Bankruptcy is a hard decision for most Americans, and this means it’s often put off until the last possible moment. But has that moment already past? If you’re being sued by creditors, have seen your wages garnished, or have already seen an asset repossessed, is it too late to seek help through bankruptcy? The answer is often no, and here’s what you need to know about why.
1. If You’re Being Sued
When a debtor can’t make the payments to a creditor, that creditor has the right to eventually ask the court to order the debtor to pay. If they still can’t or won’t, the order to pay may also be followed by an order to seize some sort of assets (such as cash, wages, or a vehicle) to pay the debt. The good news is that a bankruptcy filing includes an automatic stay that stops all collections processes — including a lawsuit.
2. If Something Has Been Repossessed
If an auto lender is about to repossess your car or truck, you can prevent this action through the same means you prevent lawsuits — the automatic stay. The lender is simply not allowed to go any farther.
What if the repossession has already happened? You may still get help through the exemptions allowed during bankruptcy. Each debtor filing Chapter 7 bankruptcy is allowed to keep certain property in certain values. These values are known as exemptions and vary according to state or federal lists. If the repossessed item would have been exempted from seizure through this process, you may be able to get it back from the lender.
However, keep in mind that if the vehicle has already been auctioned off by the lender, there is likely no getting it back at that point.
3. If a Lien Has Been Attached
A lien is a notice attached to a deed or title letting future buyers know that the owner owes a debt to the lienholder. They can prevent or hinder future sales, particularly of homes and vehicles. Unfortunately, liens are not automatically removed during bankruptcy even though the debt itself may be discharged.
While it is more tricky, some liens can be separately removed by the bankruptcy court. This may happen if the lien would interfere with your right to exempt property. Although a lien doesn’t result in the seizure of an exempt asset, it does hinder your ability to keep its equity or sell the exempted item. Therefore, you may be able to show that the lien would legally impair the exemption if not removed (or, avoided, in legal terms).
4. If Your Wages Are Being Garnished
Garnishment is the seizure of some of your wages (or a bank account) to pay a debt after a lender has sued you and won. Civil garnishments may take up to 25% out of your paycheck every week, so they can be very damaging. If you’ve been served with a notice of garnishment, the automatic stay will prevent the order from being carried out in the future.
Even if a garnishment has already begun, you can still get the benefit of the automatic stay against future withholding of your wages. However, each paycheck that passes by, you will continue to lose money that may have been protected in bankruptcy — but which you now likely cannot get back. So time is of the essence.
Where to Start
Clearly, it’s almost never too late to file for bankruptcy no matter what you face. From liens and lawsuits to garnishment and repossession, you have options to avoid losing your assets or your money. These all begin by consulting with an experienced bankruptcy attorney in your state.
Wiesner & Frackowiak, LC, has aided Kansas and Missouri residents with all their bankruptcy needs for more than 20 years. Call today to make an appointment and learn how we can help you.