Bill, we have two garnishments that total $16,000 from credit card debt, took a loan out on our house that had no mortgage two years ago to pay debts from prior marriages from my husband now and my last husband, thought the mortgage covered taxes and insurance and found out from stupidity that neither were included. Been paying on mortgage until my husbands hours were cut a lot and now going into three months behind on payments, with the garnishments it has been impossible to get caught up, my question is: Can the only way garnishments be removed is filing bankruptcy? I talked to a bankruptcy attorney and they told me that I cannot have a car worth more than $3,000, my car is worth more than that, it also was included in the consolidating loan. This is affecting my health and all I want to do is cry and it is way out of control and now my husband is getting his hours back but we are so far behind that I see no way out. Plus a bankruptcy attorney want their money up front and I am trying to keep our gas, lights and water along with food on the table. Does this sound like the only way out is losing our home and everything else?
If the only thing standing between you and a bankruptcy filing is a vehicle, you should strongly consider either selling the car or transferring the title to a friend of relative whom you trust. If you file bankruptcy immediately after transferring or selling your vehicle, the bankruptcy court may view the transfer as a “fraudulent conveyance,” meaning that the court can nullify the transaction in order to use the asset to pay your creditors, so you may need to wait a few months before you actually file your bankruptcy petition; your attorney should be familiar with the general practices of the bankruptcy court in your area and can advise you of the best course of action relative to your vehicle. If you decide to file for bankruptcy protection without selling your car, the court may order that the vehicle be sold, with the proceeds used to pay down your debts. However, because there are two types of consumer bankruptcy, Chapter 7 and Chapter 13, you may be able to obtain the bankruptcy protection you need despite the fact that your assets exceed the exemptions set by your state’s laws.
In most cases, you can safely file Chapter 13 and keep all of your property if you continue making regular payments on your home and vehicles while you are paying your other creditors through the Chapter 13 Plan. Of course, the reasonableness of the debtor’s assets and repayment plan is always an unwritten qualification — a bankruptcy judge is not going to allow a debtor to come into court with five luxury homes and expect his unsecured creditors to wait for payment while he pays five mortgages outside of the bankruptcy plan. Another good point about Chapter 13 is that consumers who have fallen behind on their mortgages, as you have, can include the mortgage deficiency in their Chapter 13 plan, which brings the home current and allows them to pay the delinquency over a much longer period. However, if you plan to keep your home, you will still be required to make your regular monthly mortgage payments in addition to your Chapter 13 payments; this arrangement may be easier than your current situation, but it can be hard for many consumers to meet these obligations every month.
Chapter 7 bankruptcy, also called liquidation bankruptcy, allows a debtor to discharge most unsecured debts. The major limitation to keeping property in a Chapter 7 is the property exemption limits provided by your particular state’s laws. Some states’ exemptions are generous while others are strict. In fact, some individuals with lots of cash and property move to a different state, usually Texas or Florida, before filing for Chapter 7 protection to take advantage of those states’ generous exemptions. When you have your first consultation with your bankruptcy attorney, you should come in with a set of goals and priorities. Tell the attorney, “I need to file bankruptcy, but I do not want to if there’s a chance that I’ll lose my house or car.” At that point, let him or her figure how to meet your expectations. None of the exemption amounts are absolute, so he will estimate your property values using an allowable standard most favorable to you so that the statutory limits are not a problem. For more information about your state’s exemption amounts, you can visit State Exemptions.
For consumers considering bankruptcy, the most important piece of advice I can offer is to find a well-respected attorney with bankruptcy experience. A good attorney will be able to fully analyze your circumstances and help you decide if bankruptcy is the right choice for you, and if so which chapter you should file. A good lawyer will also be able to design a plan that will preserve your assets to the greatest extent possible. Also, the amount of debt you have should not affect your ability to file bankruptcy, except that it may change which chapter is best for you depending on your income — this is an issue which you should discuss with your attorney.
You must carefully weigh your options before deciding to file bankruptcy, but you should know that it is extremely rare for a debtor to lose possession and ownership of any property he wants to keep, especially the family home or vehicle. To learn more about bankruptcy, I encourage you to explore the Bills.com bankruptcy page. Hopefully this information will allow you to be better informed when discussing bankruptcy with an attorney, and help you Find. Learn. Save.