Is Filing for Bankruptcy 'Dishonest'?

Many people often feel it is somehow ‘dishonest’ or ‘immoral’ to wipe away debts they would otherwise owe. There are three things to bear in mind:

First, and most fundamentally, as a United States Citizen, our Constitution entitles you to the protection of the laws of our country. The bankruptcy laws are enshrined in our legal system. As a U.S. Citizen there is no need to feel ‘bad’ or ‘immoral’’ about availing yourself of the protections of our country’s legal system.

Second, many businesses, credit card companies in particular, are well aware of these laws as well. They lend money and extend consumers a line of credit with full knowledge of the risk that consumers may file for bankruptcy and have these debts extinguished. For them this is simply the cost of doing business.

Finally, many, if not most, creditors, have likely filed for bankruptcy themselves at one point in time. Bankruptcy is simply a normal part of today’s business world. Life frequently presents many previously unforeseen challenges. When individuals and business alike encounter these challenges the bankruptcy process provides a mechanism of relief to enable you to get back on your feet. There is nothing ‘dishonest’ about this.

 At Anderson Shen we can help you determine whether bankruptcy is a viable option for you. To schedule a free consultation call 718-521-6041.

But Do I Really Need to File?

This is a common question we are frequently asked. Many people often seem content to simply let their bills pile up; if they ignore them perhaps they will go away. This is a move fraught with consequences.

So what will happen if I don’t do anything? What happens if I don’t pay my bills and I don’t file for bankruptcy? If you are employed your wages may be garnished. This means that your creditors can actually have your employer deduct money straight from your paycheck, much the same way taxes are deducted, and paid directly to them until the debt is paid off.  This means when you are already struggling under the weight of so many bills you will see even less money in your pocket at the end of each pay period. One of the many advantages to filing for bankruptcy, is that the bankruptcy process will halt garnishments.

Well what if I am not employed? What can the creditors do if I have no money to pay them? In the short term, perhaps not a whole lot. However, if a creditor, credit card companies in particular, take you to court and obtain a judgment against you, they can seize future assets which you may come into. This can come in the form of future wages, inheritance, insurance payouts, even money you may get as a result of a lawsuit if you suffer a personal injury.

The bottom line is that creditors have many means at their disposal of finding and taking your money, either now or in the future. Filing for bankruptcy protects your assets today while at the same time extinguishing most, if not all, of your liabilities.  

Mail Bag: Debt Collection, Information Subpoenas and Liens

This week, we have assortment of debt collection and bankruptcy questions. We hope you find this helpful. 

Question: I currently got my wages garnished by a creditor collection agency. I called them and they told me it was for a account back in 2001. I called the credit card company and explained that I never had a card with them. If I don't feel like I owe the money, what can I do?

Answer: If you feel as if you do not owe the amounts due in the judgment and you have reasonable excuse for not showing up to court (e.g. you were not served with papers), then you should file an order to show cause (motion) to vacate your default. Once this motion is filed, a court date will be generated. On the court date given, the credit card attorney will have to provide you and the court with proof as to the amounts owed and the contract which indicates the obligation. Although this action can be taken without an attorney, I would advise that you at least consult with one prior to submitting your motion with the court.

Question: What is an information subpoena and do I need to answer it?

Answer: An information subpoena is a fairly lengthy list of questions that aim at finding assets of a debtor. If the questions do not satisfy the creditor, then they can hold a deposition where the creditor will have an opportunity to ask more pointed questions about the debtors assets. If the debtor has no assets and has no wage, they are what some call "judgment proof," meaning they have nothing that the creditor can get. However, if the debtor has some money or property, a creditor can do many things to execute on a judgment: bank garnishments, wage garnishments (income execution), property liens, and the list goes on. If the debtor willfully disregards the information subpoena or notice of deposition, they can be held in contempt. If you have a judgment against you and you don't have a lot of assets, one thing to consider would be bankruptcy. 

Question: I don't have any income, not a lot of assets, and only a little equity in my house, what can I do if my mortgage company received an information subpoena in the mail?

Answer: If someone has obtained a judgment against you then one way that they can execute on that judgment is by placing a lien on your house. If you have low or no income, then the creditor will likely not choose to garnish your wages or bank account because you don't have enough for the creditor to take. However, if the creditor learns that you own property that has significant equity, they may opt to place a lien on the property. By doing so, the creditor will be able to obtain monies if/when your property is sold, assuming there is something left over from the satisfaction of your mortgage and other priority liens. The letter your mortgage company received is likely the creditor attempting to see if its worth going through the effort of putting a lien on your property. If you have a low income, low equity in your home, and very few assets, one thing to consider would be bankruptcy, which can discharge certain debts that are the basis of a judgment.

We will be back next week to answer more questions. If you have any questions, call or email us at manderson@andersonshen.com.