Alabama Bankruptcy Blog

A debt collector called me and said “We will garnish your next paycheck.” Can they do this?

      I am continuously amazed at the depths some collectors will go to in order to scare unwary debtors into making payments they cannot afford at the time.  The statement “We will garnish your next paycheck” is probably a lie. 

     In Alabama in order for a creditor to obtain a writ of garnishment against your employer to withhold money from your paycheck, that creditor must have a judgment against you.  In order to have a judgment against you, that creditor must have filed a lawsuit against you and won either after a trial or by default, that is, because you did not file a response.

     Normally when this threat is being made, a lawsuit has yet to be filed.  How do you know if you have been sued?  First, if suit has been filed against you, you should have been served with a Summons and Complaint by either the sheriff’s department of your county or by certified mail.  However, if you cannot be found by the creditor, the creditor may have you served by publication, that is, by running a notice in the newspaper in the county of your last known address.  If you are still unsure, you may call the clerk of court of your county.

What if I have been sued?  See a lawyer immediately.  Depending on which court, Small Claims/District or Circuit, you have either 14 or 30 days respectively from the day you were served to file an answer.  Filing an answer generally denying the allegations in the lawsuit will prevent the creditor from obtaining a default judgment against you and will lead to your case being set for court after a few months.  This will give you time to save money and/or get your bankruptcy filed.

What if I already have a judgment and/or garnishment against me?  If you already have a judgment and/or garnishment against you, I would again suggest you see an attorney immediately.  You may be able to have the judgment set aside or appealed, but only if you act very quickly.  This may also be a good time to take a strong and hard look at bankruptcy.  With a bankruptcy you should be able to discharge the judgment prior to garnishment and stop any garnishment that is already in place.  Upon filing a bankruptcy, you may even be able to have a portion of any money garnished from your check returned to you.

The bottom line is do not let calls from creditors or debt collectors scare you into giving them money you cannot afford to give them.  Many will say anything they think will frighten you.  If a debt collector says anything that worries you, make an appointment with an attorney and see what your rights are.  It’s probably a good time to take a look at your financial situation anyway.

Please email me with any questions regarding the topic of garnisments or any other bankruptcy or debt related topic.

The Whole Truth

Cathy Moran has a very timely, at least in my practice, post on her "on the Bankruptcy Soapbox" blog entitled  To Tell the Truth.

As Cathy states in her post in order to file a proper bankruptcy, we as attorneys must gather loads of information and documents from our clients.  This is especially the case with regards to assets, but is also important with regards to debts, income, expenses, lawsuits, and liens.  We need to know it all -- the good, the bad, and the ugly.  This is the only way we can truly and properly represent our client.  Things the client may think are small things left unsaid may have a tremendous impact on the bankruptcy case.

The biggest problem I have is not my clients lying to me, because if I discover this, they probably won't be my clients anymore.  The biggest problem is not being told or provided with "THE WHOLE TRUTH."

If you have any question about whether or not to tell your attorney about something, please err on the side of caution and tell your attorney.  Then the attorney can decide whether or not it needs to be a part of your case.

Foreclosure Filings Soar in 3rd Quarter

According to a report released by mortgage data company RealtyTrac the number of US homes facing foreclosure has doubled in the third quarter.  See the article at Foreclosure Filings Soar in 3rd Quarter.  You have probably seen news reports regarding this problem over the past year and it appears only to be getting worse. 

While foreclosures are a problem nationwide, I don't think they are affecting Alabama as bad as other states.  Why?  The foreclosure problem is two fold.  First, many people were enticed into adjustable rate mortgages with interest only payments or very low introductory interest rates.  Because of the lower payments at that time they could afford nicer larger homes.  However, when it came time to start making regular interest and principle payments or when the introductory rate ended, the monthly payments became unaffordable.  This leads to immediate foreclosure or the supplementing of income with credit cards or other high interest loans and then most likely to bankruptcy and/or foreclosure.

This has been an issue across the nation, including Alabama.  I see the damage the higher payments cause on a daily basis.  Often through a Chapter 13 bankruptcy we can create a budget and a plan to stop a foreclosure.  It is very important to note however, that although we can create a plan to "catch up" the payments you are behind, after filing the bankruptcy you will be required to recommence making your mortgage payment at the amount due under your mortgage.  That is if your mortgage calls for the interest rate to increase and your payment to rise, then you WILL have to make that higher payment.

The second problem leading to the national foreclosure crisis is the big drop in the housing market.  If you cannot afford your house payment, it's simple, just sell your house and then find one you can afford.  But what if your house will not sell for what you owe on it and your monthly payments are still coming due and you cannot pay them?  The answer is foreclosure.

Luckily for Alabamians, our housing market is still strong in most areas.  Therefore, most home owners can still sell their homes for at least what they owe on them and escape foreclosure.

Moving out of a home you enjoy and downsizing is not an easy decision, but if it avoids foreclosure and bankruptcy, you will be much better off in the long run.

Do you have questions or comments regarding this topic?  Please email me.