Bankruptcy offers a solution to financial problems, allowing you the possibility to get back on track and create a fresh start. But once you file, you may be asking yourself various questions, including, “Can creditors harass me after I file for bankruptcy?” Generally, creditors cannot continue to contact you regarding your debts after filing for bankruptcy, though there are exceptions.
The Automatic Stay
Right after you file for bankruptcy, an automatic stay is usually imposed.
What is an Automatic Stay?
An automatic stay briefly prevents collection agencies, creditors, government entities, and others from tracking down debtors for the money you owe. Therefore, creditors can’t contact you upon filing to collect your debt, such as credit cards and other unsecured debts. The automatic stay will typically end at the close of the bankruptcy case or if the debts are discharged.
Exceptions to the Automatic Stay
There are several exceptions where creditors or agencies can collect pre-bankruptcy debts. Those include obligations associated with:
- Criminal cases
- Certain child support actions
- Specific eviction cases
Note – The automatic stay doesn’t apply to debts you incur after filing.
Requesting to Lift the Automatic Stay
A creditor may request that the bankruptcy court lift the automatic stay, but this typically only happens if:
- The creditor has collateral-secured debt (e.g., a house or car)
- The creditor could lose money if they’re forced to wait until the completion of the case
What Do You Do if Collection Agencies Violate the Automatic Stay?
If no exception or lift applies, and the court hasn’t ended or changed the automatic stay, then a creditor’s attempt to collect is often a violation of the order. The following are ways you can manage collection agencies who contact you about your debts.
1. Ensure your creditor list is complete and accurate when you file.
The clerk of court notifies any creditor that you list when you file that a bankruptcy petition has been filed. This list lets collectors know they cannot call you or attempt to collect the debt without permission from the US Bankruptcy Court.
2. Inform the collector that you’ve filed for bankruptcy.
Often, creditors are unaware of your case, and this step alone will typically cause them to correct their violation. Also, share with your creditor if you’re working with an attorney. They should make any future communication with your lawyer instead of you.
3. Report the actions to the bankruptcy court.
Notify the bankruptcy court if the collection agency doesn’t stop and correct their violation. The court could sanction the agency if the collector’s actions were willful. The action is deemed willful if:
- The order was in place and violated
- The creditor knew of the filing and ignored the court’s order or failed to take corrective action upon learning of the case
- The collection agency acted with intent
4. File a lawsuit against the creditor.
If the collection agency continues to violate the automatic stay, it could also violate other state or federal laws. You can file a separate lawsuit to obtain potential penalties or damages.
If you are considering filing bankruptcy or have already filed and are being contacted by creditors, Mummert Law can help! We are available for a consultation. We’ll sit down together, evaluate your position, and determine how to proceed. So don’t go it alone when it comes to bankruptcy. Make your appointment with Mummert Law today!
Finances are complicated for many people these days, and we see record numbers of new bankruptcy cases across the state. But there are signs and symptoms to be aware of that indicate you may be headed for bankruptcy. And being aware of these indicators while working alongside our team at Mummert Law can ultimately help you experience financial relief.
Signs and Symptoms of Bankruptcy for Individuals
There are a variety of indications that you may be on your way to bankruptcy. Though they’re pretty standard, we understand that they can be stressful if you’re experiencing them. The following are some of those early warning signs.
1. If you have more bills or expenses than you can pay
One key indicator is that you have more money going out than coming in. Eventually, you’ll need to manage those expenses. If not, you could face significant financial stress.
2. A life-changing event occurs
Divorce, medical emergencies, a death, or unforeseen layoff can all lead to financial struggles. Once you get behind, bills can add up, and you could face increasing challenges in paying them off.
3. Accumulating credit card debt
People often turn to credit cards when their money runs empty. Unfortunately, this causes a snowball effect. Once your cards have maxed out, you may have to take out a home equity line of credit or pull from your retirement. As a result, you may find that you’re in a financial hole from which you can’t break free.
In addition, paying minimum payments or making late payments, resulting in fees and high-interest rates, can also indicate that you may have to look at bankruptcy.
4. Being contacted by bill collectors and creditors
If you’re 30 days delinquent on your credit card, car, or house payment, don’t be surprised if collection agencies begin contacting you. Their persistent phone calls can add stress and anxiety to an already overwhelming situation.
5. Borrowing money
Another early indicator that you could face bankruptcy is borrowing money from those close to you. You could also be taking cash advances from one credit card to cover another, entangling you and an increasing debt pile.
6. You can’t cover necessary expenses
If you have to put off essential expenditures, like healthcare, you may be at risk of filing for bankruptcy soon.
7. You are often stressed or worried over financial concerns.
Concerns over finances can happen periodically for many people. But if you’re finding that it’s a regular occurrence, causing chronic anxiety, you may be headed for bankruptcy. And to top it off, you may experience health problems due to your stress.
Signs and Symptoms of Bankruptcy for Businesses
Similar to individuals, businesses can also be at risk of filing for bankruptcy. While there is some overlap with personal indicators, organizations face unique challenges and bankruptcy symptoms. The following are some early warning indicators:
- Continual decreases in your cash flow
- Critical leaders or employees leave your organization
- Low cash amount or capital balance
- Unable to satisfy debt obligations like loan or lease payments
- Struggles to meet payroll obligations
- Increasing credit card interest rates
- Continual contact with collection agencies
Being aware of signs and symptoms that predict your potential road to bankruptcy can be a vital first step in finding financial relief. And if you are experiencing any of these warning signs and are concerned bankruptcy is near, we can help! At Mummert Law, we’re available for a consultation. At this time, we’ll sit down together, evaluate your position, and determine the best way to proceed. So don’t go it alone when it comes to financial struggles. Make your appointment with Mummert Law today!
Unlike a Chapter 7 bankruptcy, which absolves you from making future payments to your creditors, a Chapter 13 bankruptcy requires a payment plan to be paid in full before discharge. Typically, the debtor pays on this plan for three to five years, with payments determined by debt totals and future income.
But what if something happens during the repayment term, making you unable to pay the agreed-upon payments? Sometimes, things happen that are beyond our control. In these cases, there is a provision in the bankruptcy code, § 1328(b), the hardship discharge.
A bankruptcy hardship discharge is a provision in the code that allows you to stop payments before paying the plan in full but still receive a Chapter 13 discharge. The courts don’t grant this provision often, and it’s only used in extreme cases when all other options are first exhausted.
In What Instances Can A Bankruptcy Hardship Discharge Be Granted?
For a bankruptcy hardship discharge to be granted, the circumstances must occur outside of your control. The court hears each case individually, subject to its jurisdiction and bankruptcy judge. Still, some scenario examples of granting a hardship discharge include:
- Severe illness or injury preventing work
- Job loss
- Debtor death
- Death of debtor’s spouse
- Catastrophic home fire
- Debtor terminal illness
What Requirements Must You Meet for A Bankruptcy Hardship Discharge?
You must exhaust all interventions first before the court considers a bankruptcy hardship discharge in Maryland. When you notify your Trustee of your hardship, they will determine if it’s possible to modify your payment plan agreement.
This may include extending your plan term if it isn’t already at the maximum of five years. Depending on your existing payment amount, the Trustee could also try to lower your payments if they aren’t already at the minimum amount.
Another requirement you must meet to be considered for a bankruptcy hardship discharge is the minimum distribution amount. This means you must have paid your unsecured creditors at least as much as a Chapter 7 bankruptcy liquidation would write off. Meeting this requirement could be challenging if you have significant equity in your primary residence, especially given Maryland’s recent boom in home and property values.
Are There Other Options Besides a Bankruptcy Hardship Discharge?
Yes, there are other options besides a bankruptcy hardship discharge. If the court doesn’t grant you a hardship discharge, you may be able to convert your Chapter 13 case to a Chapter 7 case. You could also dismiss your Chapter 13 case and refile immediately to have a new case heard based on your current situation.
Filing For A Hardship Discharge?
You could be right if you believe you qualify for a hardship discharge. However, there are enough nuances and exceptions within the code, meaning this situation requires a knowledgeable bankruptcy attorney.
Mummert Law in Glen Burnie, Maryland, can review your case and help you decide how to move forward. Contact us today to schedule an appointment to determine if you qualify for a bankruptcy hardship discharge in Maryland.
Filing Chapter 11 bankruptcy allows businesses to remain open and in operation while repaying creditors over a set period. However, pursuing this route is generally too expensive and complicated for most small business owners. Therefore, the Small Business Reorganization Act created Subchapter V to eliminate numerous Chapter 11 requirements. Thus, the addition makes reorganization bankruptcies more attainable for small businesses.
Filing for Bankruptcy as a Business Owner
There are several different bankruptcy options to seek debt relief if you’re a business owner. You can consider filing for Chapter 7 or Chapter 11 bankruptcy.
Note – If you run your company as a sole proprietorship, you can file Chapter 13 in your name and include your business debts in your plan.
Chapter 7 bankruptcy is known as “straight bankruptcy.” It aims to eliminate most, if not all, of your debt in exchange for your property. You’ll be obligated to sell your business assets in their entirety, pay creditors, and close your business. However, you’ll be debt-free.
Chapter 11 bankruptcy is known as “reorganization bankruptcy,” typically involving organizations, small businesses, corporations, or partnerships with a great deal of debt. You can remain open while you negotiate payment plans with your creditors.
What Is Subchapter V?
Subchapter V was added to Chapter 11 of the US Bankruptcy Code and went into effect in 2020. The subchapter was intended to make bankruptcies involving reorganizations more accessible for small businesses.
Who Can Qualify for Subchapter V?
To qualify for Chapter V bankruptcy, businesses must:
- Engage in business or commercial activities
- Ensure their unsecured and secured debts don’t exceed $2,725,625
- Have a minimum of 50% of business debt result from business activities
- Not include debt owed to company insiders
Note – You don’t qualify for Chapter V if your primary business activity is owning and operating a single property.
Advantages of Subchapter V
Subchapter V has many advantages, including removing many Chapter 11 requirements. The following is a list of benefits associated with filing for this subchapter.
- Eliminating the absolute priority rule
Absolute priority is a rule in corporate bankruptcies that determine what order of payment will go to creditors and shareholders. For example, senior creditors are paid before junior creditors. However, there isn’t an absolute priority rule when filing Subchapter V.
- Remaining open operationally
Similar to the traditional Chapter 11, you’ll be able to keep your business open while repaying creditors
Note – While on the plan, you’ll have to pay your unsecured creditors the total amount of your disposable income.
- No disclosure is required
- Installments of expenses paid
Instead of paying the administrative expenses in their entirety, you can settle your costs in installments.
- Plan exclusivity
The debtor alone may file Subchapter V, and there isn’t an exclusivity period expiring after a certain period.
- Reduced administrative expenses
- Increased protection of the automatic stay
An individual may file a second case within two years of the prior case, staying the actions of creditors pursuing the debtor.
- Easier counsel retention
- There is no vote required to confirm the plan
The debtor can establish a cramdown plan with no approval from creditors.
- Modification of specific mortgages
- Post-confirmation plan alterations
After confirmation, only the filer may modify the plan.
- The discharge
The debtor can obtain a discharge on the effective plan date, given consensual confirmation provisions.
- No limits in the modification of motor vehicle loans
Disadvantages of Subchapter V
While there are numerous advantages to filing Subchapter V, there are several disadvantages, including:
- Limited eligibility, as stated earlier
- Plan deadlines where the individual has 90 days to file a plan
- Remedies upon plan default, which says the program must provide appropriate corrections if payments aren’t made
- Limits on cash collateral use
- Mandatory trustee appointment
- Required status conference
- Dedicated projected disposable income to pay creditors
Subchapter V simplifies Chapter 11 for small businesses. But the process can still be complex. A knowledgeable lawyer can help you thoroughly understand the proceeding and ensure you achieve the greatest possible outcome. At Mummert Law, we’re available for a consultation, at which time we’ll sit down together, evaluate your position, and determine the best way to proceed. So don’t go it alone when it comes to bankruptcy. Make your appointment with Mummert Law today!
If you want to finance anything, you need a good credit score. You could pay thousands of dollars in high interest with a poor credit score compared to someone with good or better credit.
What is Your FICO Score?
There are three main credit bureaus: Equifax, Experian, and TransUnion. The most common one used by lenders and other companies is Equifax. The Fair Isaac Corporation created the FICO score about thirty years ago as an industry-standard number of score creditworthiness.
When you take out a loan, your credit score is one of the most significant factors used to determine eligibility, how much you can finance, and your interest rate. Utility companies, cell phone providers, and landlords use your credit score to determine eligibility, if you owe a deposit, and how much you owe. In Maryland, insurance companies can also use your credit score as a factor when determining your auto insurance premium.
The higher your credit score, the less risky it is for a lender to finance your loan. This translates to a low-interest rate, fewer fees, and more available credit. People with a high credit score have more advantages, commanding lower payments and their choice of lenders. For rentals, utilities, and cell phone plans, those with high credit scores may be able to forgo a security deposit or secure a better apartment in a more desirable neighborhood than someone with a lower credit score.
What is a Good FICO Credit Score?
A FICO credit score is a three-digit number between 300 and 850. According to Experian data, The average U.S. credit score is 711 as of 2020. Credit scores fall into ranges and determine your creditworthiness.
- Exceptional: 800 and over
- Very good: 740-799
- Good: 670-739
- Fair: 580-669
- Poor: <580
As you can see, the average credit score falls into the Good range. Anything better than average is your goal if you want the best choice in lender, interest rate, and loan terms.
How Can I Build Credit Without Taking on Debt?
You can’t build a credit score if you don’t use credit. You can use two strategies to build your credit and gain a good or better score.
The first is getting a secured credit card. You deposit in the bank, and they offer you a credit card with the deposit amount as your credit line.
Another way is to get a credit-builder loan, which works the same way. You deposit money into a savings account or certificate of deposit (CD). After making on-time payments for a length of time, you get your money back. You can usually get a credit-builder loan from a credit union or community bank.
How to Build Good Credit Habits
Getting a high credit score is easy when you’re first starting. But it’s even easier to create bad habits that translate to poor credit scores. Here are a few tips for building great credit habits:
- Always pay your bills on time or early.
- Don’t carry balances by paying your bills in full.
- Use your credit cards regularly, but try to stay under 30% of your credit limit.
- Don’t close accounts because it can negatively impact your credit score. Just stop using them.
Building an excellent FICO score is an essential part of your financial strategy. If you are overwhelmed with credit obligations, and your FICO score is suffering, contact Mummert Law for a consultation to see if bankruptcy is a good option for you!
If you’re in the market for a new or used car, you may need a loan to buy it. When you work with a lender for financing, you can usually name your monthly budget, and they’ll do what it takes to meet that number or get just below it.
One way lenders do this is to extend the loan period. This is how we have gotten to 84-month car loans. When you finance a car with an 84-month auto loan, the purchase price and finance charges are spread over seven years.
Is an 84-month car loan a good option for you? Consider the benefits and drawbacks of a seven-year auto loan before signing on the dotted line.
Benefits of an 84-Month Car Loan
Low Monthly Payments
The longer you spread out the cost, the lower your monthly payments. An 84-month car loan can make it manageable for buyers on a tight budget to afford a new car. However, this could also signify that the vehicle you’re buying exceeds what you can afford. You may be better off choosing a cheaper model.
When interest rates are low — as they have been for some time — borrowing for a more extended time can make sense. How much you pay in interest over the loan term depends on the final cost of the car and the interest rate for which you qualify. If you have a lot of debt but can qualify for a low rate, accepting a longer loan term could make sense to tackle the rest of your high-interest debts.
Drawbacks of an 84-Month Car Loan
While there are a few benefits to taking out an 84-month loan, there are also some drawbacks.
Cars Depreciate Quickly
While owning a home is an appreciating asset, meaning the value increases over time, a car is the opposite. New cars lose some of their value the minute you drive them off the lot, and the value continues to decrease as the mileage and age increase.
With an 84-month auto loan, you could be underwater on the loan by the end when you owe more than the car is worth. Suppose you have negative equity and get into an accident where the vehicle is a total loss or decide to sell it before paying the loan in full. In that case, you will still owe on a vehicle you can’t drive anymore. You may be able to roll the negative equity into a new car payment, but that would mean you’re already underwater on a brand-new car.
The Loan Outlives the Warranty
Depending on the car manufacturer, the car loan may outlive the warranty. In this case, you’ll still be paying for the car payment and have to shoulder more of the cost of repairs. The older your car gets, the more it typically costs to repair, making your vehicle cost more than your budget allows.
Higher Cost Overall
The longer you pay on a loan, the more you pay in interest. For instance, you’ll pay about $1,300 in interest on a $20,000 car with a 2.5% interest rate. The same loan over 84 months would amount to about $1,820, over $500 more.
Circumstances When an 84-Month Car Loan is a Good Option For You
While an 84-month loan may not be the best solution for everyone, sometimes you’re on a tight enough budget to warrant it. Here are some reasons an 84-month car loan is a good option for you:
- You have an extended warranty beyond the loan term.
- There is no prepayment penalty.
- This loan term is the only one that fits into your budget.
- It allows you to afford a more reliable or safer car.
- You have higher interest debts and can qualify for a low-interest car loan.
As with most financial agreements, be cautious and weigh the advantages and disadvantages of your options. If you are overwhelmed by debt that makes it hard to buy a new vehicle, contact us for a consultation to see what advice we can offer.
Filing for bankruptcy can be distressing, emotional, and complex, and it can also be a time-consuming undertaking. Moving through the process of seeking debt and financial hardship relief can take months or years to accomplish. However, a knowledgeable bankruptcy lawyer can help make all the difference. Their understanding of the legalities can simplify the approach, give you peace of mind, and help you avoid problems throughout the process. But it’s vital to choose the right lawyer for you!
What Is Bankruptcy?
Bankruptcy helps debtors relieve financial stress and problems that they may face. Typically, consumers file for Chapter 7 or Chapter 13 bankruptcy, designed to give debtors a fresh start. On the other hand, businesses and organizations can file for Chapter 7 or Chapter 11 bankruptcy. Bankruptcy lawyers aim to assist individuals and companies throughout the filing process.
What Are Bankruptcy Lawyers?
Bankruptcy lawyers typically specialize in consumer or commercial bankruptcy. Both transactional and litigation affairs are involved with bankruptcy practices.
Benefits of Hiring a Bankruptcy Lawyer
A knowledgeable bankruptcy lawyer can significantly impact filing and your overall achievement of debt relief because they:
- Understand the legal process
- Can improve your chances of success
- May help you save money over time
- Provide you with peace of mind
- Can assist with avoiding problems throughout the process
- Can help you keep real estate or assets that you own
- Make a complicated process easier for you
However, picking the right attorney to experience the above benefits is vital.
Choosing the Right Bankruptcy Lawyer
How do you choose which attorney is best suited for your situation? You can begin by following these steps:
1. Look at reviews
Today’s consumers often rely on reviews before making any purchasing decision. So, as you seek a bankruptcy lawyer, consider reviewing reviews for attorneys in your area.
The AVVO rating evaluates an attorney’s background, reveals state bar association information, and showcases details about other legal professional organizations. You can utilize this as a research tool when looking for reviews.
2. Ensure they have experience in business and financial matters
Finding a bankruptcy lawyer with extensive knowledge and a considerable background in bankruptcy law, business, and financial matters is critical. These attorneys will have an in-depth understanding of the bankruptcy process. They will be able to best assist you with providing reliable consultation. They’ll also be able to keep you on track throughout the proceeding.
3. Participate in a consultation
Most law firms and attorneys provide free consultations. These meetings will allow you to ask questions and examine if you and their team are a good fit. This consultation may be your first chance to speak with the bankruptcy lawyer. You’ll be able to determine whether you believe they can help you and your family find relief. In addition, notice whether they discuss various alternative resolutions, as they should present the most beneficial way to overcome your financial situation.
4. Take note of their passion or energy
A bankruptcy attorney who is passionate and focuses their energy on helping you find financial relief is critical to the positive achievement within your case. And don’t be hesitant to ask why they chose to specialize in financial or bankruptcy law. Consider looking for a connection with their purpose and why they aim to help you and your family.
5. Make sure they take the time to listen and understand you and your situation.
Every bankruptcy case is unique. And walking through the process can be distressing and emotional. A lawyer who hears and understands you can help ensure you feel confident and secure throughout the filing process. In addition, you’ll have a great deal of contact with your lawyer. So, you must find one with whom you’re comfortable.
The mere thought of filing for bankruptcy and finding a lawyer can be intimidating. We understand, and that’s why we’re here to help make your journey to achieving debt relief as easy as possible. At Mummert Law, we’re available for a consultation. At this time, we’ll sit down together, evaluate your position, and determine the best way to proceed. So don’t go it alone when it comes to bankruptcy. Make your appointment with Mummert Law today!
Few people go into marriage expecting it to end in divorce, especially when you have kids. But more than half of first marriages end in divorce, and many divorcees marry for a second time.
Before you blend your families together, discussing what will happen when one or both of you pass away is essential. One way to ensure your desires are met when you die is to create a trust. A joint trust may be a solution, as it is a way to avoid probate and pass on assets to your beneficiaries.
A joint trust is a single trust created and funded that covers both spouses. The spouses are co-trustees, and the trust can include individual and joint property and assets.
How Does a Joint Trust Work?
With a joint trust, two people, usually spouses, become co-trustees to a single trust. When the first spouse dies, the surviving spouse is now the sole trustee and manager of the trust.
Once the remaining spouse passes away, the joint trust cannot be changed and is now an irrevocable trust. The designated successor trustee is now the manager of the trust. They are responsible for distributing the assets to the beneficiaries under the trust document instructions.
Who Should Have a Joint Trust?
There are benefits to a joint trust between spouses, but it isn’t a solution for every marriage.
In community property states, joint trusts are especially beneficial. Since both spouses own all property and assets acquired after marriage, a joint trust can make it easier to distribute assets upon death. Maryland is not a community property state, so this may not be as beneficial to Maryland residents entering a first or second marriage.
A joint trust is usually easier to maintain than two separate trusts and is more cost-effective. A joint revocable trust between spouses allows for asset and term changes while both are still alive.
Both spouses have equal control over the trust and the assets involved. You should only consider a joint trust if you expect this marriage to last until death. If you die first, your spouse is the sole owner of the trust. Logistically, dividing assets within a joint trust can be challenging if you divorce.
Who Shouldn’t Have a Joint Trust?
Both spouses must agree on any changes or adjustments within the joint trust. If you want to handle your assets differently than your spouse, a joint trust may not be for you.
If either of you expects a large amount of money at any point in the future, you may want to rethink a joint trust. It could affect the amount of estate tax due. If you improperly draft the trust, it could also disqualify you from the marital deduction.
If you or your spouse get sued or owe money to someone or an entity, like the IRS, a joint trust may not be in your best interest. Creditors can seize assets from a joint revocable trust, even if the debt is just for one spouse.
How Can I Create a Joint Trust?
Creating a properly executed joint trust is not easy. To ensure it’s enforceable and properly drafted, it’s best to hire an estate attorney. Schedule a consultation with Mummert Law to answer your trust questions, find out if a joint trust is right for you, and create one.
When you have children and have been through a divorce, it’s natural to be apprehensive about your kids’ future if you decide to marry again. A second marriage often requires much more planning than just a wedding when children are involved. This is especially true if you have assets you want to pass along to your children when you pass away.
If you were to pass away first and didn’t implement a plan, your children could unintentionally get disinherited. A trust may be a solution to ensure your share goes to your children from your first marriage.
What is a Revocable Living Trust?
A living trust, also called a revocable trust, is an account that holds the assets and funds you place in it throughout your lifetime. You can put your home, car, and other assets in the trust’s name.
While alive, you can add, remove or make changes to the trust as often as you like. Once you pass away, the trust becomes irrevocable, and no changes can be made. The designated trustee will then distribute the trust assets and funds per your instructions.
Should We Create a Joint Trust or Separate Revocable Trust?
If you and your second spouse want everything equal, a joint trust may be the right option. But if you want your children to receive your assets or you and your spouse have different ideas for allocation, two separate trusts are advisable. It’s also the best solution if you plan to keep your finances separate. If you have assets and property separately going into the marriage, you may wish to keep them in your family.
There are other benefits to having separate spouse trusts. If your spouse is in financial trouble and has creditors coming after them, having a separate trust can shield your assets from creditor access. In a joint trust, everything is up for grabs to pay for a debt if a creditor comes knocking.
Suppose you or your spouse expect to receive an individual inheritance you’d like to keep separate. In that case, a separate trust is the best choice. A joint trust makes the inheritance equally available to your spouse.
Perhaps the most practical reason to create a separate trust is for tax savings. Maryland has an estate and inheritance tax, often referred to as a death tax. Your heirs may have to pay estate and inheritance tax if your net worth exceeds Maryland’s exemption amount. However, separate spousal trusts allow you to double the tax exemption amount, which could reduce or even eliminate the amount of taxes they owe.
Ready to Set Up Your Separate Spouse Trusts?
Having children from a prior marriage can make finances tricky. If you think two separate spouse trusts are the way to go, are leaning towards a joint trust, or aren’t sure which is the best choice for your situation, contact Mummert Law to schedule a consultation. We can help you figure out which trust solution is best for your family and set them up correctly so there’s no chance of a dispute later.
Financial situations are unique, complicated, and can be overwhelming. Sometimes, if your debts go unpaid long enough, a creditor can garnish your wages. But what is wage garnishment? And can you still file for bankruptcy after your wages have been garnished?
The short answer is that many people file Chapter 7 and Chapter 13 Bankruptcy to either stop or prevent a wage garnishment.
Wage Garnishment Defined
A creditor can sue you over unpaid debt. Typically, they’d need to obtain a money judgment against you, which is a court-issued document stating the creditor won the lawsuit. A money judgment is entered if you don’t respond to the initial suit, which is known as a default judgment, or after a trial and the Court rules in favor of the creditor. In Maryland, you have 10 days to pay the judgment. If you don’t pay the judgment, many creditors will then garnish 25% of your income from your wages, as well as attach your bank account or put a lien against your property.
Wage garnishment is when a creditor files a request to have your employer withhold or deduct part of your wages to begin paying back your debt. The types of debt that a creditor can collect through wage garnishment include:
- Credit card debt
- Personal loans
- Medical bills
Note – While you are allowed to oppose the garnishment, generally speaking, there is no defense in State Court of I cannot afford the garnishment. Also, this wage garnishment is not the same as attachment of your wages for unpaid child support or alimony.
Bankruptcy and Wage Garnishment
Filing for Chapter 7 or 13 Bankruptcy will stop your wage garnishment (except for child support or alimony). In addition, upon filing for bankruptcy, a court-ordered automatic stay stops the majority of civil lawsuits brought against you. It also eliminates most collection actions against your property.
What is an Automatic Stay?
An automatic stay briefly prevents collection agencies, creditors, government entities, and others from collecting on the money you owe them.
The automatic stay will typically end at the close of the bankruptcy case, statutory code provision that automatically terminates the stay, or an order terminating the stay.
A creditor may request that the bankruptcy court lift the automatic stay, but this typically only happens if:
- The creditor has collateral-secured debt (e.g., a house or car)
- The creditor could lose money if they’re forced to wait until the completion of the case
- To allow a creditor to continue with a divorce or other domestic proceeding
Chapter 7, Chapter 13, and Wage Garnishment
Chapter 7 Bankruptcy
A stop will be put on your wage garnishment when you file for Chapter 7 Bankruptcy (otherwise known as wage attachment). If you successful complete the Chapter 7 and a discharge is entered against that debt, the creditor will not be able to garnish your wages anymore.
Note – Child support, certain taxes, and student loan debts aren’t dischargeable through Chapter 7 Bankruptcy. You are also required to continue to pay your child support and alimony while in bankruptcy.
Chapter 13 Bankruptcy
When filing for Chapter 13 Bankruptcy, you’ll pay your creditors, including the ones garnishing your wages, through payment plans. At the end of the Chapter 13 case, the debt should be discharged and the creditor will not be able to have your employer withholding income to satisfy the debt.
Note – As long as you’re complying with your Chapter 13 three-to-five-year repayment plan, your garnishments will stop. After that, however, the court can decree that the repayment plan be fulfilled by garnishing wages.
Wage Garnishment and How to File for Bankruptcy
At the Mummert Law Firm, we assist debtors in stopping wage garnishments. We will meet with you, discuss your financial circumstances, and propose the best course of action, inside and outside of bankruptcy.
If you elect to file bankruptcy, we will assist you in obtaining the information to prepare the Bankruptcy Petition, Schedules, and Statements (approximately a 50+ page documents). Once we file bankruptcy, we will notify the Court that entered the judgment and garnishment, the creditor seeking the garnishment, and your employer that an Automatic Stay has been entered on your behalf. Further, we will notify everyone that if they continue to collect the debt, that person could be subject to Contempt of Court for violating the Automatic Stay.
Finances are complicated, and you could be facing crushing debt and wage garnishment. Creditors can seek to collect on credit card debt, personal loans, taxes, and medical bills through your wages. But filing for bankruptcy can end your wage garnishment. However, don’t go it alone when it comes to finding financial relief. If you are facing wage garnishment, Mummert Law can help! We are available for a consultation, at which time we’ll sit down together, evaluate your position, and determine the best way to proceed. So make your appointment with Mummert Law today!