- Prior to filing for bankruptcy, any creditor has the right to file a lawsuit and obtain a judgment against you for the debt you owe. Once your bankruptcy case is filed, any civil litigation that hasn’t begun is prevented and any civil litigation that is pending is terminated.
- Creditors who believe that they can make a criminal case for fraud can press charges with the appropriate prosecuting agency. Bankruptcy does not stop these proceedings.
- If a creditor believes they can make a case for fraud or misrepresentation (523(a)(2)), fraud or embezzlement in a fiduciary capacity (523(a)(4)), or willful or malicious injury (523(a)(6)), then they can file an adversary proceeding to have the debt declared non-dischargeable.
- Enforce a civil judgment that is discharged in bankruptcy. Civil lawsuits and judgments – in and of themselves – are not special debts. Just because a judgment has been entered against you does not mean that the debt cannot be discharged in bankruptcy.
- Creditors cannot seek to collect a debt by threatening criminal prosecution. What does that mean? It means that if they think they have a criminal case, then they should just press charges. They cannot try to strike a deal with you where they drop the charges in exchange for payment from you. If they do, then they are potentially guilty of two things…
- If a bankruptcy case has been filed and they make these threats, then they are in violation of the automatic stay. Acts of criminal prosecution are distinguishable from threats of criminal prosecution. The former is not stayed by bankruptcy, but the latter is stayed. Desert Palace, Inc. v. Baumblit (In re Baumblit), 15 Fed. Appx. 30, 35-36 (2d Cir. N.Y. 2001) and Batt v. Am. Rent-All (In re Batt), 322 B.R. 776, 779 (Bankr. N.D. Ohio 2005).
- Even if a bankruptcy case is not filed, they would be guilty of criminal extortion in Wisconsin, under Wis. Stat. sec. 943.30.
- Under state law, the redemption period ends once the house is sold at the sheriff’s auction. Under this deadline, the client has only given me a couple of hours to do what ought to be done over the span of – at minimum – a couple of weeks.
- Judge Kelley, a bankruptcy judge here in the Eastern District of Wisconsin, has ruled that debtors can still stop a foreclosure up until the date that the sale is confirmed by the state court. Confirmation of sale typically takes place about two weeks after the Sheriff’s Auction. In re Wescott, 309 B.R. 308 (Bankr. E.D. Wis. 2004). Under this deadline, we’ve got a little more time to get the case ready to file – but still not very much time.
- Bankruptcy is complicated. Chapter 13 is even more complicated than Chapter 7. If you are going to use Chapter 13 as a vehicle to save your home, you want to give yourself plenty of time to appreciate what you’re getting into. If you call an attorney the night before the Sheriff’s sale, then you’ll be forced to make a lot of quick, snap decisions that you may regret later. You’ll also want to allow yourself plenty of time to ask questions.
- On that same note, it does take an attorney some time to prepare your case properly. Filing a “bare bones” petition is dangerous. If the attorney has not had sufficient time to interview you properly, review your case properly, do his due diligence and research, and to advise you of important information before your case is actually filed. Asking an attorney to slap together a petition and schedules in a short period of time virtually guarantees slop work, and that could cause big problems later on. You should allow at least 6 weeks for good, thoughtful preparation.
- You’ll have less to pay! In most Chapter 13 cases, you’re proposing to cure the default. Each month that passes between your initial missed payment through the Sheriff’s sale just adds to your bill to the mortgage company – to say nothing of late fees, penalties, and interest. The sooner you can file a bankruptcy case, the less you’ll have to pay back to the mortgage company.
Side Note: Certain decisions simply should not be rushed into. If you need to file bankruptcy to save your home from foreclosure, I personally recommend that you give your attorney at least six weeks of lead time. Why? Certainly not because it takes that long to prepare a case. However, there is a difference between filing a case and filing a case properly. If you actually want your case to go smoothly and succeed, you’re going to want your case filed properly. It doesn’t take six weeks to draft schedules or any of the other things involved in preparing a case. But you should give your attorney six weeks for two reasons. First – so your attorney isn’t rushed. So your attorney has plenty of time to review your case, to make sure that all T’s are crossed and I’s are dotted, to make sure that all supporting documents have been assembled, etc., etc., etc. The second reason is actually for your benefit. Rushing into Chapter 13 is a bad idea. It’s a 3-5 year commitment that requires adherence to a disciplined budget. Giving at least six weeks’ notice will give you ample time to prepare yourself for what you’re about to commit to.
Notwithstanding subsection (b)(2) and applicable nonbankruptcy law — a default with respect to, or that gave rise to, a lien on the debtor’s principal residence may be cured under paragraph (3) or (5) of subsection (b) until such residence is sold at a foreclosure sale that is conducted in accordance with applicable nonbankruptcy law.
Debtor defaulted on the monthly payments of his home mortgage with the creditor. The creditor commenced a foreclosure action and a court entered a judgment of foreclosure. After a six-month redemption period, the creditor purchased the property at a sheriff’s sale. Before the foreclosure sale could be confirmed by the state court, debtor filed a Chapter 13 petition. In his Chapter 13 plan, debtor proposed to resume making regular monthly payments to the creditor on the mortgage, and to pay the pre-petition arrearage through the Chapter 13 trustee. The creditor objected on the ground that debtor could no longer use Chapter 13 to cure the mortgage default and reinstate the mortgage. In overruling creditor’s objection, the court held that under state law debtors retained the right to redeem property at any time prior to sale, and that the sale occurred upon confirmation by the court. The court held that, because debtor could redeem after the foreclosure sale and before confirmation, debtor could cure his defaults utilizing 11 U.S.C.S. § 1322(c)(1).In re Wescott, 309 B.R. 308 (Bankr. E.D. Wis. 2004)
- The maximum amount that can be garnished is 20% if your “disposable earnings” (your gross wages, minus amounts taken out for federal tax, state tax, and social security taxes, but does not include other deductions such as insurance or union dues). If you have child support deducted from your paycheck, then the combined amount of child support deductions and the wage garnishment can be no greater than 25% of your disposable earnings.
- Garnishments typically last for 13 weeks. They can end sooner if the underlying debt is fully paid. They can be extended for a longer period either by stipulation, or by a new application that takes effect after the first 13 week period is up. Also, public employees can be garnished until the debt is paid off.
- You can only be garnished by one general creditor at a time (does not include tax levies, federal student loan levies, and child support).
- You cannot be fired solely because of a wage garnishment (though most employment in the United States is “at-will” employment, which means an employer can fire you for any reason or no reason at all, so long as it is not solely for a discriminatory reason). There is also an exception to this rule if you have a collective bargaining agreement that permits termination under such circumstances.
- You may dispute a wage garnishment. To do so, click here for the form. Send a copy to the Clerk of Courts, the creditor and/or the creditor’s attorney, and your employer. Your employer must not garnish you if you file one of these responses, unless and until the court overrules your application and directs the employer to proceed with the garnishment. Your employer must wait at least 5 days after your pay date before sending garnished funds to the creditor, to allow time for you to file a dispute.
- Most creditors cannot touch certain types of income (such as social security). However, if you owe debt to the government, social security and other types of income can become fair game.
- You have filed bankruptcy and the automatic stay is still pending. (In pending Chapter 13s, only until property of the estate revests back to you.)
- You have received a bankruptcy discharge, and the debt was incurred before your bankruptcy case was filed.
- Your household income is below the federal poverty guidelines.
- If your household income is above the federal poverty guidelines, but the garnishment would bring you below the guidelines, you can only be garnished to the extent that it brings you down to the poverty guidelines.
- Currently, or in the past six months, you have received – or determined to be eligible for – public assistance (food stamps, W2, SSI, etc.).