Creditor Lawsuits

Aggressive Collection Practices

I have seen a recent spike in aggressive collection practices. This isn’t surprising. In fact, it is something of an annual rite of passage. Collection firms tend to be more aggressive early in the year because they know debtors may be receiving Federal tax refunds. This makes it more likely debtors will have money to repay… or seize.

While this spike in creditor actions is not surprising, there has been a clear, abnormal increase in creditors taking the next step… going after property. This generally occurs in the following manner. The creditor will file an action at the magistrate level. When the debtor does not respond, the creditor gets a default judgment against them. The creditor then files a motion in the Court of Common Pleas to execute on the judgment from the lower court.

Once the Court of Common Pleas issues a judgment, the creditor may execute on the judgment. In short, this means “go after your property”. Recently, creditors have been executing by issuing interrogatories on debtors, or scheduling depositions for the creditor to testify. Interrogatories are formal demands for information regarding your property and its location. You will be asked to list bank accounts, real estate, cars, retirement accounts, investments, and other property.

Depositions are similar demands for information, except the information is taken in person, under oath. The purpose of both interrogatories and depositions is to gather information about your property in order to seize some of it to satisfy the judgment, for instance, by putting a lien on a home or freezing a bank account.

It is important to note that if you do not respond to these demands for information, you may be found in contempt of court. Unlike the initial lawsuit where a judgment is entered against you if you do not respond, but there are no other penalties, you can not ignore these demands. Even if you do not have an attorney, you should respond.

What should you do if you receive an interrogatory or deposition in aid of execution? Call an attorney. As an experienced bankruptcy attorney and debtor’s rights attorney, I may be able to discharge the underlying debt before you need to answer. In some cases, an arrangement can be made to satisfy the debt. It is actually best to speak with an attorney as soon as the original lawsuit is served on you, but it is not too late once you reach this stage. The sooner you contact an attorney, the sooner you will be protected.

Contact us if you are the target of aggressive collection practices such as these, or aggressive phone calls and notices. You don’t need to lose you property or be harassed. If the creditors get aggressive, you need to be prepared to be aggressive yourself!

What To Do If You Need To Wait On Filing Bankruptcy

There will sometimes be occasions when filing a bankruptcy is not possible at the moment. Whether it be due to a means test timing issue, the need to make payments on legal and filing fees, or an exemption issue, sometimes waiting to file is preferable or even necessary.

What should you do in the meantime?

The first question should be, "Is there a lawsuit against me?" If the answer is "yes", you will need to plan accordingly. A lawsuit that has become a judgment will allow the creditor to put a lien on your bank account, home, or vehicle. A lien on your bank account can happen without your knowledge, so the first thing you will probably want to do it stop automatic deposits into your bank account and severely limit the money you hold.

Speak directly with your attorney about planning for the possibility of a bank account lien, it is very important. Marital accounts will be protected against the lien of a creditor of only one spouse, but once again, make sure to discuss this possibility with your attorney. Stopping direct deposit and operating day-to-day without a bank account may be a huge hassle and generally annoying, but losing a paycheck or two in a frozen bank account is worse, especially considering it is an avoidable problem. Discuss the issue with your bankruptcy attorney.

Also, keep your attorney informed if you are served with any additional paperwork related to a lien being place on your home or car. This is a call you should make on the same day. A lien on a home or car may require moving up the filing date or your bankruptcy so that the automatic stay can be used to protect your property.

While waiting to file bankruptcy, you should also avoid taking out any new loans (car payments, home equity loans, personal loans, credit cards, etc.) The bankruptcy court will closely scrutinize your financial activity for YEARS before filing, so make sure you discuss any large financial plans with your attorney. Avoid large purchases and cash advances, especially as you move closer to your anticipated filing date.

Finally, you should also avoid transferring property or the title of property in the time you are waiting to file bankruptcy. Once again, the Court will closely scrutinize your financial activity. Transferring the title of property gives the impression you are try to avoid paying your debts and may even make it appear you are trying to defraud the bankruptcy court. In most cases, these transfers will serve no purpose other than preventing you from filing a bankruptcy... you can usually exempt and protect your property without transferring it.

In the time between retain your attorney and actually filing, which may be several months or longer, make sure you stay in touch with your bankruptcy attorney about your financial activity. An experienced bankruptcy attorney can help you protect your assets and avoid pitfalls that can undo a filing. Proper planning is essential. Make sure you don't sabotage your bankruptcy filing or lose assets because you didn't take the proper precautions.

Joint Debts In Bankruptcy, Part 1

A common concern for new clients is understanding how their joint debts will be treated in Chapter 7 bankruptcy and Chapter 13 bankruptcy. This will often be a determining factor in whether or not they will even file, so it is worth taking a little time to discuss over my next two posts.

Most joint debts are "jointly and severably liable". This means if you and another person both sign on a loan that defaults, the creditor is allowed to go after one of you, both or you, or neither of you (not often!) for the full amount. The creditor is not limited to only going after half of the debt from both debtors. The creditor can collect 90% from one, 10% from the other, or any other combination.

This can be very important in situations where the joint debtors have large differences in income and assets, or are not on good terms. When there is a large difference in income and assets, the creditor is permitted to go after the assets of the wealthy signer on the loan, even if they hardly benefited from the credit. Unfair as this seems, this is entirely legal. I have had many clients co-sign on loans for their children or spouses get sued on those debts despite never enjoying any of its benefits. If you think about it, most cases with joint debtors will be unbalanced for this reason. The whole reason for applying for joint debt is that one individual has much better credit than the other.

Joint debts are also a big issue when the debtors are not getting along. This is frequently the case in divorces, where joint debts must be negotiated as part of the marital property settlement. In some cases, a joint debt you have agreed to assume through a marital property settlement will NOT be discharged in bankruptcy. I'll elaborate on this situation in my next post, but you will want to speak to an experienced Pittsburgh bankruptcy attorney to account for this situation. Regardless, when joint debts go bad, the debtors are often not willing to cooperate on dealing with the consequences.

Joint debts come in many forms. Credit cards are the most common. Cars and mortgages are also common situations. An individual wanting and needing a car will often not have the credit to finance one. This is when a parent or spouse will co-sign on the loan. "Co-signing" makes this parent or spouse jointly and severably liable. So, if further down the road, the car is repossessed, the creditor can go entirely after the co-debtor who never even used the car, but was only trying to be helpful, for the deficiency. This is actually a quite common issue.

These joint debts can be eliminated through bankruptcy. Unfortunately, there are not many legal alternatives to otherwise avoiding a joint debt, unless you can prove your co-debtor committed fraud.

The important thing to understand is that if you are a joint debtor on the loan, you are as much on the hook as your co-debtor, even if you only co-signed to be helpful. In my next post, I'll talk about how joint debts are treated in bankruptcy, which is sometimes the only way to deal with them when they have gone bad.

Contact us with any questions about your joint debt! 

Do I Have to Attend the Creditor Lawsuit Filed Against Me?

This is a common question I am asked the first time I speak to a new client. They have been sued by a creditor, usually on an old credit card debt or car repossession, and the paperwork the sheriff has served on them mentions a hearing date and time. Not surprisingly, this is a major concern.

We are conditioned to believe that not showing up to a hearing will have big, important, negative repercussions. In most cases this is true. When you don't show up to a court hearing, the judge will automatically rule against you and/or find you in contempt of court. In almost every situation, it is advisable to appear at a court action you are served with, and in most cases it is advisable to retain a lawyer.

Whether or not you should appear at a creditor lawsuit related to a debt will depend on one question... are you filing a bankruptcy? If the answer is "yes", you will probably NOT appear at the creditor lawsuit held at the Court of Common Pleas or magistrate level. Why is this seemingly negligent course prudent? It's alright not to show up when you are filing a bankruptcy because the bankruptcy will discharge the the underlying debt to the lawsuit. There is no reason to waste your time or pay a costly legal bill and have an attorney appear when the default judgment will be discarded anyways by the Bankruptcy Court. The automatic stay will stop the lawsuit, and the bankruptcy discharge will eliminate the lawsuit. The court will not hold you in contempt, as this is the normal practice.

Now, if for any reason, the debt related to the creditor lawsuit will NOT be included in the bankruptcy, you should be prepared to answer the lawsuit and appear in Court.

Contact us if you have been sued by a creditor on a debt. You should act as quickly as possible, as you only have 30 days to respond to the lawsuit in writing after you have been served, or the Court will cancel the hearing date and rule against you WITHOUT A HEARING. Yes, you read that correctly.

Call my office to speak to an experienced Pittsburgh Bankruptcy Attorney who can explain your rights to you and determine if bankruptcy is an option. It will be possible to file a bankruptcy even after the lawsuit has become a judgment, so it's never too late. You will need to do something about the judgment, because it will be good for 20 years, and may result in the loss of your home, car, bank account, or personal property.

Call sooner, not later...

Car Accidents and Bankruptcy: A Summary

My last three posts have discussed the dischargeability of certain debts related to auto accidents. There are several distinctions to make... Chapter 7 or Chapter 13? Intoxicated or not? Willful and/or malicious? Personal injury or death? Or just property damage? I'll attempt to summarize the distinctions below. Please review my previous blog posts "Car Accidents and Bankruptcy, Parts I, II, and III for great detail.

Below is an attempt to summarize, in shorthand, what is (and is NOT) discharged in both Chapter 7 and Chapter 13 bankruptcy when dealing with damages in an auto accident.

Damages Discharged in Chapter 7:

  • Not willful and malicious, AND;
  • No intoxication or drugs influencing accident
  • Intoxication/influence causing only property damage

Damages NOT Discharged in Chapter 7:

  • Willful AND malicious damage to either property OR person, OR;
  • Intoxication/influence causing personal injury or death

Damages Discharged in Chapter 13:

  • All damages related only to property
  • Damages related to personal injury/death but NOT willful OR malicious

Damages NOT Discharged in Chapter 13

  • Personal injury or death resulting from intoxication/influence OR willful act OR malicious act

NOTE: Even though a debt may be "dischargeable" in Chapter 13, it may still end up paid in full or in part depending on the rate at which the debtor is required to repay unsecured creditors. More accident-related debts are dischargeable in Chapter 13 due to this being the case.