If I get a judgment against me, what can I expect to happen next?

[GoneBust]

I have three pending judgments against me. Two of them are for $30,000 in business Visa cards and another is a $7,500 Chrysler repossession of a 2008 Jeep Commander. We also have a $70,000 SBA loan that needs to be addressed, but they haven't been hounding me about it since we told them we were going to file bankruptcy over a year ago. We haven't made any payments on any of these debts in well over a year.

If I let these judgments happen as they are schedule to in the next few weeks and months, what will happen next if I don't immediately file bankruptcy? Can anyone spell out the sequence of events for me?

My main questions are these:

If a creditor gets a judgment against me...

1. How quickly can they collect on it?

2. Will I get a hearing to see what I am able to pay?

3. I am self-employed. Can the creditor seize my checking account and/or my PayPal eBay income until the judgment is satisfied? If so, will this be allowed immediately when the judgment occurs, or at a later means-test hearing of some kind?

4. Will the creditors accept any type of settlement or payment arrangement at this point? I mean, if I straight up tell them I am going to file bankruptcy if we cannot work out a settlement - wouldn't they want to go that route - or is it too late?

My wife is getting a job and my income is probably a little too high for Chapter 7, and neither of us want to go into 13 if possible. However, if it is possible for our creditors to seize our income, then I will have to file bankruptcy.

It seems now that we have been summoned to court for the judgments, we can't get anyone to answer the phone on the attorney's name and number on the summons. Most of the debts seem to have been sold.

Thanks for any advice or tips - we are in a very desperate mode at the moment, as I'm sure you can all relate to.

[kornellred]

There is absolutely no question that creditors who hold a judgment against you will go after their money in any way that they can. Since you are self-employed, they cannot garnish the wages that you pay yourself, if wage garnishment is permitted in your state. It is hard to imagine running a business without some sort of financial accountability, and the creditors will levy any bank accounts that you may have. Any money that they can legally get their hands on - they will, if possible.
There is absolutely no point in trying to negotiate a settlement with your creditors before judgment, but you may get a chance to make payment arrangements post-judgment. After a judgment is obtained, some creditors contact the debtor and offer a chance to make reasonable payment arrangements before they begin the attempt to take your assets without your permission.

You are going to end up filing for bankruptcy in any case, so you might as well get to it!

[GoneBust]

You are going to end up filing for bankruptcy in any case, so you might as well get to it!

I can understand how some people may think that way, but I've never been one to limit myself when it comes to finding new income sources. I have been hundreds of thousands of dollars in debt with my business and I paid it all off. My debt right now only amounts to about $170,000.00 that I was having difficulty paying after the 2008 recession hit. Now my business is on an upswing, so I would probably be forced into a 13. I would actually prefer to pay off the debt without going through the scrutiny of a Chapter 13. With my business income fluctuating we would end up on a rollercoaster ride with the trustee. I would rather work out a settlement with each creditor and repay the debt than go that that type of hell. I just don't know that my creditors will make this possible without trying to seize my assets. If that happens, I will file bankruptcy. Don't they realize that?

[keepmine]

If that happens, I will file bankruptcy. Don't they realize that

You have to understand that creditors hear the "B" word a few thousand times a day. Nobody takes a bk threat seriously until you actually file.

[DesdemonaB]

In a quick Bing search I found the following:

After obtaining a judgment, the creditor can ask the court to direct the consumer (i.e., the judgment debtor), to appear back in court for an additional or "supplementary" proceeding. The purpose of this new hearing is to let the creditor ask questions of the debtor about his or her income and assets.

In Illinois, the document which directs the debtor to come back for this examination is called a "Citation To Discover Assets". The Citation might direct the debtor to bring certain documents to the examination.

The creditor can ask the judge to enter a turn-over order. A turn-over order directs the consumer to turn-over to the creditor some of his income or property that is not protected by law (i.e., not exempt).

If non-exempt assets other than cash or real estate are discovered, they can be ordered turned over to the Sheriff to conduct a public sale, the proceeds going to the creditor to pay off the judgment.

The Citation must be properly served on the consumer, and it must include a special notice. Among other things, this notice must advise the debtor about the debtor's exemption rights and how to assert them in court at the citation hearing or some earlier date. This notice must be in a particular form.

By law, no turn-over order can be entered unless there is proof in the court record that the consumer was properly served with the Citation and a copy of the special notice about exemption rights.

Four Important Things to Know About Citations to Discover Assets

• This is a court-ordered appearance. Failure to show up and answer the questions can result in arrest, a finding of contempt of court against the consumer, and a jail sentence. A Citation to Discover Assets should never be ignored. If the debtor is jailed for failure to appear, the debtor may be ordered to pay a large bond in order to be released. This money may then be applied to the debt, even if the bond money came from exempt income or property.
• The consumer is under oath when answering questions. The debtor has to be truthful when answering questions about income and assets. Lying under oath is perjury.
• Turn-over orders should not affect exempt income or property. The debtor should know the debtor's exemption rights and should tell the judge what property is exempt, to make sure that exempt income property is not included in any turn-over order. At any citation hearing where the consumer asks for a declaration that certain income or assets are exempt, the court must make a determination whether that income or property is or is not exempt.
• Be careful about agreeing to a court-ordered payment plan. The creditor or his attorney may try to get the debtor to agree to a payment or installment plan, and may try to have that agreement formalized by court order. A consumer should be very careful about making such an agreement, and should not do so unless absolutely certain that s/he can keep up with the payments. If s/he fails to make good on a court-ordered payment plan which s/he agreed to, s/he may possibly be held in contempt of court and jailed.

Basis on this it sounds as IL has some laws that allow creditors to go for non-wage properties. If you do not have a lawyer maybe it's time to get one.

[AbbeyA]

If your debts are primarily non-consumer, you will qualify for a non-consumer chapter 7 regardless of a high income. I believe that a non-consumer ch. 7 filing is possible when your non-consumer debt exceeds 50% of our total debt. So if your total debt is $170,000 and 70k is an SBA loan and 30k is in business credit card debt, that would be more than 50% of your total debt and you should qualify for a non-consumer ch. 7

Go check out the small business forum and also start doing some research on non-consumer ch. 7 bk to see if you fit the bill for it. Meet with a few attorneys and make sure they are familiar/well versed in non-consumer ch. 7 bk. I wouldn't want this hanging over my head for years and years. DH and I filed a non-consumer ch. 7 after dh's business failed in early 2009 -- it was not a fun process but I am so happy to have it finally behind us. Best of luck to you.

[GoneBust]

If your debts are primarily non-consumer, you will qualify for a non-consumer chapter 7 regardless of a high income. I believe that a non-consumer ch. 7 filing is possible when your non-consumer debt exceeds 50% of our total debt. So if your total debt is $170,000 and 70k is an SBA loan and 30k is in business credit card debt, that would be more than 50% of your total debt and you should qualify for a non-consumer ch. 7

We have a home mortgage of $278,000 and the home is worth $389,000 according to a local realtor, but the tax records only tax it on $337,000 - which is what the BK court would base its value on according to our attorney. We are almost current on the home payment and our car payment. It's mainly the business debts that we were unable to make payments on.

[kornellred]

Bankruptcy - any kind of bankruptcy - is far, far better than remaining in debt. Apparently, you do not share this opinion, which I suppose is to be expected among high-earning individuals with significant assets. It is, after all, purely a business decision, even among bottom-feeders like me. I'm on my 2nd bankruptcy, and I would plan on a third but for the fact that I will not live long enough to get into debt again!

Good luck.

[GoneBust]

Bankruptcy - any kind of bankruptcy - is far, far better than remaining in debt.

I would agree, but 13 scares the hell out of me. I am worried that we would fail several years into it due to my self-employed income dropping off and we would get booted out of 13. Is that a realistic concern?

[shark66]

I still don't understand why you wouldn't consider a non-consumer Ch. 7....

Good luck.

[GoneBust]

I still don't understand why you wouldn't consider a non-consumer Ch. 7....

Good luck.

I'd love to - but here is the problem:

We have a home mortgage of $278,000 and the home is worth $389,000 according to a local realtor...

[shark66]

That's really not that much of a problem.

The value that you've been quoted is most likely a "normal" one, where you could use a "fast sale" value and get much closer to where you need to be...with no equity, or with an amount that can be exempted...

In any case, you need a good attorney. And they don't come cheap, but are definitely cheaper than any other option you might be facing at the moment.

Good luck.

[debee]

Just because you're over the median doesn't mean you can't file a chapter 7. Have you done a trial run of the Means Test?