Stop Garnishments
As soon as your Chapter 7 bankruptcy case is filed all garnishment actions must stop. If you have had money taken out you may be able to get that money back.
How Bankruptcy Can Stop a Garnishment
The minute a bankruptcy case is filed the automatic stay is issued which prohibits creditors from trying to collect on debts that were included in the bankruptcy.
The automatic stay is self-executing, effective upon the filing of the bankruptcy case and requires that all collection calls, lawsuits and garnishments must stop immediately.
Creditors who continue with collection efforts face stiff fines and penalties from the bankruptcy court.
Section 362(k) of the Bankruptcy Code provides:
An individual injured by any willful violation of a stay provided by this section shall recover actual damages, including costs and attorneys’ fees, and, in appropriate circumstances, may recover punitive damages.
You may even be able to recover some of your wages lost to garnishment. Your wages can only be protected up to a certain amount, so you likely won’t be able to recover all of your losses that occurred due to garnishment.
When your employer is served with a Georgia garnishment, it is extremely important that you take action as soon as you can. If you do nothing, the creditor is going to garnish up to 25 percent of your net paycheck.
- You are typically not warned by a creditor before they seize your bank account or garnish your wages.
- Some creditors such as the IRS, student loans, or child support do NOT need a court order to seize your bank account or garnish your wages.
Don’t wait to take action because it still takes a few days for a garnishment release to be issued and to get any monies back. If you are being sued and know you cannot pay, talk to a Georgia bankruptcy lawyer.
How Bankruptcy Can Stop a Collection Lawsuit
The moment you file for bankruptcy the automatic stay goes into effect. Once in place, the automatic stay prohibits most creditors from initiating or continuing to collect against you, including through collection lawsuits. A credit card company that has already filed a debt collection lawsuit against you cannot proceed further while the stay is in effect. If you complete your bankruptcy case the lawsuit will not be able to proceed.
Once a bankruptcy case is filed our office contacts the lawsuit creditor’s attorney and serves them with a cease and desist notice regarding the pending lawsuit.
Bankruptcy is federal law and is very powerful tool in dealing with debt collection lawsuits. Being served with a lawsuit can be stressful and embarrassing. If you are being hounded by debt collectors Chapter 7 bankruptcy may be the best option.
If you have been served with a notice of a lawsuit and you don’t show up at your court date the creditor will get a default judgment against you. Once they have the judgment they can proceed with bank account and wage garnishment.
- If you have been served with a collection lawsuit your credit is already damaged from non-payment on the account.
- If you don’t have the money to pay the debt it may be difficult to settle with the creditor.
- The total cost of a bankruptcy is usually around $1400.00 so if you owe more than that, Chapter 7 bankruptcy may be the easiest and cheapest way to get back on track financially.
The typical “rebound” time for credit coming out of a Chapter 7 bankruptcy is usually about 12 months.
Stop Lawsuits
Filing for bankruptcy can stop a lawsuit brought by any creditor, and release the debtor of liability to repay credit card debt.
Stop Collection Calls
Harassing debt collection calls are not only annoying but they wear you down mentally as well. Bankruptcy can stop collection calls.
How Bankruptcy Stops Collection Calls
When faced with financial hardships, paying off debts can be a difficult task. The last thing you need is another creditor calling to harass you to make a payment. Debt collectors are relentless in their pursuit to collect on a debt and rarely consider the difficult financial situation you are experiencing. Often times, creditors will refuse negotiation efforts and insist all debts must be paid in full.
Creditors may threaten debtors via phone, visits to their homes and by notifying credit agencies of delinquency. Bankruptcy can provide relief from collection efforts and protect you from the persistent calls from creditors.
When you file for bankruptcy, the court issues an automatic stay that halts all collection efforts by creditors. The automatic stay provides protection under a Federal law that prevents creditors from contacting you and attempts to collect on debts.
If a creditor still contacts you AFTER you file for bankruptcy and you have provided them with your bankruptcy information you have legal rights which can be enforced in bankruptcy court. Here is what you should do if a creditor still keeps calling you after your bankruptcy filing:
- Make note of the harassment. If they send letters, collect all of the correspondence. And if they call you, write down the time and date that they contacted you. Keeping a paper trail of the harassment is crucial in the fight against these creditors.
- Contact your Georgia bankruptcy attorney. Once you have collected correspondence and have written down the phone calls, it’s time to contact your bankruptcy attorney for assistance.
- Take them to court. If they still persist, it’s time to fight back against your creditors and take them to court.
Don’t put up with debt collection harassment and demeaning behavior from your creditors! Filing bankrutpcy can not only put a stop to harassment from creditors but it can also provide you with a new financial life.
How Bankruptcy Can Give You a Fresh Financial Start
When you hear the word “bankruptcy,” it probably means a Chapter 7 proceeding. In a Chapter 7 bankruptcy, your assets (other than your exempt assets) are gathered together and sold. Any unsecured debt that isn’t paid off from the sale proceeds is discharged, giving the debtor a debt-free fresh start.
Traditionally, Chapter 7 has been the most common type of bankruptcy proceeding. It is available to an individual, a partnership, or a corporation or other business entity. Chapter 7 is one of the three major options for relief under the bankruptcy code. It differs from Chapter 13 and Chapter 11 plans in that it is a liquidation bankruptcy, while the other two are reorganization bankruptcies.
Chapter 7 bankruptcy provides debtors a fast and easy way to clear out their debt and start rebuilding their credit immediately.
A fundamental goal of bankruptcy is to give debtors a financial “fresh start” from burdensome debts. The Supreme Court articulated this point in a 1934 decision where it said that:
“[Bankruptcy] gives to the honest but unfortunate debtor…a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt.”
Local Loan Co. v. Hunt, 292 U.S. 234, 244 (1934).
- This goal of a “fresh start” is realized through the bankruptcy discharge, which releases debtors from personal liability for specific debts and prohibits creditors from taking any action against the debtor to collect those debts.
- Individual debtors receive a discharge in more than 99 percent of chapter 7 cases.
- The bankruptcy court will issue a discharge within 60 to 90 days after the date first set for the meeting of creditors.
An individual receives a discharge for most of his or her debts in a chapter 7 bankruptcy case. Debts not discharged include debts for alimony and child support, certain taxes and student loans. The debtor will continue to be liable for these types of debts.
Get Fresh Financial Start
Bankruptcy is a federal legal process for helping people who can no longer pay their creditors get a “fresh start” – by liquidating assets to pay their debts or by creating a repayment plan.
Rebuild Credit in 12 Months
Rebuilding credit after bankruptcy is not difficult. After 6 months, our clients recover from bankruptcy and will start reestablishing credit. Over the next one year, you can rebuild your credit by establishing a history of payment.
How You Can Rebuild Your Credit in 12 Months After Bankruptcy
The typical Chapter 7 bankruptcy filing will reduce your credit score by 150 to 200 points. One of the things that most people don’t consider is that’s it’s far easier to rebuild your credit after bankruptcy than it is before.
For those who have a number of debts piling up with all of their monthly income already claimed, the bankruptcy is unlikely to affect their credit that much. It will, however, give them the relief they need to start over and begin rebuilding their credit from scratch. If your credit score is already low, then you don’t have a lot to lose by filing for bankruptcy.
Once your bankruptcy has been granted, all of those individual credit dings on missed payment are replaced with only one, the bankruptcy itself. Now, with less financial obligation and fewer or no debts hanging over your head, you can begin taking real steps to repair your credit whereas before these outstanding accounts would continue to damage whatever positive strides you had already made.
Your credit score is based on a calculation comprised of five components of your credit report. To rebuild credit after bankruptcy, you need to understand how credit scores are calculated. By understanding how your daily financial decisions impact your credit rating, you can focus your effects more successfully.
- Payment History — Your payment history makes up 35% of your credit score.
- Amount Owed on Debts — The amount of credit you owe makes up 30% of your credit score. However, it is not just the total debt owed, the calculation also analyzes the amount you owe on different types of debt, how many accounts have open balances, the percentage of the credit limit used for each account, and other factors.
- Length of Credit History — 15% of your credit score is based on the length of your credit history. A long credit history is generally a positive factor.
- A Mix of Credit — The mix of accounts on your credit report represents 10% of your credit rating. In most cases, a mix of credit accounts is a positive factor to increase your credit score.
- Recently Opened Accounts — Your score is also impacted a small amount (10%) by the number of new credit accounts opened within a brief period.
The best way to rebuild credit scores during bankruptcy is to make all ongoing credit payments on time. If you are keeping your home and vehicle in a Chapter 7 case, you should make each monthly payment before the due date for that payment. If you have income tax debt and student loans that were not discharged in bankruptcy, you need to make those payments on time too.
How Bankruptcy Can Get Rid of Tax Debt
Many people are surprised to learn that bankruptcy can wipe out back taxes. As a general rule, income taxes more than 3 years old can be wiped out. And while you must have filed your returns and not committed fraud, bankruptcy can be a powerful way to deal with the IRS.
There is a common misconception that income taxes are not dischargeable in bankruptcy. Most of our clients are shocked when we tell them that they can actually discharge some federal, state, and local income taxes in Chapter 13 and Chapter 7 bankruptcy.
The penalties and interest that have also accrued on these taxes are also dischargeable. Determining which back taxes are dischargeable can be a complex process. Nonetheless, it is possible to discharge significant income tax debt in bankruptcy, if your tax debt fits within certain rules.
he IRS only discharges tax debt in bankruptcy if the tax debt meets certain conditions. If you do not meet these or if you miss a deadline even by a day, the tax debt may be due at the end of your bankruptcy proceedings. Here are the conditions:
- Only Income Tax — You can only discharge income tax through a Chapter 7 or 13 bankruptcy. You cannot usually include payroll taxes, business sales taxes, excise taxes, or other types of taxes.
- At Least Three Years Old — This is the three-year rule. You can only include taxes that are at least three years old. The clock starts on the return due date. That is usually April 15 of every year. If you request an extension, the three year period begins on the tax-filing extension due date. That is usually October 15.
- Filed at Least Two Years Ago — You must have submitted the tax return associated with the tax debt at least two years ago. For example, you cannot file an old return from three years ago and include that tax debt in bankruptcy the following week. In this situation, the tax debt is old enough, but the filing is too recent.
- Not From a Substitute Return — A substitute return is when the IRS files a return on your behalf. You cannot include taxes from a substitute return in your bankruptcy. You must file the tax return yourself.
- Assessed at Least 240 Days Ago — If the IRS makes changes to your return or adds to your unpaid tax debt, that is a tax assessment. You can only include assessed taxes if the assessment occurred 240 days ago or more.
- No Fraud or Evasion — If you are convicted of tax evasion or fraud, you cannot include tax debt in your bankruptcy.
Once your Chapter 7 bankruptcy comes to a conclusion, you will receive a discharge of your debt. In other words, for those debts that are dischargeable, you will not be personally liable anymore.
Get Rid of Old Tax Debt
Believe it or not, you can actually get rid of taxes in a bankruptcy case. While there are a few guidelines, bankruptcy is a frequent tool in dealing with tax debt.
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