Stopping Garnishment by filing a Bankruptcy

A lot of people have had their bank accounts garnished this week. My phone has been buzzing about it. I think the law firm of Messerli and Kramer must have been cleaning up their garnishment backlog over this past weekend or something.

So now I am having to explain that I can’t just create a bankruptcy filing to stop the garnishment inside of a few hours or even a few days. To be sure I am getting it right, I need somewhere around six weeks, maybe more, to put one of these bankruptcy cases together. A bankruptcy petition is a document that usually exceeds 50 pages. There are hundreds and hundreds of questions to be answered. The penalty for not answering correctly can include criminal felony charges. It just is not the sort of thing that should be slapped together in a rush.

There is a procedure for an emergency filing. It involves filing part of the bankruptcy petition, and then being allowed 14 days to get the rest done. I have done this in the past prior to the passage of the 2005 “reform” legislation, but since then I have been of the opinion that it’s too hazardous. It’s best to let them garnish away and get the bankruptcy done properly.

The filing of a bankruptcy does stop garnishment – immediately upon the filing of the case. It’s really nice that way. But if you may be vulnerable to a garnishment, don’t let it go. Get to a competent bankruptcy lawyer and get started now.

What to Bring to a Bankruptcy Hearing

At the outset let me say that this post is about the practices that I encounter here in Minnesota, mostly for cases right here in the Twin Cities. If you are from somewhere else, please consult an attorney in your own jurisdiction. Even though bankruptcy is based on federal law and should be about the same everywhere in the country, there are in fact tremendous variations from one locale to another.

Usually the only hearing there is in a Chapter 7 or Chapter 13 bankruptcy is a little proceeding they call the “Meeting of Creditors.” Sometimes it’s also called the “341” or “341 Meeting,” after the section of the bankruptcy code that sets up the hearing process. In this post when I say “hearing,” I mean this meeting of creditors.

This week I have had a hearing nearly every day, except for Friday when I had two. It is usually simple and short, possibly just five minutes, if the lawyer and the clients are properly prepared. But there’s nothing that can delay it worse or mess it up more than not coming to the hearing with all the required documents.

For most of these the required doucments fall into four categories, sometimes five. Here they are:

1. Driver’s license or goverment photo ID for each debtor.

2. Social security card. It’s surprising how many people can’t find this or have lost it a long time ago. If you absolutely can’t find your card, there are some substitutes that are acceptable. In general you can use anything that you have that has your social security number on it, AS LONG AS IT WAS CREATED BY A THIRD PARTY.

So a pay stub would work, since that is created by your employer. So would a W-2. Trouble is that most pay stubs don’t have the social security number on them anymore. It’s getting harder and harder to find a document that has it. Health insurance cards used to have them, but now most don’t. In this day of identity theft, the items that have a social security number on them are disappearing. About the only thing that I can use reliably is a W-2 or 1099. I usully can’t use a tax return, because that’s considered a self generated document – it’s not from a third party.

3. Most recent paystub from employment for each debtor. That is the pay stub that is most recent as of the date of the hearing, not the most recent stub from before the date of filing. The handout from the court which I have posted on my site says to bring “evidence of current income,” but I’ve never seen a trustee ask for anything other than a pay stub. I’ve never seen a person who gets a pension or unemployment be asked to produce evidence of that at the hearing. My experience also is that self-employed people don’t have to produce anything in this category – not at the hearing at least.

4. Bank statements for all open accounts which show what the balance was on the day the case was filed. If the account is open, you have to produce a statement for it. However, unlike the pay stub, this is not necessarily the most recent statement as of the date of the hearing. Usually the statement that comes in the mail at the beginning of the month following the filing of the case will do the trick. You have to be sure, however, that the date of filing is covered in the period included in the statement. In cases where my clients are unable to get a statment that came in the mail, I tell them to go on line or actually go to the bank and get a statement that includes about two weeks before the date of filing and two weeks after that date. Some of the trustees like to snoop through these statements, and I’m concerned that they would be disappointed if we just came in with one page that gave the balance on date of filing.

5. Additional information if the trustee requests it. The above four items or categories of items are all that’s required for more than 90% of the cases I handle. However, every now and then there will be a case where the trustee sends us a letter asking for more information. This could be almost anything, but the rule I follow is that if the trustee wants it, I tell my clients that we better provide it. Often these letters ask that the material be emailed to the trustee several days before the hearing.

Trouble over what to bring to the bankruptcy hearing.

I call it a “hearing.” The official name for the event which takes place about a month after filing a bankruptcy is “First Meeting of Creditors.” Since creditors hardly ever come, I have always thought this was a misleading name. It usually takes place at a federal courthouse in a room which looks very much like a courtroom. My clients are sworn in and questioned. If that isn’t a “hearing,” I don’t know what is.

There are certain things that a debtor is required to bring to this event. They include a picture ID, social security card, most recent pay check and bank statements covering the date the case was filed. It any of these items is missing, there is a big problem. Until the items are produced and given to the bankruptcy trustee, the whole process is held up.

Although I explain this as clearly as I can, both in direct conversation and in email, I seem to be having an increase in the percentage of clients who show up at the hearing without everything they need. One common problem is that my clients will assume that if a bank account has a negative balance, a low balance, or no activity for a long time, the trustee won’t want a statement for that account. I have recently started adding to what I used to tell my clients a whole extra spiel about these bank statements.

The trustee doesn’t care if the account has been there five years with only five dollars in it and no deposits or withdrawals. The trustee doesn’t care if the bank has quit sending statements and cut off on line access – which they sometimes do after a bankruptcy is filed when it’s a case where that bank is one of the creditors. If it’s any kind of bank account at all, and it was open on the day the case was filed, you have to have a statement for that account at the hearing, and that statement has to include the date of filing.

I am starting to tell my clients that if there is no other way to get a statement, please actually go to the bank in question and have them print you one. Even the banks that won’t send a statement, and who have cut off on line access, will still give you a statement if you go to the bank in person.

So that’s my rant for today.

Tucson till Tuesday

I’ll be out of town between Thursday November 5th and Monday November 9th, and will be back in the office on Tuesday morning, November 10th. I’ll be attending a weekend seminar in Tucson, AZ put on by the National Association of Consumer Bankruptcy Attorneys. They provide information that I can’t get anywhere else, and every once and a while I have to take a few days to soak it up as best I can. This time I will be doing a fairly intensive course that will be mostly about Chapter 13.

I have a pretty bad cold and I hope to get over it once I get to the desert climate. The high temperature in Tucson on Thursday is supposed to be 92.

Mortgage Modification Amendment Defeated in Senate

I just received an email from NACBA – National Association of Consumer Bankruptcy Lawyers. They say that the mortgage modification in Chapter 13 Bankruptcy amendment which NACBA was trying to get passed was defeated today in the Senate. The amendment in question was to be part of the Helping Families Save Their Homes Act.

I think that means it’s totally dead for this session of Congress. Had it passed, I was going to have to find a class or seminar to attend to learn what all the bill contained as finally passed. NACBA has it’s convention in Chicago at the end of this month, and I would have had to be sure that I got there. As it is, I can probably wait till next year without missing anything essential.

Recession Sing Along

While you are waiting to come down with the swine flu, you might want to have a good laugh. The funniest thing I’ve seen in a long time is a recession sing along at the Newsday web site. Click the following for a direct link to the animated video.

Maybe you have to be old enough to remember the West Side Story movie from the 1960s to fully appreciate this thing. I don’t see how the mortgage broker singing “I Feel Greedy” could quite have the full intended impact unless the viewer is familiar with the original “I Feel Pretty” from the movie.

A sales tax for filing bankruptcy? Some change!

It seems that the leadership of our Minnesota state legislature is considering slapping a sales tax on legal services. If they have to do that, I would suggest that there be an exception for legal services connected with bankruptcy filings. I just sent the following email to Minnesota State Representatives Kelliher, Sertich, Lenczewski and Benson; and to State Senator Bonoff:

I am a lawyer who does bankruptcy work. Many people who contact me cannot afford to file a bankruptcy the way it is. Adding a sales tax to my fee would make that much worse.
A sales tax for filing a bankruptcy. Some change that would be.

Warning about Debt Management Scams

I’m looking this morning at the March 15th tip of the day from Kim Komando. It’s a rather long article entitled Beware of debt management offers. She describes three different types of programs which one will find when running a Google search: 1) Debt negotiation, 2) debt consolidation, and 3) debt elimination. Personally I would like to add one more type: 4)debt management.

The third one – debt elimination – is always a scam. These are people who are trying to sell information that they claim is secret that you can use to make your debt just go away entirely. If anybody tells you they have that sort of a program, which sometimes is in the form of a magic form you can fill out and then send to the creditors, run away as fast as you can. There is no such program.

Debt negotiation or debt consolidation programs may or may not be legitimate. The Komando article suggests that you should make sure that any agency you use is licensed by your state and also accredited by one of two organizations, the National Foundation for Credit Counseling or the Association of Independent Consumer Credit Counseling Agencies. I would also suggest that you make sure they are on the approved Department of Justice list for counseling programs acceptable for the pre-filing and post-filing credit counseling required by the bankruptcy statute. You can find a link to the Department of Justice list of approved bankruptcy counseling agencies on my web page at http://www.mn-bankruptcy.com/chapter7.html. At that page click on “Credit Counseling Requirement.”

My two favorite local places to go for real counseling are Lutheran Social Services and Family Means. Both have offices fairly close to my office. Both are non-profit. Both do debt management, my Item 4 on the above list. Debt management might involve negotiation, but not necessarily. They are not trying to make money out of your desperate situation. They are tying to figure out how to get you on a payment plan that will actually work. And if that is a hopeless idea for you, they will tell you and suggest that you talk to someone like me.

Credit Card Industry Profits Increased

I find myself looking at a 32 page report, complete with colorful graphs and charts, written by a gentleman by the name of Michael Simkovic. Mr. Simkovic was a fellow in law and economics at Harvard Law School between 2006 and 2007. He published this report last July. His subject is the effect of the 2005 “Bankruptcy Abuse Prevention and Consumer Protection Act.” Many of us call that BAPCPA (pronounced “bapceepa“).

The report begins by reminding us that supporters had claimed that ultimately this law would benefit consumers, because it would lower the cost of credit card debt. The data shows, however, that while credit card company losses decreased, and the card companies had record profits, costs to consumers actually increased. “In other words,” says Mr. Simkovic, “the 2005 bankruptcy reform profited credit card companies at consumers’ expense.”

No big surprise there. But thanks to Mr. Simkovic for laying out the details and proving it beyond a reasonable doubt. This seems to be very consistent with a series of articles published in the Star Tribune last October which stated, among other things, that BAPCPA has been one of the contributors to our current economic meltdown.

"Enhanced"

The electronic sign over I-394 just a half mile here from my office says “Enhanced DWI Enforcement Thru Jan 1.” I don’t think they’re kidding.

“Enhanced” according to the old hard-bound dictionary on my desk means “to make greater” or to raise, intensify or heighten. It seems to be a term that is used a lot in connection with DWI. For example, if you have a second offense within ten years, that second offense is “enhanced” because of the first. Please remember that taxi cabs are really cheap compared to the cost of being arrested.

As I think I have mentioned earlier, I am noticing that the fact that one is considering or working on filing a bankruptcy seems to enhance to possibility of either being arrested for DWI or being injured in a serious accident. If you should happen to have bankruptcy on your mind, please keep a proper perspective. Focus on what you are doing, when you are doing it. It’s only money. You have more reason now than ever to properly care for yourself – including making sure that whatever you consume is in moderation.

close
Facebook IconYouTube IconTwitter Icon