Received summons from debt collector..what should I do?

[creditgone]

I have not posted in a very long time. Just a little background. We stopped paying our creditors in July 2010. We were planning on filing Ch.7 this summer but now we have just received a summons for this May from one of the debt collection companies. We are not ready to file. We have to pay back money we borrowed last year to a friend with our tax refund and I know that will not fly with the trustee. This is not an option we have to pay it back.

1. What are our chances of fighting this in court to buy us time until we are ready?

2. If we just retain a lawyer for Ch.7 will that be enough to make them drop it or judge in our favor or do we have to actually file Ch.7?

Please someone give me some advice? I don't know what to do.

[SMinGA2]

Retaining an attorney does not stop the creditor. FIling does.

One concern: paying back a friend now is likely to cause a problem. The trustee can require your friend to pay the $ to the trustee, to send to other creditors. Are you able to exempt your tax refund? If you have a wild card exemption and use it this way, perhaps you could file sooner and protect your refund. After filing ch. 7, how you eventually use the (exempted) funds should not create a problem.

[tobee43]

you can go to court and stall it. or just let it go since you are filing your 7 shortly. even if they do get a judgment, after you bk is discharged you file a motion to vacate the judgment and get it removed. however, DO NOT forget to list the judgment and if you file before it goes through, make certain you list the creditor, the collection agency and the atty they are using just to cover all bases.

it will be fine. really, i know it's scary to get the summons but after your 7 you can remove most judgments.

[LadyInTheRed]

SMinGA2 makes a good point. If the loan to your friend is the only reason you are delaying filing and you can exempt your tax refund, hire an attorney, file now and then pay your friend after you file.

[GoingDown]

We don't know all the details, but Creditgone said that they are not ready to file yet. There may be other reasons why this person cannot file yet, besides the tax refund.

Trying to stall the lawsuit by filing a written answer and making motions for discovery, and motions for continuance can drag out the lawsuit for over a year, but there will be court fees to pay along the way, and if you don't know how to word the motions you may need legal advice from an attorney, and that can run up your costs as well. I know someone who has been through 3 divorces, and numerous lawsuits from creditors, and he has become quite good at throwing everything including the kitchen sink at them to drag out the process and buy himself time, but the court fees have cost him over a thousand dollars so far.

This is just me thinking out loud here, but why does anyone need to know about the loan from your friend? It's not on your credit report. Why couldn't you just pay them off with cash or a series of money orders? And maybe make a series of withdrawls from your checking account, so it looks like maybe you are just using the cash to buy food at the grocery store, etc. How is anyone going to prove that you paid back this friend, whom they know nothing about?

[LadyInTheRed]

This is just me thinking out loud here, but why does anyone need to know about the loan from your friend? It's not on your credit report. Why couldn't you just pay them off with cash or a series of money orders? And maybe make a series of withdrawls from your checking account, so it looks like maybe you are just using the cash to buy food at the grocery store, etc. How is anyone going to prove that you paid back this friend, whom they know nothing about?

Paying the friend and then filing BK without listing the payment on the Statement of Financial Affairs would be fraud which we don't encourage at Bkforum. In fact, suggesting it is against forum rules.

[creditgone]

Retaining an attorney does not stop the creditor. FIling does.

One concern: paying back a friend now is likely to cause a problem. The trustee can require your friend to pay the $ to the trustee, to send to other creditors. Are you able to exempt your tax refund? If you have a wild card exemption and use it this way, perhaps you could file sooner and protect your refund. After filing ch. 7, how you eventually use the (exempted) funds should not create a problem.

Thanks for the replies. I talked to a lawyer today for a free consult and he said to not pay the money we owe to our friend or we may not be granted the discharge at all or they could chase down our friend. He said he can exempt our refund (which we arlready received) and do what we want when its all over. He said its a simple straight Ch. 7. I did not know that you can remove the judgement with bankruptcy though.

Can someone tell me more about this? It might be better to just go to court and see what happens and deal with it after if I am understanding this correctly.

[creditgone]

you can go to court and stall it. or just let it go since you are filing your 7 shortly. even if they do get a judgment, after you bk is discharged you file a motion to vacate the judgment and get it removed. however, DO NOT forget to list the judgment and if you file before it goes through, make certain you list the creditor, the collection agency and the atty they are using just to cover all bases.

it will be fine. really, i know it's scary to get the summons but after your 7 you can remove most judgments.

Thanks for the replies. I talked to a lawyer today for a free consult and he said to not pay the money we owe to our friend or we may not be granted the discharge at all or they could chase down our friend. He said he can exempt our refund (which we arlready received) and do what we want when its all over. He said its a simple straight Ch. 7. I did not know that you can remove the judgement with bankruptcy though.

Can someone tell me more about this? It might be better to just go to court and see what happens and deal with it after if I am understanding this correctly.

[shark66]

Thanks for the replies. I talked to a lawyer today for a free consult and he said to not pay the money we owe to our friend or we may not be granted the discharge at all

That's called "stretching the truth by a significant margin"...

or they could chase down our friend

That's more like it.

He said he can exempt our refund (which we arlready received) and do what we want when its all over. He said its a simple straight Ch. 7.

You've received reasonable advice IMO.

I did not know that you can remove the judgement with bankruptcy though.

You can't. Not automatically, anyway.

What bankruptcy does is remove the liability for the debt. You still have to file a motion (or whatever the norm is in your neck of the woods) to have the judgment voided after your BK is done with.

Can someone tell me more about this? It might be better to just go to court and see what happens and deal with it after if I am understanding this correctly.

If returning the $$$ to your friend is the only reason your filing is on hold, go ahead and file NOW. That way there's no court to go to, and no judgment to be removed later on

Good luck to us all.

[tobee43]

Thanks for the replies. I talked to a lawyer today for a free consult and he said to not pay the money we owe to our friend or we may not be granted the discharge at all or they could chase down our friend. He said he can exempt our refund (which we already received) and do what we want when its all over. He said its a simple straight Ch. 7. I did not know that you can remove the judgment with bankruptcy though.

Can someone tell me more about this? It might be better to just go to court and see what happens and deal with it after if I am understanding this correctly.

it is your choice, however, i would not waste my time unless you think you can win.

what happens after you bankruptcy is discharged and closed is you can file a motion to vacate the judgment. provided the debt was discharged with the bankruptcy you should have no problem winning the motion. an order will be issued which you MUST file to record that the judgment is now canceled. it's not really "satisfied" but you need to make certain the country where the lien, suit or judgment is recorded that you also record the signed court order from the judge vacating the judgment. i know it sounds like some work, personally, even being a paralegal i had an atty do mine and make certain all the proper papers were recorded. otherwise when you least expect it 8 years down the road it could come back to bite you hard. you'll have to go through proving it was vacated etc., so it's best just to complete the process as soon as you state allows.

best of luck! and keep posting everyone is here to help

[mountanddo]

SMinGA2 makes a good point. If the loan to your friend is the only reason you are delaying filing and you can exempt your tax refund, hire an attorney, file now and then pay your friend after you file.

I would tend to think that not reporting that this debt is owed to this "friend" is also fraud. Isn't everyone always saying you have to report all your debts no matter what?

[tobee43]

I would tend to think that not reporting that this debt is owed to this "friend" is also fraud. Isn't everyone always saying you have to report all your debts no matter what?

excellent point.

i would just list the friend on the petition as unsecured debt and be done with it..friend or not tell them it's a tax loss for them and enjoy it. end of story.

[creditgone]

Thanks

Thanks for the advice everyone!! We talked to our friends, they are fine with not paying them right now. We helped them out in the past when we were up and they were down so they understand. I really wanted to do right by them when we got our taxes. I know in the eyes of the court they would be considered a debt but I think borrowing money off of a friend is way more personal.
I think we are just going to file this month. I am so bummed and scared. I promised my daughter she would finally have a birthday party this year and she could pick a sport to do. I haven't been able to afford it for a couple years. Now I just feel terrible I dont know how to break the news that once again she will not have a party.

[shark66]

I think we are just going to file this month. I am so bummed and scared. I promised my daughter she would finally have a birthday party this year and she could pick a sport to do. I haven't been able to afford it for a couple years. Now I just feel terrible I dont know how to break the news that once again she will not have a party.

Why not? Unless you were planning on throwing her one at the local Ritz...

Good luck to us all.

[creditgone]

no definitly not the ritz but birthday parties are around $250-300 around here at a place and our small house is too small to have one here. I will consult with the lawyer and see what he says.