Help! $8300 taken out of checking accounts by collection agency/lawyer!

[AZGuy23]

To update...

Made an appointment to meet with the bankruptcy attorney later today and he said we can do an emergency filing at the latest tomorrow which will put a stay on everything, including the garnishment funds that are on hold at the bank. He did say however that there is no guarantee that we can get the money back, that the creditor's attorney may try and argue that the money was already theirs since it was on hold, even though it hadn't been distributed to them. If the money does go to them, then it can be taken back by the Trustee but they will want to distribute the funds to the creditors, so I still wouldn't get it back it seems (even under Chapter 13).

I'm really lost/confused on what to do right now and I'm really pressed on time so I need to make a decision NOW.

As I mentioned, all my other debt (~$61,000) is already outside of the statute of limitations for a lawsuit and all will also fall of the credit reports by March 2013. That was my initial plan, since so much time had passed anyway, I was just going to wait it out until they fell off the reports and I figured everything would be ok.
I didn't know about the judgment and that is what threw a wrench in the whole thing.

The two options are to either settle with the garnishment creditor which would take care of the judgment, and then wait everything else out like was the original plan. The upside to that is that there would be no bankruptcy on my credit and after March 2013, I would essentially have a completely clean credit report (the judgment does not show up on my credit reports for some reason).
Problem with this is that it could cost up to $14,000 to get rid of the judgment, I don't know if they would be willing to settle for less, they may be. Other problem is that even though all the other debt will fall off the credit report, it's still not settled and is "out there"...though if no one can see it, does it matter? Still I think I would like to actually get it settled and put it behind me and know that I have a clean slate.

The second option is to go ahead and file for Chapter 13. The upside there is that everything gets cleaned out and I could potentially recoup the garnished funds. It will take care of the judgment and I'll be on a path to cleaning everything up.
The potential downsides here are that I may not be able to recoup any or all of the garnished funds. If I lose those funds, plus the fees to file bankruptcy, plus the amount I have to pay back thru Ch. 13...it could end up costing more than if I just pay the judgment creditor now and avoid bankruptcy all together. Also, if I go with the bankruptcy, then of course it would be on my record 7 years vs if I don't, I could potentially have a clean record after March 2013.

I'll go to the bankruptcy appointment today and ask some more questions...try to see how much I would have to pay back via Ch. 13 and see if they can give me additional information about getting the garnished funds back.

Any input would be appreciated it.

[LadyInTheRed]

Still I think I would like to actually get it settled and put it behind me and know that I have a clean slate.

If your goal is to know you have a clean state, you should file BK.

The expiration of a statute of limitations does not mean a creditor can't sue you. If you don't file BK and are later sued by a creditor, you have to file an answer and then prove that the SOL expired. That can be expensive if you hire an attorney and difficult to do correctly if you don't hire an attorney. If a creditor files a lawsuit on a debt discharged in BK, you just have to send them a copy of your discharge order. If they foolishly don't have the case dismissed, you have a claim against the creditor for violating the BK court's permanent injuction against collection efforts.

If you are able to settle the current judgement and everything else goes your way, it could end up being less expensive to avoid BK. But, there are no guarnatees and you will never know for certain that one of your old debts won't come back to haunt you.

What price do you put on certainty? Only you can decide that.

In making your decision, I suggest you give your credit reports the lowest priority.

ETA: I just reread your post and want to make another point. You didn't know about this judgement and it didn't show up on your credit report. How do you know there aren't other judgements out there?

[GoingDown]

AZGuy23, my experience is: don't trust any accounts to be safe now. You must get all money out of all accounts ASAP, leaving no more than $150 in any one account (or any amount you are willing to lose) before another garnishment hits. They are allowed to garnish all but $150 each time. This applies to any account in your name or any other name on any Summary Judgement against you, such as a spouse. You will get no warning of a garnishment, only notification afterwards. Each single garnishment from each account requires a separate, single writ to be filed and served on the financial institution. In other words, this garnishment you're speaking of is independent of any other garnishment writs that may be filed. After the garnishment occurs, the bank is required to mail you a copy of the writ and how to appeal it. If you don't appeal it, you will lose the money to the creditor.

This happened to me with my business account due to a judgement on a personal debt, and it cost an additional $100 that the bank charged to perform the garnishment. I knew better but didn't do anything with my account balance until the garnishment occurred. You need to learn to operate with little money in your account to prevent this from happening again. As long as there is a balance owed on the judgment or until you file for bankruptcy, any judgement creditor can file for a garnishment at any time. The ONLY thing in your favor is the fact that, as I mentioned before, each single garnishment event has to have a separate writ filed with the court and served on one single unique account. This can be expensive for a creditor to do if they find several accounts of yours. However, if you're going to leave large balances in your accounts, they will probably spend the money to garnishment it over and over.

I now keep no more than $150 in my business account and virtually nothing in any personal account. When money hits my account, I remove it the same day. I cash all checks sent to me, so the only money hitting my account is credit card receipts. I now put the cash onto a prepaid debit card from US Bank, hoping that it will be hard for a creditor to find the account. I tried the Walmart Money Card, but they charge $3 for each deposit to the card, which can get expensive. US Bank charges only $3 per month even though I deposit to the card at a branch teller. The only advantage I still see for a Walmart card, is that they don't have an actual banking presence in Arizona, so finding the account is harder for a creditor. My wife cancelled her direct deposit and now cashes her paycheck, from which we get money orders to pay bills with.

I would recommend that you move your money out of any bank account, hold it [IN THE FORM OF CASH], and put it on a prepaid debit card only when you need to pay someone. I don't know if you can do this with any Google payments - I'm not familiar with them, but at least with a debit card you can make an electronic payment to someone. Or mail them a cashiers check [or money order].

Also very important, by using cash, money orders, prepaid debit etc., be sure you keep all receipts for your expenditures so you can prove where your money goes for tax purposes and, more importantly for any bankruptcy filing. After you file a bankruptcy, I believe no more garnishments can be performed like this. You could then begin to use the accounts again with Trustee permission, but that's a whole other conversation.

Good luck.

The parts I "bolded" could be useful to the original poster of this thread. Thanks for the info.




What happened to the original poster happens over and over again.

I don't know how many times I have said this, but people need to realize that once someone files a lawsuit against you, you need to realize that your money is no longer safe in a checking account or savings account, except for something like Social Security being direct deposited (which doesn't apply in this situation). Everything else is not safe.

Let this be a learning lesson to everyone out there.

When someone files a lawsuit, you have to make a decision:

1. File bankruptcy

or

2. Make yourself as judgment proof as possible. And that means getting all your money out of a checking account. In hindsight, this person's money would have actually been safer under their mattress than it was leaving it in a checking account.





This is one of those cases, where, if they sued me, they still wouldn't get anything from me.

I haven't had a checking account since 2006. I get paid with checks, and I immediately cash them, and then use the cash or money orders to pay for everything.

Since this judgment proof lifestyle may not be acceptable for the original poster, bankruptcy might be a better option.

[AZGuy23]

ETA: I just reread your post and want to make another point. You didn't know about this judgement and it didn't show up on your credit report. How do you know there aren't other judgements out there?

It's not that I didn't know about it...I was just under the impression that it was "taken care of" for some now obvious dumb reason. I got sued back in 2008 and then did get a bunch of court papers related to it. I did some research online and filed an answer myself (without the help of an attorney). From what I remember, a bit later, I got a court form labeled "Judgement" but it was blank, maybe it was a copy of the judgement application and not the judgement itself? All the while, I checked my credit report and county recorder's office and no judgment showed up. A couple years went by, didn't hear anything, then I got a "Release of Garnishment" that was addressed to Chase Bank. I took that...plus the fact that the judgment didn't appear on any reports and stupidly thought that somehow the lawsuit had gone away. Obvious wishful thinking on my end so I never looked into it further....and now here I am.

As for if there are other judgments...I guess I can't know for sure but I don't recall getting court paperwork any time in the past like I did for this judgment.

[GoingDown]

It's not that I didn't know about it...I was just under the impression that it was "taken care of" for some now obvious dumb reason. I got sued back in 2008 and then did get a bunch of court papers related to it. I did some research online and filed an answer myself (without the help of an attorney). From what I remember, a bit later, I got a court form labeled "Judgement" but it was blank, maybe it was a copy of the judgement application and not the judgement itself? All the while, I checked my credit report and county recorder's office and no judgment showed up. A couple years went by, didn't hear anything, then I got a "Release of Garnishment" that was addressed to Chase Bank. I took that...plus the fact that the judgment didn't appear on any reports and stupidly thought that somehow the lawsuit had gone away. Obvious wishful thinking on my end so I never looked into it further....and now here I am.

As for if there are other judgments...I guess I can't know for sure but I don't recall getting court paperwork any time in the past like I did for this judgment.

It is possible, but very unlikely that you wouldn't get any court paperwork. Just like with this one, you did get court paperwork, but unfortunately, you thought it was over, and didn't prepare for the judgment by either filing bankruptcy or making yourself judgment proof by getting all your money out of checking accounts.

Did you check this website for the judgment?

http://justicecourts.maricopa.gov/FindACase/casehistory.aspx

and this one?

http://www.superiorcourt.maricopa.gov/docket/CivilCourtCases/caseSearch.asp

I have found them to be more accurate than the Recorder's website.

[AZGuy23]

Another update:

Met with the bankruptcy attorney and got the rest of my questions answered. We can file tomorrow (after I do a mandatory 30 minute credit class this evening) and that will put a stay on everything. The attorney will immediately send notice to the bank to not release the funds to the judgment creditor and to release the funds back to me.

I have to go with Chapter 13 because of the business. If I went Chapter 7, they could take the assets of the business and that would not be good. If we fall under $54,000/year net personal income, then it would be a payment plan for 36 months. If we fall above that amount, it would be 60 months. We should fall under the $54,000 but being self-employed (though we are actually employees of our own company) it's a bit more complicated that normal because we have to take into account owner's draw as well and then see the total, but it should still be under $54,000. So that $54,000 determines the length of the payment plan.

The second part, if I understood it correctly, is they take your income and then subtract expenses. Now this part is interesting because there are set amounts you can take as credits...for example $300/month per car for operating expenses (excluding the car payment/insurance). If you spend more then that, you can adjust it by providing proof but otherwise you can use that figure. Same with utilities and other items like food. If at the end you come out with a negative number (more expenses then net personal income), then you can qualify for a very low monthly payment, $100 was given as an example. If it's positive number, then the monthly payment would be more.

The attorney did say that you can never pay more than your current debt. That makes sense of course...but scared me at first because my total debt is $75,000, except it's not. Legally, if the statute of limitations has expired, I no longer owe that debt. So the only real debt that I legally have to pay is the $14,000 on the judgment. Which is what brings me to the decision I have to make...I'm in essence filing bankruptcy over $14,000. There is also the peace of mind of not being possibly sued in the future.

If I go through the bankruptcy and qualify for the 36 month payment plan and qualify for a payment of $100/month...that's $3600 + attorney fee of $1500 (the attorney fee is actually higher but they said that they will actually get paid by the Trustee out of the monthly payment). Point is, it could be substantially less expensive to file the bankruptcy and also get a clean slate to boot. Just seems a bit odd to file bankruptcy over essentially $14,000.

Thank everyone for reading and helping out, it helps to sort of write this stuff out.

[azdebtor]

AZGuy23,

I was going to tell you as GoingDown did to check the State and County court websites that he gave you. I know that each of my judgments is listed on one or the other, and a couple are listed on both. Now I also have several creditors that haven't sued me yet and you are probably in that position too. As Lady said, you will be better off replying to a zombie debt collector with a bankruptcy case number than having to reply to a potential lawsuit in court to prove SOL has run out.

As far as filing Chap 13, not knowing what kind of business you have, don't forget that any depreciation on assets may be counted as income to you. I'm not sure that this would apply in BK, but it sure does in the mortgage business. If you are an S Corp, any profits pass through to the owners on your K1. I would also look at this as filing BK on not only the $14k, but the older debt as well and it will all be put to bed forever.

Hopefully your attorney has explained that you will have to pay into your Chap 13 the excess attorney fees not paid up-front, the value of any assets that you can't exempt including the value of your ownership in the business, any arrearages on a mortgage or vehicle, and priority taxes (employment and state/federal/sales.) You will also pay a percentage fee to the Trustee to administer your bankruptcy. After you perform the Means test and fill out Schedules I & J, you will then know what your Disposable Monthly Income is which tells you how much you can contribute monthly to your plan. If you are current on your mortgage and auto loans, if any, try to pay them outside of your Chap 13 plan in order to avoid additional fees to the Trustee for processing those payments for you. Don't be too surprised if you end up in a 60 month plan.

[AZGuy23]

AZDebtor,

I did check the two court websites and the judgment shows up on one but not the other. No other judgments are listed.

The business thing is really complicating this and making me reconsider doing the bankruptcy. Our company is set up as S-Corp which is what scares me. Like I said, we just took out $12,000 cash out of the business account and while it was the business' money...with an S-Corp it's essentially our personal money since everything passes through, no?

I also read that if your income situation changes, then you must adjust your plan payment accordingly? Is that correct? Sometimes with the business we'll have a couple off better months and others we won't...if when we submit the Business Operating Statement it shows that there was a good amount of net left that month, do we need to send the excess money to the Trustee?

Additionally, any large purchases need to be approved by the court, such as a house purchase? We were actually wanting to buy a house early next year (my wife would apply for the mortgage only) but would that be allowed/need approval?

[AZGuy23]

The more I am thinking about this, the more it's not making sense in my head to file for bankruptcy. Really the total I owe is $14,000 and with the information I know now, it sounds like I will have to pay back that whole amount over 36 or 60 months as the money in the bank + the assets of the business equal at least $14,000. Seems like the difference here is either paying the $14,000 up front now to settle the judgment (or possibly settling for less) or paying the $14,000 over 36 or 60 months + paying attorney fees for the bankruptcy, correct?

Yes with the bankruptcy it puts to rest the remaining debt but that debt is no longer legally due. But then on the other end, I would have the bankruptcy on my record for 7 years plus be scrutinized for the next 3-5 years over what I buy and how much money I make. I mean heck the Trustee themselves would probably look at it and say...you're filing bankruptcy over $14,000? Why not just pay it up front since it looks like you are able to.

[bcohen]

The more I am thinking about this, the more it's not making sense in my head to file for bankruptcy. Really the total I owe is $14,000 and with the information I know now, it sounds like I will have to pay back that whole amount over 36 or 60 months as the money in the bank + the assets of the business equal at least $14,000. Seems like the difference here is either paying the $14,000 up front now to settle the judgment (or possibly settling for less) or paying the $14,000 over 36 or 60 months + paying attorney fees for the bankruptcy, correct?

Yes with the bankruptcy it puts to rest the remaining debt but that debt is no longer legally due. But then on the other end, I would have the bankruptcy on my record for 7 years plus be scrutinized for the next 3-5 years over what I buy and how much money I make. I mean heck the Trustee themselves would probably look at it and say...you're filing bankruptcy over $14,000? Why not just pay it up front since it looks like you are able to.

This is bad reasoning. You're not "filing [for] bankruptcy over $14,000" as you claim--you're filing for bankruptcy for ALL of the debts you currently have, as well as the interest, fees, and penalties which continue to accumulate on those balances. You are filing to discharge ALL of your dischargeable debts, less whatever the trustee makes you pay over the course of your Plan.

[AZGuy23]

But if the statute of limitations have expired, I understood from the attorney that I no longer legally owe those debts. Now the attorney didn't advise me one way or the other, he said that is a decision I need to make but he said that is the only legal debt.

[LadyInTheRed]

But if the statute of limitations have expired, I understood from the attorney that I no longer legally owe those debts. Now the attorney didn't advise me one way or the other, he said that is a decision I need to make but he said that is the only legal debt.

Again, the fact that the statute of limitations has expired does not prohibit creditors from trying to collect on the debt or suing you for the debt. Only BK does that. When you file BK, you will (or should, anyway) list even the debts that are past the SOL and those debts will be discharged. If a creditor tries to collect or sues you on any of the discharged debt, they will be in violation of the BK court's permanent injunction. You would be filing BK on more than $14K of debt.

Some are satisfied to rely on a statute of limitations. But, you really can't beat the finality of a bankruptcy discharge.

[AZGuy23]

It really is a tough decision with a lot of unknowns. I understood from the attorney that during a Chapter 13 repayment plan, you will never pay more than the debt you owe...and he gave the $14,000 as an example. So then would the rest of the $61,000 debt be listed, even if it's SOL, and if it is listed, then would that debt be counted as the maximum debt owed? The problem in this situation is that we have a business and if they look at your total assets and base the repayment on that, then we would be paying back a pretty large part of the total debt, if not close to all of it.

[GoingDown]

Speaking from experience, I have a LOT of debt that is beyond the Arizona Statute of Limitations.

NONE of my SOL creditors nor my SOL junk debt buyers have ever sued me.

I think it is exceedingly rare for a creditor or a junk debt buyer to sue someone over debt that is beyond the statute of limitations.

You can help to make sure that they don't sue you over SOL debt by sending them a cease and desist communications letter that says something to this effect...

"Cease and desist from any communication with me.

The Arizona statute of limitations has expired. If you file a lawsuit against me, I will fight it in court, and I will win, and I will ask the court to make you pay my legal fees and court costs, since I have now notified you in writing that this matter is time barred by the Arizona statute of limitations."


[PLEASE NOTE THAT I NEVER USE THE WORD "DEBT" IN MY LETTERS]

If I was a junk debt buyer or a creditor or a debt collector, and I got a letter like that sent by certified mail, I would throw that account in the inactive file and not waste any more time, money, or effort on it since I would figure that I would never get a penny from that person.

And here's some encouraging news, out the many, many credit cards I defaulted on, I never paid any of them one red cent. Not even the one that sued me. And they sued me about 4 months after I defaulted, not after the SOL expired. And to this day, they have never received even a penny from me, and they never will.

So, my point is this... SOL debt rarely sues, and can be fought in court and you can win, and simply ask the court in writing as part of your written defense to the lawsuit to award you court costs and any reasonable legal fees, and they will grant it to you. The creditor cannot overcome the time-barred defense against a lawsuit, if you file a written answer using it as your defense.

In my opinion, filing BK over SOL debt is a waste of time, money, and effort, and you can't file bk again after that for a certain period of time. I'd rather save that nuclear option for a later date when I really needed it, against someone who could actually sue me and win. Not against creditors who can't win a lawsuit against you, and most of the time, once they know you will fight them in court and they know that you know you will win, they lose interest in you.

They always go for the low hanging fruit. They have bills to pay themselves and if they waste all the time on someone who is not going to pay them anything, they will go out of business.

[bcohen]

So, my point is this... SOL debt rarely sues, and can be fought in court and you can win, and simply ask the court in writing as part of your written defense to the lawsuit to award you court costs and any reasonable legal fees, and they will grant it to you. The creditor cannot overcome the time-barred defense against a lawsuit, if you file a written answer using it as your defense.

In my opinion, filing BK over SOL debt is a waste of time, money, and effort, and you can't file bk again after that for a certain period of time. I'd rather save that nuclear option for a later date when I really needed it, against someone who could actually sue me and win. Not against creditors who can't win a lawsuit against you, and most of the time, once they know you will fight them in court and they know that you know you will win, they lose interest in you.

They always go for the low hanging fruit. They have bills to pay themselves and if they waste all the time on someone who is not going to pay them anything, they will go out of business.

I am not really sure this is good advice. Sure, most collection law firms make some attempt to guage what if any assets a particular debtor might have in order to pay a judgment before choosing to sue, but not all of them do this. Likewise, there are some collection law firms who aggressively sue on out-of-SOL debt because they know that SOL is an affirmative defense, and if the defendant fails to file a timely answer, or fails to raise the SOL defense, then it is deemed waived, and the law firm wins its judgment. The small number of debtors who might fight the lawsuit and/or file a FDCPA complaint for suing on out-of-SOL debt are just a cost of doing business.

In fact, I am now being sued by Gurstel Chargo for an old Discover card that I defaulted on more than 3 years ago, and the collection attorney knows (or should know) based on my credit reports that I have absolutely nothing to seize, levy, or garnish, yet they have chosen to sue. I am in fact, raising the SOL defense, which it will be a matter of law whether the judge will accept my reasoning that the 3-year SOL should apply, or not. In any case, I plan to file BK before I have any wages or other assets which a judgment creditor could go after.