This blog focuses on what a creditor can do once they've won the lawsuit against you. So let's assume you owed $10,000 on your Bank of America credit card. You fell behind on your payments, you got sued, and you lost the case.
Once you've lost, there is officially a "judgment" against you on the court records. This could mean several things as follows:
1) The judgment could create a "lien" against any real estate that you own now or will own in the future. A lien is invisible, and it's sort of like placing a hold on your real estate. This "lien" is powerful protection for the judgment creditor because if you try to sell or give away your real estate and someone does a "title search" on you, you will learn that you can't sell your real estate without paying off the judgment creditor. This might come as a total shock to many people. The lien results from the judgment, and once Bank of America (BOA) has a judgment against you, it stands to reason that BOA is going to do everything in their power to try to collect the money you officially owe them. So placing a lien against you is just one of the ways they can try to get their money.
When BOA places the lien on your property BOA realizes that it is not very likely that you are going to sell your property right away, so this lien is sort of like long term protection for BOA - if they don't get their money from you soon, at least they know that they will eventually get it with interest when you sell the real estate.
But let's not be naive about this. Most creditors want their money now. If not now, then as soon as possible. And they can get their money sooner by exercising one of the following powers that the law gives them.
2) Freeze or "Levy" of your bank accounts. A client I recently filed bankruptcy for came to me almost in tears. A smart judgment creditor used the power of the county court officer to find out where my client had her bank accounts. She owed this creditor about $10,000, and not too long after the creditor obtained a judgment against her, the attorney learned that she had four different bank accounts.
The judgment creditor didn't waste any time at all. The attorney got the local sheriff's officer to place a freeze (also called a levy) on four bank accounts that she had at a local bank. She had about $6000 in the accounts and boy was she surprised when she found out that she couldn't touch her money, and she couldn't pay her bills. I think she also had a few checks that bounced as a result of the levy.
Fortunately, she decided to file for a chapter 7 bankruptcy, and filing a chapter 7 will normally release the money from a frozen bank account if you act quickly.
Even before she filed her bankruptcy, we called the attorney for the creditor and asked them to release $1000 from one of her accounts to her immediately. The attorney's office agreed to do so, not because they decided that they would be nice to my client, but because they had to do this.
The reason they released the $1000 was that New Jersey has what is known as an "exemption" law. The purpose of this law is to protect people that have been sued from losing every last dollar they have. Here's what I mean. My client had $6000 in the bank, and couldn't even access one dollar out of her account. But because we know about the exemption law, we got the creditor's attorney to release $1000 to my client. The government says that the first $1000 is protected from the creditor getting that money. But you won't get it released if you don't ask for it to be released. So it definitely helps to know the law in this situation.
Hopefully this knowledge will help people who get their bank accounts frozen:
a) If you have less than $1000 in the bank, tell the creditor that you want to claim your $1000 exemption, and ask them to release all of the money to you. If they play hardball and refuse to release it, you can call the court clerk and file a "motion to release levied funds", and the judge will likely sign an order which will require the creditor to release the money to you.
b) If you have more than $1000 in the bank, ask the creditor to release $1000 to you immediately. Hopefully they will cooperate and do so, but if they refuse, then just follow the advice I gave in a) above, and file a motion to release levied funds in the amount of $1000.
c) Here's another piece of useful information that will hopefully help you: If the money in your bank account has come from social security, unemployment, disability, worker's compensation, or welfare, guess what? All of that money is "exempt". So if the creditor froze your account, and the money in your bank account came from a source that is legally exempt, the creditor has to release it back to you as soon as you can prove to them where that money came from. If they give you a hard time, call a knowledgeable lawyer who knows what to do to protect your rights.
3) Most creditors know exactly what they can legally do to try to collect on their judgments, so don't expect them to stop after they have put a lien against your real estate and put a levy on your bank account. Creditors have more arrows in their quiver, if you know what I mean. So the other thing that is likely to happen is that the creditor will ask the court to permit them to take money out of each and every paycheck you get in the future until they are paid in full.
How much money, you ask? Well, it depends, but most of the time it is about 10% of your gross paycheck. So if you make $800 a week before taxes, they might take $80 from every paycheck until they are paid in full. Now you do have a right to object to this process, which is known as a wage garnishment or an execution against wages. If 10% out of your paycheck creates an undue hardship, you have the right to ask the judge to lower it.
You should also know that if you file for bankruptcy, you can usually stop the wage garnishment, and you can usually get a frozen bank account released, but you must act quickly. And here's one additional bonus. If the creditor has taken $600 or more out of your paycheck within the last 90 days before you filed bankruptcy, there is a good chance that your lawyer might be able to get the creditor to give all of that money back to you once your bankruptcy is filed.
So now you know that creditors have a lot of rights once they have obtained a judgment against you. One more thing to point out is that you can almost always try to make some kind of settlement with your creditors. For example, I recently had a client that owed about $23,000 on her credit card, and after a little bit of negotiation, the creditor was willing to settle for just $7000. That's a saving to my client of $16,000 as a result of just my talking to the collection agent and making him aware of my client's limited assets, and the fact that they might get zero if my client decided to file for bankruptcy.
We do a lot more than just file bankruptcy for clients. If you ever want to engage in debt settlement and pay a creditor a lot less than the full amount that you owe them, you can call some internet company that you never heard of (and you don't even know if they are a scam or a sham) and see if they can help you (and how much they are going to charge you), or you can call a local attorney that you can see, personally talk to, check out, and then decide if you want that attorney to help you.
And if you want to talk to Seymour, and ask him to be your Underdog Advocate, you can call him, and you can also check out his website for lots of helpful blogs, videos, and other information. www.wipeoutyourbills.com