Bets On Who Is Going To Blink First (Mother vs Cap. 1)

[BrokeIn2010]

My mom got sued over a Cap. 1 card. She had tried on of those Debt Management things (trying to avoid filing BK) and got took. She was under the impressions (from their own forms) that they were going to settle the bills and the they were working with his creditors. Long story short, in May Cap. 1 sued, and are no claiming that they never spoke with the DM agency of received dime one from them.

She goes to the family attorney, he pushes off the court date. Says "Don't talk to them, I'll talk to them". Fast forward to this past week: They're got a new court date (next week) and no Mom's attorney is trying to get them to settle or set up a payment plan through his office. He hasn't heard back from them, and he's thinking they're going to take it right up to the courthouse steps hoping she'll settle for at least 60+%.

He's filing a BK case for them in January, but he doesn't want them to get a judgement cause he doesn't want them to get a lien on the house; cause if they get a lien on the house and she misses just one of the court arranged payments (before the BK is filed and the stays kick in) on the judgement they could force a sale of the house.

I asked about the lien, and he says that they can't force a sale of the house unless she refuses to pay the judgement and/or doesn't discharge the underlying debt in a BK action. And they won't get the lien next week, they'll get a judgement and then (if they can get a date before he files the BK) they'll be a second hearing/discovery where they'll put in their requests for whatever collections of liens process they'll take. Does that sound about right?

[AngelinaCatHub]

Everything sounds about right except the lien forcing a sale. Usually a lien will be against the house and even in bk won't be lifted. A Judgment can be set aside. But a lien is satisfied upon payment when a thing is sold. It cannot force a sale unless TN law is far different from most other places. I doubt that any Judge would put a person on the street for a CC balance. 'Hub

[BrokeIn2010]

That's what I always thought. But her attorney told her that if they get a judgement and get the lien during/after the asset discovery they can use it to force a sale if she misses a payment. Apparently that's why he trying to settle it, even though he's filing a Ch. 7 in a couple months: he doesn't want them to try to force a sale through the BK court.

[AngelinaCatHub]

That's what I always thought. But her attorney told her that if they get a judgement and get the lien during/after the asset discovery they can use it to force a sale if she misses a payment. Apparently that's why he trying to settle it, even though he's filing a Ch. 7 in a couple months: he doesn't want them to try to force a sale through the BK court.

I agree that it is best not to get a Judgment. Why can she not go bk sooner? 'Hub

[AngelinaCat]

Your mom could file an Emergency Petition. Then she has 15 calendar days to get the rest of the schedules submitted. But that filing date and case number will kick in the Automatic Stay.

[BrokeIn2010]

Your mom could file an Emergency Petition. Then she has 15 calendar days to get the rest of the schedules submitted. But that filing date and case number will kick in the Automatic Stay.

I'll let her know and have her give the lawyer a call.

I agree that it is best not to get a Judgment. Why can she not go bk sooner? 'Hub

The 8 year age out. It's up at the end of this month, but the court date is this week. I figure they won't be able to get a discovery hearing before her filing though-- if I understand the whole thing that the Judgement and Discovery process are two separate things.

[debee]

I don't know the particulars for TN, but the BK code provides that the trustee can avoid a lien to the extent that it impairs an exemption. So if the creditor gets a judicial lien that eats into your Mom's allowed exemption on the house, it can be avoided by the trustee during the BK filing. Also, the creditor is last in line in terms of proceeds from sale - so the first mortgage holder comes in first, the second gets dibs next and so on down the line with the creditor getting whatever other scraps fall off the table.

[BrokeIn2010]

See that's what I would think would be the bigger concern: The Trustee possibly forcing a sale. I can't see Cap. 1 trying to force a sale for a couple of thousand-- lien, yeah, sale, no.

[debee]

Do you know how much equity she has?

I don't know about TN but it may be that the plaintiff can also use the services of the sheriff to levy on your bank accounts and garnish wages.

I wonder why the lawyer didn't just head them off at the pass & file...

[BrokeIn2010]

Between the exemption and the equity of the house? She's about 2000 or so above the exemption (7500 in TN). And the attorney said she had to wait 8 years from her last Ch. 7. Which is way she went to one of those Debt Management companies, she was trying to stay out BK and they more or less drove her directly into one anyway; she'd been better off filing a Ch. 13.

[BrokeIn2010]

Mom got off the phone with her attorney about an hour ago (thankfully she taped the convo...yeah I'm paranoid these days). He told her that he had it worked out, but he couldn't give her the details till after Wednesday morning, when he and the other attorney got with the Judge in pre-trial. She doesn't have to appear and shouldn't be at the court house, and he said she'll be be happy with "the deal" but he wants to get everything locked down before he brings her to the office to sign the papers. She's worried about not being there and the fact that he's not giving her any details; I told her that if they get a default judgement and there's no "deal" and there was never any "deal" and the attorney was blowing smoke, all she needs is her tape from today's convo and she can't probably roast some a$$es over it.

[catleg]

As stated above, the lien is voided in BK to the extent it impairs an exemption.
Meaning, if she has no equity or less than what she's allowed to keep, it's gone.
The judgment would need to be vacated by a motion in the state court that granted it, usually not a problem.
The attorney would most likely work out a stipulated judgment with the creditor by which she would make regular payments and only create a court judgment and lien if she defaults on the stipulated judgment, but she'll hopefully just be filing BK which would end it all.

I'm not sure what it's like in TN, here in NJ the creditor needs to get a judgment and then after a diligent search for personal property it can be docketed against any real property of the debtor within the state by making a filing.
At that point they have to go through the sheriff's sale process against any real estate to recover money.

The key take away is to avoid letting judgments get created if you have equity in real estate, this can result in unsecured debt becoming secured.

[BrokeIn2010]

Looks like (according to the court's clerk, seeing as Mom attorney is out sick and not returning calls at the moment) the Judge granted a continuance till some time in January (they'll mail her the exact day and time). Which is going to put it past her BK filing date if all thing work out.

[catleg]

Excellent. Probably the best outcome of all.

[debee]

Glad it's working out, Broke.