Self Employed Contractor

[DaisysMom]

I am a self employed contractor. I have several credit card companies after me and I can't file BK for another couple of months. It's been about 1.5 years since I made a CC payment. Can my wages be garnished?

Thank You DM

[keepsmiling]

In NJ it is called "motion to turn over funds out of income". Not sure what your state law would be but could be something similar.

[GoingDown]

While it is technically possible to attach self-employment income, it is very rarely ever done because it is so very difficult, time-consuming, and expensive for the creditor in terms of legal fees, attorney costs, court costs, depositions, debtor's exams, etc.

My advice to you is to NOT talk to them. Don't tell them any more than they may already know about your income as a contractor. If you don't tell them, there is a chance that they may never know about it.

I have heard from debt collectors that for all practical purposes, if a person is self-employed, it's not worth their time, effort and expense to go after them. They are in essence, judgment proof. Debt collectors love to go for wage garnishment because then they are dealing with a third party (your employer) and getting the money from them instead of you.

Think of how easy it would be as a self-employed contractor to simply switch over to a cash basis where your customers pay you with cash or with a check, and rather than depositing the check, you simply go to their bank and stand in line and cash their check. Where is the paper trail for the debt collector attorney to follow to prove how much money you made that month? It is a nightmare for debt collectors to go after self-employed individuals.

You haven't even been sued yet, right? And you're going to file bankruptcy in the next 6 months? If so, don't worry about it. By the time they got around to suing you and going through the huge amount of effort and expense to get at your business, you can file BK and their judgments would become worthless.

[DaisysMom]

Yeah....I could do that...just go to the bank and cash the checks.

And, no, I haven't been sued yet. They haven't even threatened me yet...although they call me, whining all the time about trying to get a hold of me (they have some very good offers, lowering my debt amount..lol.)

I do own my home, but the equity amount is way below the exemption amount for my state..Ohio. Could they put a lien on the house? I have about $15,000 in equity, but the exemption is over $25,000. So I'm under the exemption amount by 10K.

Maybe I am judgment proof???

TY for your responses!! DM

[ryan]

... I have heard from debt collectors that for all practical purposes, if a person is self-employed, it's not worth their time, effort and expense to go after them. They are in essence, judgment proof. Debt collectors love to go for wage garnishment because then they are dealing with a third party (your employer) and getting the money from them instead of you.....

This may be generally true, but with many exceptions as well.

I, for example, am very obviously self-employed, CC's have known my status for years, and have been sued twice already, (just 7 and 9 months after default) by big CC's. Merely being self-employed by itself, may not be enough protection from creditor legal action.

I will agree that ACTUALLY GETTING MONEY from a self-employed debtor can be very tough for creditors. Some types of self-employment lend themselves to it more than others.

For instance, if you have an identifiable store, they can try to do a "till tap" where they get a court order to literally walk in and take all the money in the cash register(s)....not common, but is supposed to scare the crap out of the debtor and force him to make payment arrangements, etc.

If you have long term identifiable clients, who pay you every month, judgment holder can get a court order to force the clients to stop paying you, and pay the creditor instead. Again, this is not common, but has happened.

A lone wolf consultant type self-employment or independent contractor would be the hardest to get anything out of.
Their main method would probably be to try and levy your banks accts. I do believe operating on a cash basis as a business to try and avoid this, would be possible, but also a real pain in the ......

[DaisysMom]

I have about $15K in home equity and the exemption is about 25K, so does that mean they can't put a lien on my home?

And TY all for your responses...this is a wonderful resource!!!

DM

[ryan]

I have about $15K in home equity and the exemption is about 25K, so does that mean they can't put a lien on my home? ...

Just make sure that you find out the appropriate court procedure to assert your exemption...otherwise I have seen it where the debtor's exemptions are ignored by the court and garnishments and levy's occur. It's the debtor's responsibility to do this, the court won't initiate it for you.

[catleg]

I have about $15K in home equity and the exemption is about 25K, so does that mean they can't put a lien on my home?

And TY all for your responses...this is a wonderful resource!!!

DM

A creditor with a judgment can put a lien on your home, even if you are underwater. The idea is that hopefully someday you'll sell and have positive equity to pay them off, which would be required by the buyer's title insurance to get clear title.

However, as long as your equity (even if it is zero) is less than the homestead exemption then the judgment is said to "impair the exemption" and it is voidable after a bankruptcy.

[GoingDown]

This may be generally true, but with many exceptions as well.

I, for example, am very obviously self-employed, CC's have known my status for years, and have been sued twice already, (just 7 and 9 months after default) by big CC's. Merely being self-employed by itself, may not be enough protection from creditor legal action.

I will agree that ACTUALLY GETTING MONEY from a self-employed debtor can be very tough for creditors. Some types of self-employment lend themselves to it more than others.

For instance, if you have an identifiable store, they can try to do a "till tap" where they get a court order to literally walk in and take all the money in the cash register(s)....not common, but is supposed to scare the crap out of the debtor and force him to make payment arrangements, etc.

If you have long term identifiable clients, who pay you every month, judgment holder can get a court order to force the clients to stop paying you, and pay the creditor instead. Again, this is not common, but has happened.

A lone wolf consultant type self-employment or independent contractor would be the hardest to get anything out of.
Their main method would probably be to try and levy your banks accts. I do believe operating on a cash basis as a business to try and avoid this, would be possible, but also a real pain in the ......

Yep, what you said is true for things like stores, etc., where there is a till to tap.

I don't think she was talking about that sort of thing.

And for long term identifiable clients, they would need to do a debtor's exam to find the info. Which is expensive and rare. And personally speaking, I might get a bit of memory loss when someone asked me about my long term customers, or I might give them information about some very old customers who have died. It would be exceedingly hard for the collector to prove anything without a paper trail, which is what the self-employed person could do if they went on a cash basis. Standing in line to cash a check is not that hard, and it sure beats giving it to the debt collector.

[GoingDown]

A creditor with a judgment can put a lien on your home, even if you are underwater. The idea is that hopefully someday you'll sell and have positive equity to pay them off, which would be required by the buyer's title insurance to get clear title.

However, as long as your equity (even if it is zero) is less than the homestead exemption then the judgment is said to "impair the exemption" and it is voidable after a bankruptcy.

Yep, this is true.

[Nicollette]

I am a self employed contractor. I have several credit card companies after me and I can't file BK for another couple of months. It's been about 1.5 years since I made a CC payment. Can my wages be garnished?

Thank You DM

I noticed you're from Ohio, and yes, your wages can be garnished because mine were up until I filed BK.