I get a lot of calls from potential clients here in Colorado Springs looking to file for bankruptcy after judgments have already been entered against them. If that’s your situation, I’ll be happy to discuss it with you and we’ll do our best to get the judgments against you discharged.
If, however, no judgments have yet been entered against you, that’s a good thing. And you want to keep it that way. Why?
- A creditor with a judgment have some pretty powerful tools to use against you to collect the judgment.
- Having a judgment against you may force you to file your case earlier than you would otherwise like.
- In some rare cases, the judgment may not be dischargeable in your bankruptcy case.
I’ll discuss the first category in this post today. The other two will be discussed in my next two posts.
The overwhelming majority of collection cases end up with a judgment being entered in favor of the creditor and against the debtor. Much of the time these judgments are the result of the debtors not disputing that the debt is owed, or even more common, the debtor not having the financial ability to hire an attorney to defend the case. So what happens is, no one shows up to defend the case and a judgment “by default” is entered against the debtor. As a matter of routine, when I’m preparing the paperwork for my clients for a Chapter 7 or Chapter 13 bankruptcy, I’ll do a search to see if any judgments have been entered against them. I can’t tell you how many times these judgments come as a complete surprise to my clients.
So what happens after a judgment is entered?
Well, if the creditor knows where your bank account is located, they could file a Writ of Garnishment on the bank and get the funds that are currently on deposit. Or if they know where you work, they can serve a Wage Garnishment on your employer. Then, your employer is required to withhold a certain percentage of your wages to pay back the creditor.
If you own real estate, the creditor can file a Memorandum of Judgment with the County Clerk and Recorder, in which case the judgment becomes a lien on any real estate you own within that county. This will apply even if you are not the sole owner of the property, that is, even if you own it with your spouse, a parent or anyone else.
And if the creditor doesn’t know where you bank, doesn’t know where you work, and doesn’t know about your real estate?
Then they can serve you with Written Interrogatories asking you to to divulge all of that information. And if you fail to comply with that request? Then most likely the judge will find you in contempt and issue a Bench Warrant. That probably won’t have any effect on you until you get pulled over for a traffic violation. Then you can expect to spend some time in the local jail getting everything straightened out.
What if you have a local business? Well we’ve recently seen here in Colorado Springs the situation where a collection agency went to some local businesses, and with the help of the El Paso County Sheriff’s Department, performed “till taps” on them. What’s a till tap? Well these various businesses found out. The sheriffs came in and and took all of money out of the cash registers. Fortunately the El Paso County Sheriff has discontinued the use of till taps after a public outcry within the last month or so. But that doesn’t mean that the other methods have also been put on hold.
So, if you can prevent a judgment from being entered against you, you should do everything in your power to do so. Then, as soon as you can, set an appointment with a competent bankruptcy attorney in order to discuss all of your options.