however, to ensure that you are dealing with a reputable organization before “investing” with any such entity.  (The FTC has recently revised the Telemarketing Sales Rule to encompass debt settlement companies which will hopefully bring some regulation to this industry.)
• Mortgage Modification (including Home Affordable): If you own a home and do not wish or need to file a Chapter 13 Bankruptcy, a mortgage modification may be a better option than bankruptcy as the filing of the HAMP Application will also avoid mortgage foreclosure while in consideration by the Lender. The government is attempting to streamline this process and, as the name implies, make monthly rates far more affordable for those who qualify by requiring banks which took bailout money to offer the Home Affordable Loan (HAMP). Others have joined the program voluntarily seeking to take advantages of the financial incentives being paid by the government. However, the program has been moving very slowly to date because it has been left up to the banks to administer. For those who do not qualify because of income or other reasons or because their bank simply does not offer a HAMP, there are usually conventional programs offered by the lenders, typically with less favorable terms. There are also special programs available for those who have Fannie Mae or Freddy Mac backed loans.
• Debt Settlement & Mortgage Modification: a potent combination for the in debt home owner may well be to combine a debt settlement program to reduce unsecured debt with a mortgage modification to reduce monthly mortgage payments, as these in combination can resolve most of the pressing debt issues for many homeowners.
• Other Programs: There may be other alternatives for homeowners, especially for those who cannot take advantage of any of the above programs and are willing to enter into a short sale or deed in lieu of foreclosure and exit gracefully from their homes. In addition, there may be short or long term aid available to eligible homeowners at the state or local level, such as the Act 91 (HEMAP) program in Pennsylvania. (Unfotunately, word is that there is no longer funding available under this program which was partially federally funded.)
• Bankruptcy as a Last Resort: It is important to note that the debtor who has tried and failed to utilize one or more of the above programs, may still avail themselves of bankruptcy as a last resort, to save their home, car and/or seek protection from their creditors. In addition, in certain circumstances a bankruptcy working in combination with one of the other above options, for example a Chapter 7 bankruptcy in concert with a mortgage modification, may be a potent option. In addition, a debtor who is current on their mortgage payments under most circumstances may exercise the “retain and pay” option to keep their home, under Section 521 (a) (2)  of the Bankruptcy Code which remains largely intact after the 2005 amendments to the Bankruptcy Code.

The key point is that each debtor’s situation is unique and deserves special consideration. Further, because the process is hardly ever as smooth as it is supposed to be because of the complexities and pitfalls involved, it is advisable to consult a competent and compassionate attorney who has experience in bankruptcies and/or in negotiating modifications to guide you through the process and help you properly complete the paperwork.

©Christopher C. Carr, Attorney at Law 2009, 2012, All Rights Reserved

“Can I Stay in My Apartment if the Landlord Sues to Evict Me for Back Rent and Wins if I File Bankruptcy?”

Before  2005, the answer was clearly “yes”…a tenant bankruptcy could easily stop an eviction by filing for a Chapter 7 or Chapter 13 bankruptcy even after an eviction judgment had been entered against the tenant in state court. Once the tenant filed for bankruptcy, the “automatic stay” prevented all creditors, including landlords, from pursuing the repayment of debt.

But in 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act (“BAPCPA”) changed all that. The last three words of the title of the Act (“Consumer Protection Act”) are no more than legislative window dressing  as the new provisions relating to evictions found within Title 11 of the United States Code at Sections 362(a)(22), 362(a)(23), 362(l) and 362(m) are some of the harshest changes facing consumers under the new law.  The landlord can now evict a tenant if the landlord obtains a court-ordered judgment for possession prior to the tenant filing for bankruptcy. There is no longer an automatic stay to protect the tenant against the landlord unless the narrow exception described below applies.

If the eviction is for the nonpayment of rent, an exception applies if state law allows a tenant to remain in the rental unit and “cure,” or pay the rent, after an eviction judgment. Most states do not however even allow this “pay to stay” (as I will call it for simplicity’s sake) option.

If the tenant in pay to stay a state pays the rent into court and files the certification, on the day that the bankruptcy petition is filed (and serves the certification on the landlord), the tenant gets the benefit of the bankruptcy “automatic stay” but only for a period of thirty days from the date that the bankruptcy petition is filed.

If the tenant wishes to remain in the apartment beyond the initial thirty day reprieve, the tenant will have to satisfy the amount stated in the judgment for possession within thirty days following the filing of the bankruptcy petition and must at the same time file a certification with the bankruptcy court that the tenant has paid this amount (and serve the certification on the landlord). However, even here if the landlord objects to either certification and in court, the tenant must still leave.

The bottom line is that if tenants who are facing eviction in non-pay to stay state due to monetary default are in essence forced by BAPCA to gamble for if they lose in the state court level, they will have no avenue of relief open to them in the bankruptcy court.  (In a pay to stay state the gamble is less onerous if the tenant is successful in jumping through the hoops described above.) If on the other hand, they choose to forgo their day in court in favor of the safer route of filing bankruptcy, they are facing considerable expense for the privilege of staying in their apartment.

Additionally, filing bankruptcy destroys credit and thus can make it much more difficult if not impossible to find a new apartment.  The better counsel for most tenants facing eviction may be to preserve their credit and their cash and simply find a new home.

If you live in the Suburban Philadelphia area, including the counties of Berks, Bucks, Chester, Delaware, Lancaster, or Montgomery, and are seeking a competent and compassionate bankruptcy lawyer to help you explore your options and find the optimum solution, please call Attorney Christopher C. Carr, MBA (Finance) at 610-380-7969 (Offices in Paoli and Coatesville) for a FREE DEBT RELIEF EVALUATION. Or visit my web site at christopherccarrlaw.com and fill out the contact sheet.

Struggling with too much debt: you’re not alone? The entire nation it seems has a credit card hangover especially after the new year when the bills for all those Christmas Presents start to roll in. For years, credit was easy and many people became overextended. But we now have to “pay the piper”. The advice of the debt experts is to be sure you don’t make your situation worse by making common mistakes.

So let’s talk frankly: Here are 5 strategies you should avoid:

1. Paying only the minimum amount on your debt as this will result in the amount you owe actually GROWING and your problems will only become worse. Look at some of those credit card statements you get. It’s downright scary! 35 or 50 years to pay off your card at minimum payments! And maybe your cards are maxxed out and you really HAVE no more credit…what good is that? When that happens, it usually is a sign that it is time to get a fresh start!
2. Relying on friends and relatives to bail you out with loans you probably never can repay as this can permanently damage relationships with the most important people in your life.
3. Resorting to unscrupulous companies that demand cash upfront or high fees for help they promise, but don’t deliver. You need to do extensive due diligence before ever giving any of these companies a dime.
4. Using new high-interest loan to pay off lower interest rate loans or doing a debt consolidation– while it may seem easier to just have one payment, this will actually increase the amount you have to pay back over time. Debt consolidation is just that: it just gets you one big bill instead of several smaller ones. What you really may need is Debt Settlement by an attorney, who will work hard to dramatically REDUCE your debt without bankruptcy.
5. Declaring bankruptcy unless you have consulted with a bankruptcy lawyer and determined that this is the only appropriate choice for you – Bankruptcy can give you a fresh start even can SAVE YOUR HOME, CAR OR APARTMENT but it is NOT for everyone- it can have long term and severe consequences for your financial future. There usually are other alternatives such as debt settlement or a mortgage modification or a combination of tools and techniques which may work for you…

How to select a professional to guide you?  The lawyer you select to advise you should be compassionate, versatile and experienced: able to understand each of these alternative tools and techniques, advise you as to which to choose and perform the service(s) you ultimately select with his/her assistance.

If you live in the Suburban Philadelphia area, including the counties of Berks, Bucks, Chester, Delaware, Lancaster, or Montgomery, and are seeking a competent and compassionate bankruptcy lawyer to help you explore your options and find the optimum solution, please call Attorney Christopher C. Carr, MBA (Finance) at 610-380-7969 (Offices in Paoli and Coatesville) for a FREE DEBT RELIEF EVALUATION. Or visit my web site at christopherccarrlaw.com and fill out the contact sheet.

I also provide Debt Settlement; IRS Tax Settlement & Mortgage Mod Services NATIONALLY.