Secured debt vs unsecured debt: a legal injunction by a credit card company

[Mirkosan]

Greetings: Apologies if this issue has been posed already. I'm new to this forum and am filing on my own using the Nolo book.

My question is regarding the following: Discover Bank filed an injunction against me for credit card debt I owe. I had no funds to pay them, and so pretty much just ignored it figuring they can't get water from a rock.

Now, a year and a half later, they garnished everything in my checking account (I had a loan from my mother in there to pay back taxes). This is why I'm declaring bankruptcy although my total debt is less than $30K. I'm stunned Discover thinks I have anything at all to give (unemployed for three years now, no assets whatsoever).

My question is what kind of debt is the Discover Card now that it has been sanctioned by a court? Is it secure now? Or should I list it with the rest of the unsecured debt?

Thanks in advance!

[tobee43]

no, it's not a secured debt. it's a judgment. they can put a lien on any of your assets, and the bad news is they can keep hitting your bank accounts until you stop putting money into them.

when you file your bankruptcy, you must list the docket number of the law suit that discover card filed and make certain it is listed in appropriate part of the petition. once your bankruptcy is closed and discharged you must go back and file a motion to vacate the judgment from discover card to get it off your back. while, they can no longer collect the money, it will still be an actual judgment until the order is signed by the judge to get it removed.

in the meantime, proceed cautiously with using your bank accounts. as what they do is wait until a amount has built up that peeks their interest and them slam you. they have people that just check your accounts daily. terrible!! but true.

best of luck! and welcome to the forum!!! keep posting your questions there are many here to help you

[Mirkosan]

Thank you Tobee43! This was very, very helpful! So I suppose I list the Discover Card unpaid balance in "unsecured", and the judgement in the part that asks if I've been involved in any lawsuits or court actions?

Regarding bank accounts, yes, you have confirmed my new-found paranoia about using them until all this is settled. So glad the US mail is still functioning so I can buy money orders to pay my bills.

[sh9730]

Also, make sure you list this garnishment in your filing as the trustee may consider it a preferential payment (not your problem) to Discover and claw it back to spread it around to others depending on the timing of the garnishment vs filing and how much it is - (may not be worth his time).

[HHM]

You need to check to see if the judgement has been recorded. There are two places judgments get recorded, the "county" (to put a lien against any real estate you own) and the "secretary of state" (to put a lien against all other personal property you own). If the judgment has been recorded in one or both places, it is now secured.

[Mirkosan]

Much appreciated. It makes an otherwise easy bankruptcy (NO ASSETS, single, no anything of value) complicated. They garnished all of $911, but this was, to me, a whole lot of money.

[btbeme]

I'll add a small bit - after you file, you would expect to have the appropriate court(s) notified of the BK. I would recommend that you follow up at two points - once after filing (give them a few days) and again after discharge to ensure that the proper notification and reactions have taken place. Don't assume that everything goes smoothly, even though it does 99% of the time. It is worth your time to do so.

[Mirkosan]

Thanks all! I'm due in court in a little over a week to challenge the garnishment (why not?). I figure that would be an appropriate time to mention the bankruptcy again (I've already informed the court and Discover's horrific lawyers of the decision to declare bankruptcy when I sent in the challenge). Planning on filing the BK paperwork before then, and hoping I get it right. Going to print out all the comments here--they've all been really helpful. Good to know people with knowledge about this stuff are willing to share!

[LadyInTheRed]

I'm due in court in a little over a week to challenge the garnishment (why not?).

The more important question to ask is "why?" Do you have a basis on which to challenge the garnishment? Your impending bankruptcy filing is irrelevant to the validity of the garnishment.

[tobee43]

You need to check to see if the judgement has been recorded. There are two places judgments get recorded, the "county" (to put a lien against any real estate you own) and the "secretary of state" (to put a lien against all other personal property you own). If the judgment has been recorded in one or both places, it is now secured.

how so??? if one doesn't own property, and closes one's bank account what then is the basis of the security?? unless the lien is attached to a car, a house, explain more in detail how it can be a secured judgment when one owns nothing? when there is no physical asset and one only has the possibly of a wage garnishment or grab a bank account. once the bk is filed and the a motion to vacate is ordered the judgment is gone. ( not really, one must work endlessly to get it off the record even after the motion has been granted).

inquiring minds would like to know.

also, whether secured or not, the process would not differ, as one would still have to go in and file the motion to vacate the judgment, which i understand there maybe time variances state by state. i.e. florida it is one year, while nj is immediate.

[tobee43]

Thank you Tobee43! This was very, very helpful! So I suppose I list the Discover Card unpaid balance in "unsecured", and the judgement in the part that asks if I've been involved in any lawsuits or court actions?

Regarding bank accounts, yes, you have confirmed my new-found paranoia about using them until all this is settled. So glad the US mail is still functioning so I can buy money orders to pay my bills.

postal money orders are great to pay the bills.

i didn't have the full story about your pending garnishment. as lady points out the pending bk will most likely impede that situation.

[frogger]

what then is the basis of the security??

I would like to know that as well.

A judgment is a "secured" debt, however if it has no physical property that secures the debt, then what is that basis?

I see many "secured" debts/judgments that are demoted to general unsecured debt because the judgment has nothing that is attached to and interferes with your allowed exemptions. A motion/pleading to the bk court results in the debt not being secured.

[Mirkosan]

Okay, I haven't filed yet, and meanwhile I got the papers saying I can challenge the garnishment, which seemed like it was worth the effort as I really needed the funds (a mere $1000) to pay back taxes and simply to live off of. I earn a bit in my freelance gigs, although nothing on a steady basis, so I averaged the sums I got over the last three months and challenged on the basis that they did not leave me with 75% of wages. There is also the exemption whereby one is allowed $217.50 per work week. The hearing is in a week, so perhaps I should wait to file until after I get the result.

[Mirkosan]

The garnishment occurred and was, considering my financial situation, devastating. I cannot live without a secure bank account. Ironically, it is an impediment to my freelance work, which I'm working hard at developing into a steady income. I have to get these guys off my back. I would like to get some of the funds back, though, too.

[Mirkosan]

Seems to me the exemptions I qualify for are "217.50 per week", and perhaps, also, "75% of wages", although what I earn as a freelancer translator, editor, and custom paper writer is hardly a living wage.