A person who is drowning in debt may make the mistake of ignoring his or her creditors. A common misconception is that ignoring a debt will make it go away or help it become more manageable. In reality, pretending a debt does not exist only makes creditors more aggressive, and when it becomes clear that you will not pay them voluntarily, they will begin exploring other methods to extract money from you. One way a creditor may obtain money owed is by getting a

What is a Garnishment?

Garnishment refers to garnishing, or collecting money on behalf of a plaintiff, from the funds of another person. Typically the plaintiff is someone who is owed money by a defendant, and garnishments can be used by major companies, law firms, or even average individuals. The garnishment allows your creditors to obtain the money you owe them through means outside of the collection actions with which most are familiar.

The Garnishment Process and How it Affects You

Once you have fallen significantly behind in payments for a debt, your creditor may take you to court to try and collect their funds.  This method is often used when the debt is unsecured since they have no property such as a vehicle or home to repossess. If the court agrees that the defendant (debtor) needs to pay the debt, then the creditor receives a judgement.  

After the judgement is received a creditor may request a post-judgment garnishment order. The process and secondary order affect you by allowing your creditor to send the garnishment order directly to any person who holds your money or property. As soon as your creditor has a garnishment order, they can contact your employer or bank to have money withheld from your paycheck or withdrawn from your bank accounts.

How to Stop a Garnishment

Finding out that you have a garnishment can be financially devastating, but it is not the end of the world. It is possible to object to the garnishment in writing and make outside arrangements to pay the debt, allowing the garnishment order to be canceled. However, this method is time-sensitive and may not always work. If a creditor has failed to get you to honor other arrangements or the court itself does not agree with the plan, then the garnishment order may remain active. Alternatively, filing for bankruptcy stops all collection activities including garnishments under the automatic stay giving you an opportunity to find a way to recover financially.  

Contact an Attorney

If you have been taken to court or fear that you may have your bank account or income source garnished, then it is important to reach out to an attorney as soon as possible. Timely advice may help you avoid being forced to file for bankruptcy and could save you significant financial hardship. The garnishment attorneys at Resnick Law have experience helping people in situations just like yours. We work with you to make sure that the best choices are made and are available to answer any questions that you may have. Call us today at 248-642-5400 to schedule a free consultation so that we can begin providing you with the legal assistance that you need.

(image courtesy of Pepi Stojanovski)

Creditors would generally prefer to be able to collect a debt from a debtor simply by sending the debtor a bill and receiving immediate or gradual payment from the debtor. Unfortunately, not all debtors pay their bills on time, and some do not pay the debt at all. When a debtor defaults on a debt, the creditor has to decide how to best collect the debt.

Creditors who make the decision to file a lawsuit to compel a debtor to pay a debt may do so in order to preserve their rights. If a debt goes unpaid for a certain period of time, the debt can become unrecoverable through a lawsuit. This period of time is known as the statute of limitations and can be used as a defense by a debtor. Therefore, a creditor can file a lawsuit before the time is up in order to stop the debtor from raising this defense.

If the debtor chooses not to participate in the lawsuit, the court can automatically rule in the creditor’s favor, and grant a default judgement. Even if the debtor does not pay the judgement awarded in a lawsuit, the creditor can use the judgement to take other collection actions, such as wage garnishment.

The preservation of the creditor’s rights by avoiding a statute of limitations defense is one of many considerations that go into the decision to file a lawsuit. Another major concern is the cost of litigation to preserve the creditor’s rights. If the cost of filing a lawsuit and litigation to collect the debt is more than the debt, the creditor may decide to write off the debt.

In many cases, especially if the debt is small and it would cost the creditor more to try and collect the debt, a creditor may decide to turn the debt over to a collection agency. In some cases the creditor sells the debt to the collection agency for less than the debt owed.

It is more difficult to collect a debt that is unsecured if the debtor files for bankruptcy. A bankruptcy trustee usually pays off secured debts first, and then unsecured debt may be paid off for a fraction of what is owed. In some cases, unsecured debts are not paid at all. If commercially possible, creditors should ensure that all credit extended to debtors is secured by some collateral. Securing a debt can also be useful before a debtor files for bankruptcy.

A creditor can use a lien to foreclose or repose property that secures a debt and force its sale to pay the debt. Arranging a sale of repossessed property usually requires taking certain steps to ensure the best price is paid for the repossessed property. Before organizing a sale to recover a debt, the creditor should consult an attorney to ensure that they do not violate the debtor’s rights when executing the sale.

Contact Us for More Information

For more information on how you can best collect a debt with minimal costs to your organization and how to deal with debtor bankruptcy, you need to consult an experienced creditor’s rights attorney. Contact us at Resnick Law, P.C., in Bloomfield Hills and Detroit, Michigan to schedule a consultation.

(image courtesy of Fabian Blank)

A person can file for bankruptcy under several different chapters of the Bankruptcy Code. People seeking a clean slate and to avoid having structured payments often chose to file under Chapter 7 of the Code. Generally, a person who receives debts as part of a divorce can discharge that debt as far as the creditor is concerned along with all his or her other eligible debt in a Chapter 7 proceeding. This would practically mean that the person will no longer owe the creditor the debt after the bankruptcy discharge.

However, this move can have negative consequences for the filer’s former spouse. The creditors are not parties to the divorce and do not have to abide by a court’s order for one spouse to take on the debt. Therefore, after the filer’s debt is discharged, the creditor can still seek the debt owed from the other spouse. Because of this, the law allows the former spouse of a person who files for Chapter 7 bankruptcy to continue to pursue payment of the debt from the filer as if the debt is owed to the former spouse directly and not the creditor. Therefore, the debt is not truly discharged.

This means that while the creditor cannot legally sue the filer for a debt discharged in a Chapter 7 bankruptcy, the filer’s spouse can seek to enforce the divorce decree by having the filer held in contempt for failing to pay the debt. In addition, the former spouse can seek enforcement by taking steps such as putting a lien on the filer’s assets in order to ensure the debt is paid.

Additionally, Chapter 7 bankruptcy does not allow a person to discharge debt that is considered support debt following a divorce. This means that debts incurred for child support or marital support payments are not dischargeable in a Chapter 7 bankruptcy even after other debts are discharged.

Filing for Chapter 7 bankruptcy to help manage divorce debt is not necessarily a bad idea in all cases. For example, filing under Chapter 7 can allow a person to free up more money from having to pay the dischargeable debts and use that money to pay the divorce debt. However, there may be a better option to discharge divorce acquired debt under Chapter 13 bankruptcy.

Contact Us for Legal Advice

In order to make the best decision for your situation, or to decide if bankruptcy is right for you, you need to have a detailed discussion with an experienced bankruptcy attorney. For more information about how to deal with debt incurred as a result of a divorce, contact our experienced bankruptcy attorneys at Resnick Law, P.C., in Bloomfield Hills and Detroit, Michigan.

(image courtesy of Glen McCallum)

Debt settlement is a process by which a debtor settles a debt to a creditor for less than the total balance of the debt owed. Creditors realize that they are not able to collect the full amount by debtors 100% of the time. Therefore, where there is a chance of settling the debt, a creditor may be willing to take the lower settlement amount than risk never getting paid at all. Some debts, such as a mortgage or a car loan, are not generally settled, and bankruptcy may be a better way to resolve these debts.

Creditors are generally under no obligation to settle debts. However, through negotiation, some creditors may be willing to take a lower settlement amount. Negotiating with creditors can be tough, and in most cases, having a skilled negotiator with experience handling debt settlements can make a big difference. If the creditor agrees to a settlement, there are some things to keep in mind.

• The amount of the debt that gets cancelled in the settlement becomes taxable as income if it is over a threshold amount. This means that if a person owes $20,000 to a creditor, and settles the debt for $15,000, the debtor will owes taxes on the $5,000 that is cancelled. This sometimes comes as a surprise to debtors because they never actually receive $5,000 in cash or in their bank accounts, but the tax still attaches to the money.
• In order to ensure that the debt is truly settled, you must have it in writing, and confirm all the terms of the settlement are what you understand them to be. This is where having an attorney handling the debt settlement can come in handy. An attorney can negotiate on your behalf and ensure that, under the terms of the agreement, you do not end up owing any hidden fees, and that your debt really is settled.
• Even with debt settlement, your credit will still be negatively affected. However, if you are significantly behind on your bills, the settlement may not make as big of an impact on your overall score. Additionally, even with debt settlement, payments can be spread out over a period of time, and while making payments may help overall, it will not mean an immediate improvement in your credit score.

Call Us for Legal Assistance

Before you decide how to best deal with mounting debt, you need to know all your options. To schedule a consultation to discuss bankruptcy, debt settlement, and other ways you can manage your debt, contact us at Resnick Law, P.C., in Bloomfield Hills and Detroit, Michigan.

(image courtesy of Fabian Blank)