When my clients make their initial consultation, it’s often because an aggressive creditor has filed a lawsuit, obtained a judgment, and started garnishing wages or bank accounts.
A garnishment can be devastating to an indivdual or family living paycheck-to-paycheck. Fortunately, a bankruptcy filing will stop the garnishment and allow the seized funds to be returned to the client.
The filing of a bankruptcy petition, whether chapter 7 or chapter 13, invokes the “automatic stay” codified in the Bankruptcy Code under 11 U.S.C. § 362(a). In a nutshell, the automatic stay is generally invoked immediately and automatically upon the filing of a bankruptcy petition. Therefore, once the bankruptcy case is filed, GARNISHMENTS are supposed to IMMEDIATELY STOP as a matter of law. The law is clear, but without a court order dismissing the garnishment or directing the bank or employer to release the funds, it’s not always easy to convince banks or employers to stop the garnishment or release the funds “automatically” or “immediately.”
It’s relatively easy to stop wage garnishments upon the filing of a chapter 13 bankruptcy in the Northern District of Georgia. A chapter 13 case, commonly referred to as a “wage earner plan,” involves submission of a weekly or monthly payment to creditors under a court-approved plan. The payments are deducted from the debtor’s paycheck pursuant to an “Employment Deduction Order” or “EDO.” Immediately upon the filing of a chapter 13 case, the Court issues an EDO, which is directed to the debtor’s employer. Here’s a link to the standard EDO form issued in the Northern District of Georgia.
The EDO instructs to employer to remit a set periodic payment to the chapter 13 trustee. Paragraph 4 of the Court-issued EDO contains the following language: “This order supersedes any previous order issued with respect to the debtor’s wages.” As a result of the EDO, which is usually issued within hours or days of filing of the chapter 13 case, the Employer has a clear and unambiguous mandate from the United States Bankruptcy Court, instructing the employer to STOP ANY PENDING WAGE GARNISHMENTS.
The real problem arises when a chapter 7 is filed in the Northern District of Georgia. Chapter 7 cases eliminate debt – there’s no EDO issued in the case. Most employers require a COURT ORDER stopping or dismissing the garnishment, or in the alternative, a DISMISSAL OF GARNISHMENT from the creditor. Since we don’t have an EDO, the debtor’s lawyerusually has to contact the attorney for the creditor responsible for the garnishment, and ask that attorney to DISMISS the garnishment. Many creditors attorneys are diligent, but it’s not uncommon for a creditors’ attorneys to take days, or weeks, before filing a dismissal. The delay often has catastrophic consequences when my clients need to pay their living expenses (utilities, insurance, house or car payments, etc.) and can’t get the garnishment lifted.
I am able to file various motions with the bankruptcy court, seeking a court order staying the garnishment, but these motions take 30 days minimum for a hearing, then several more days for entry of the order. If “justice delayed is justice denied,” then “money delayed is money denied.” I can also file a motion for contempt, if the creditor acted unreasonably or exercised control over my client’s funds. The problem, again, is the delay in ultimately recovering funds for my client, and the additional cost to my client for the additional legal work.
One of our neighboring jurisdictions – the United States Bankruptcy Court for the Western District of Tennessee – has SOLVED THE PROBLEM. That district allows the debtor’s attorney to cause an Order Staying Wage Garnishment to be immediately and automatically issued in a chapter 7 case, stopping all wage or bank account garnishments.
I can’t think of any reason for our District not to implement this form Order for chapter 7 cases. The Order simply follows the Code; specifically, the automatic stay. It’s time for our local bankruptcy attorneys and trustees to make a concerted effort to bring this problem, and the proposed solution, to the attention of our judges and clerk.
Feel free to e-mail me with any questions, or leave a comment below.
If you are being sued or garnished, please call my office for your free and confidential chapter 7, chapter 11 or chapter 13 bankruptcy consultation. I have offices in Cartersville, Atlanta, Dallas, Dalton and Calhoun.
In the next few days, I will post a series of articles addressing common problems encountered by bankruptcy lawyers and consumers in the Northern District of Georgia. These problems have a real impact on my clients, primarily from Cartersville, Dallas, Calhoun and Dalton.
Specifically, I will address:
– Why the Northern District of Georgia should implement a General Order that directs employers and State courts to stop wage and bank account garnishments IMMEDIATELY upon the filing of a Chapter 7 bankruptcy.
– Why the Court should revise the standard § 522(f) Order Avoiding Lien that is issued when the Respondent does not file a response.
– The serious problem that exists regarding venue and forum shopping in the Northern District of Georgia. Many of my colleagues are discouraged that Georgia residents are filing bankruptcy cases in an improper venue – Chattanooga, Tennessee.
– A problem that exists in Georgia’s post-foreclosure judicial confirmation statute, codified in O.C.G.A. § 44-14-161.
Our firm represents consumers and business in need of debt releif, including bankruptcy. We have offices located in Cartersville (Bartow County), Dallas (serving residents of Paulding County, including Hiram, Rockmart, and Acworth), Calhoun (serving residents of Gordon County), and Dalton (serving residents of Whitfield, Murray and Chattooga).
For a free consultation, call our office for an appointment. (770) 382-8900 www.northgabankruptcy.com
Cartersville | Dallas | Dalton | Calhoun | Atlanta
Today’s discussion addresses some of the most common myths about bankruptcy.
1. Everyone will know I’ve filed for bankruptcy.
Unless you’re a prominent person or a major corporation and the filing is picked up by the media, the chances are very good that the only people who will know about a filing are your creditors. While it’s true that bankruptcy is a public legal proceeding, the number of people filing is so massive that very few publications have the space, the manpower or the inclination to run all of them.
Some local newspapers publish bankruptcy filings (the newspaper in Rome, GA, for example), but the majority of local newspapers have better things to print. The newspaper in Cartersville, GA – The Daily Tribune News – for example, does NOT print bankruptcy filings.
Certain types of debts cannot be discharged and erased. They include child support, alimony, government-issued or government-guaranteed student loans, and debts incurred as the result of fraud.
3. I’ll lose everything I have.
This is the misconception that keeps people who really should file for bankruptcy from doing it. They think the government will sell everything they have and they’ll have to start over in a cardboard box.
While the bankruptcy laws vary from state to state, every state has exemptions that protect certain kinds of assets, such as your house, your car (up to a certain value), money in qualified retirement plans, household goods and clothing. Georgia’s exemptions are discussed in a previous blog. If you’re concerned about keeping your property, it’s a good idea to make an appointment with me, or Brad Stephens, to discuss whether any of your property is at risk.
Most people will pass through a bankruptcy case and keep everything they have.
4. I’ll never get credit again.
Quite the contrary. It won’t be long before you’re getting credit card offers again. They’ll just be from subprime lenders that will charge very high interest rates. “There are innumerable companies that will provide credit to you,” says California bankruptcy attorney and trustee Howard Ehrenberg. “I don’t advise any of my clients to run out and run up the bills again, but if someone does need an automobile, they can go and will be able to get credit. You don’t have to go underground or something to get money.”
5. Only deadbeats file for bankruptcy.
Most people file for bankruptcy after a life-changing experience, such as a divorce, the loss of a job or a serious illness. They’ve struggled to pay their bills for months and just keep falling further behind.
With credit markets tightening, chances are you’re not in a position to buy a house or car. But if you are, you might want to do that before you file. After bankruptcy, those loans will be tough to get and the higher interest rate on such a large purchase would have a significant effect on your payments. Also, if you have a credit card with a zero balance on the day you file for bankruptcy, you don’t have to list it as a creditor since you don’t owe any money on it. That means you might be able to keep that card even after the bankruptcy.
6. If you’re married, both spouses have to file for bankruptcy.
Not necessarily. It’s not uncommon for one spouse to have a significant amount of debt in their name only. However, if spouses have debts they want to discharge that they’re both liable for, they should file together. Otherwise, the creditor will simply demand payment for the entire amount from the spouse who didn’t file.
7. I don’t want to include certain creditors in my filing because it’s important to me to pay them back someday and if the debt is discharged, I can’t ever repay them.
Bless you for even thinking about such a thing. You’re no longer obligated to repay them, but you always have that opportunity. If your conscience won’t let you sleep nights because you didn’t pay your debts, there’s nothing in the bankruptcy code that prevents you from doing that once you’re back on your feet. But bankruptcy is an all-or-nothing deal, so you have to include all your creditors in the petition.
8. You can’t get rid of back taxes through bankruptcy.
This is one of the most common misconceptions about bannkruptcy. Taxes CAN be discharged through bankruptcy, but you’ll need to dicuss the criteria for dischargeability with your attorney. Generally, income taxes that came due more than 3 years ago CAN BE EILIMINATED.
9. You can file for bankruptcy only once.
You can file for bankruptcy more than once, but the bankruptcy law that went into effect in October 2005 lengthened the required wait between filings. You can file for Chapter 7 bankruptcy only once every eight years. You have to wait two years to repeat a Chapter 13 filing and four years between a Chapter 7 and a Chapter 13 case.
10. I can max out all my credit cards, file for bankruptcy and never pay for the things I bought.
That’s a form of fraud and credit card lenders, as well as bankruptcy judges, can get really cranky about it.
For a free consultation about bankruptcy or debt relief, call today for an appointment. We have offices located in Cartersville, Dallas, Calhoun and Dalton. (770) 382-8900
Yesterday’s post “Chapter 7 Bankruptcy – How Do Lawyers Get Paid” contained a link to the class action lawsuit filed against Clark & Washington. I wanted to follow-up that post with a link to an Order by Judge Michael Williamson from the Middle District of Florida. That Order explains the legal and ethical implications of paying for chapter 7 legal services AFTER the case is filed. Judge Williamson found that the practice of accepting post-dated checks violates the automatic stay and discharge injunction.
On the one hand, I understand WHY Clark & Washington opted to accept post-petition post-dated checks from their clients. Section 362(b)(11) states that it’s NOT a violation of the stay to “[present] a negotiable instrument [i.e., a check].”
Any attorney that has attended one of Judge Paul W. Bonapfel’s ethics lectures knows that it is completely unethical to put a client into a chapter 13 wage-earner plan simply because that client can’t afford the $1,300+ chapter 7 fee. (Note: a chapter 13 case only costs the $274 filing fee to start.) The problem arises when a client NEEDS a chapter 7 IMMEDIATELY, but doesn’t have any available money.
But, on the other hand, it’s hard to deny the fact that “financing” a chapter 7 case, and accepting payments AFTER the case is filed, creates an unethical conflict of interest (see yesterday’s blog).
The Lundquist class action is an intersting case that has generated much discussion in the bankuptcy legal community.
The Plantiff’s attorney is Terry Haygood, a very good friend of mine, and tenacious advocate. The managing partner of the Defendant is Rich Thompson, whom I owe a debt of gratitude for helping me with various issues in the past. Rich is also a very well-known, and well-respected bankruptcy attorney in the Northern District of Georgia.
I’m not sure how the case will play-out, but a lot of consumer bankruptcy attorneys will be on the sidelines watching.
North Georgia Bankruptcy 