Garnishment In Depth

Revised Code of Washington 6.27 Garnishment

A Writ of Garnishment may only be issued after you are sued and  a Judgment is entered against you, except for student loans.  Student loan creditors do not need to sue you prior to garnishing your wages.


YOU COULD BE FIRED

Garnishment lasts for 60 days, and can be renewed until the Judgment is paid in full.  Repeated garnishments are not just embarrassing, they can be grounds for termination from employment.


EVERY 60 DAYS YOU HAVE AN OPPORTUNITY TO SETTLE

Since the Writ of Garnishment expires in 60 days, a settlement opportunity arises.  It is important to analyze your eligibility for Chapter 7 bankruptcy prior to making any settlement offer.  See Bankruptcy Pitfalls Re Tax Liability for Debt Settlement.


FUNDS GARNISHED WITHIN 90 DAYS OF FILING CAN BE EXEMPT

Funds garnished within 90 days of filing bankruptcy may be claimed as exempt and should be returned to you, so it is important not to let garnishments run and to file bankruptcy to stop them.




YOUR EMPLOYER COULD HAVE TO PAY YOUR DEBT

Employers who are served with a Writ of Garnishment stand in the shoes of the Debtor regarding the debt, and are required to answer interrogatories without compensation and deduct 25% of net pay by order of the Court.  If the employer fails to deduct funds from the Debtor's paycheck, then the employer is liable for the debt.  


LACK OF PROPER SERVICE IS NOT A DEFENSE

It is common for Debtors not to be personally served with a Summons and Complaint and to only receive notice of the debt when they are contacted by Human Resources regarding the garnishment.  That is one reason monitoring your credit report and following up with creditors you think you might owe is important.

The creditor's remedy if you spend the money and win a Motion to Set Aside a Judgment based on lack of service is that the creditor simply reserves you and then wins the lawsuit with a higher Judgment amount.


CONTACT ME IMMEDIATELY IF YOU ARE GARNISHED

Please email MULVANEY LAW OFFICES, PLLC immediately at chris@mulvaneylawoffices.com with a copy if you are served with a Summons and Complaint or receive notice of a Writ of Garnishment.


 14205 SE 36th St Ste 100
Bellevue, WA 98006-1553
www.mulvaneylawoffices.com
Phone: 425-649-1190
Fax: 425-223-3197

chris@mulvaneylawoffices.com
 

 

Foreclosure In Depth

Revised Code of Washington 61.12 Foreclosure

Below is a good plain language summary of Washington foreclosure law.
http://www.foreclosurelaw.org/Washington_Foreclosure_Law.htm

Below are what I consider to be the key point to understand regarding the interplay between bankruptcy and foreclosure.

 Know whether you have personal liability for your mortgage debt.  If you have a home equity line of credit (HELOC) or a 2nd mortgage, then you should assume you have personal liability for the debt. The word mortgage is a commonly understood term that does not distinguish between the two key documents in purchasing a home:  the promissory note (creating personal liability) and the deed of trust (creating the lien on your home, which includes the right to foreclose if you don't pay).

      The legal distinction below is necessary to your understanding:

Personal Liability vs. Liens

Personal liability is the right of a creditor to sue you, obtain a Judgment, and garnish your wages.
Liens (mortgages) are liabilities on the property only, and not on you personally.  It is personal liability that is discharged in bankruptcy.  Liens are unaffected. (Except in certain cases.  See Lien Strippping and Cramdown.)

So, it matters if you have a single purchase money mortgage that you have never refinanced or if you have refinanced or have a HELOC or 2nd lien of any kind. For homeowners with only one original mortgage, if the bank forecloses the bank is limited to the price received at the foreclosure sale (assuming a non-judicial foreclosure), and cannot sue you for the deficiency (the difference between what you owe and the foreclosure sale price).  This bar against collection against you personally is referred to as "Non-Recourse."

However, lenders do have recourse against you personally for a HELOC or 2nd lien.  This means after the foreclosure sale, you can expect to be sued for the balance.  It is this creditors right of recourse against you personally that commonly triggers bankruptcy.

WARNING REGARDING TAX IMPLICATIONS

Consult your CPA regarding claiming exemptions to the general rule of tax liability regarding foreclosures. I am not a CPA and cannot give tax advice.  I try to learn enough about taxes to warn clients about questions they should ask their CPA.

Below is a link to the IRS web site with answers to common questions about bankruptcy, foreclosure and other issues.
http://www.irs.gov/uac/The-%E2%80%9CWhat-Ifs%E2%80%9D-for-Struggling-Taxpayers

 14205 SE 36th St Ste 100
Bellevue, WA 98006-1553
www.mulvaneylawoffices.com
Phone: 425-649-1190
Fax: 425-223-3197

chris@mulvaneylawoffices.com
 

 

Importance of Honesty In Bankruptcy

Above is a photo of the warning sign that hangs on the wall outside the room in which 341 meetings are held in Seattle.  Please read it, and heed it.  I assure you that this warning from me is far more friendly than being questioned by the US Trustee, the US Attorney, the FBI, or the IRS.



Above is the seal that hangs on the wall behind the Trustee in Room 4107 where 341 meetings are held.  The Latin quote means:  "Who Prosecutes on Behalf of Lady Justice."  The Department of Justice oversees the United States Trustee Program.  The US Trustee is the superior of the Interim Trustee who takes your testimony at the 341 meeting.

Most debtors do not appreciate the seriousness of filing an inaccurate bankruptcy petition under penalty of perjury.  Debtors can have their discharge denied, or even revoked after it is entered in extreme cases.  Debtors can also be criminally prosecuted.  In extreme cases, Debtors could go to Federal Prison and still owe their debts when they get out.




Above is the seal that hangs behind the Bankruptcy Judge in Bankruptcy Court.  Hopefully, you will never see it.  If you do, it means there is a dispute in your case that is being argued.  When you testify at the 341 meeting, your testimony has the same legal consequences as if you had given it in Court, to the Bankruptcy Judge with the seal hanging behind the Judge.

I present these warnings to you so that you will appreciate the vital importance of honesty in the bankruptcy process.  Report all assets, transfers, income, debts and all other information requested on the petition completely and accurately. 

Bankruptcy provides relief for honest debtors.  If you are not honest, then you are not entitled to the relief you are seeking - the discharge, and the full force of the United States of America in all of its relevant branches can come down upon you. 

 14205 SE 36th St Ste 100
Bellevue, WA 98006-1553
www.mulvaneylawoffices.com
Phone: 425-649-1190
Fax: 425-223-3197

chris@mulvaneylawoffices.com
 

 

Bankruptcy Chapter Conversion

It is possible to convert from Chapter 7 to Chapter 13 and vice versa.  However, there are rules and strategic factors to consider.

CONVERSION FROM CHAPTER 7 TO CHAPTER 13

Converting from Chapter 7 to Chapter 13 is generally permitted so long as the Motion to Convert is made in good faith and does not violate bankruptcy rules.

Bad Faith

For example, a Motion to Convert to Chapter 13 which is motivated by an asset that the Debtor deliberately concealed and did not list on the bankruptcy petition would be in bad faith and should not be permitted.

Factors Outside Debtor's Control

For example, a Debtor who has a relative die within 180 days of filing is required to report the eligibility to receive the inheritance to me and I am required to report it to the Trustee.  So, if a Debtor's wealthy grandmother died right after the Debtor attended the 341 meeting and the Debtor became eligible for an inheritance of something sentimental like jewelry, art, or antiques, then the Debtor may wish to convert to Chapter 13 and pay creditors over 5 years what they would have received if the sentimental gifts would have been sold.




CONVERSION FROM CHAPTER 13 TO CHAPTER 7

You cannot convert your Chapter 13 case to Chapter 7 unless you were eligible for Chapter 7 on the day you filed.  A Motion to Dismiss your Chapter 13 followed by a re-filing under Chapter 7 would be required if you became eligible for Chapter 7 while you are in Chapter 13.

Previous Filing

For example, a Debtor who had a previous Chapter 7 discharge 5 years ago will become eligible for another Chapter 7 discharge 3 years into the 5-year Chapter 13 plan.  Eight full years from the filing date of the first Chapter 7 case must have passed before a new case may be filed.  So, that Debtor may choose to dismiss the Chapter 13 and refile under Chapter 7 in order to avoid making 2 more years of payments, assuming that the debtor is income eligible to do so.

Tax Debt

For example, a Debtor who is income eligible for Chapter 7 when the Chapter 13 petition is filed and who owes the IRS for debt that is only a year old, may choose to convert to Chapter 7 2 years into the plan.  Tax debt can become dischargeable after 3 years so long as tax returns are timely filed, taxes are timely paid, and other conditions are met.

 14205 SE 36th St Ste 100
Bellevue, WA 98006-1553
www.mulvaneylawoffices.com
Phone: 425-649-1190
Fax: 425-223-3197

chris@mulvaneylawoffices.com

 

Chapter 7 Bankruptcy In Depth

CHAPTER 7 BANKRUPTCY - NO MONTHLY PAYMENTS TO CREDITORS


DISCHARGE- "to relieve of a burden" "to set aside, dismiss, annul"

      To receive a Discharge is the primary purpose of filing bankruptcy.  The bankruptcy Discharge is an injunction, a Court Order that permanently bars collection of debts, thereby relieving a debtor of the obligation to pay.  The right not to pay tens of thousands or hundreds of thousands of dollars in debt is a valuable life-changing right.
Please treat the requirements and obligations to obtain a discharge with the seriousness they deserve.

Below is a good plain language summary of nondischargeable debt.
http://www.nolo.com/legal-encyclopedia/nondischargeable-debts-chapter-7-bankruptcy.html

Highlights of Nondischargeable debt are below:

• unscheduled debts
• certain taxes 
• debts for spousal or child support or alimony 
• debts owed to a former spouse or child if they arose out of a divorce or separation, including attorney fees
• debts to government agencies for fines and penalties
• student loans
• debts for personal injury caused by the debtor’s operation of a motor vehicle while intoxicated (or other intentional torts)
• debts owed to certain tax-advantaged retirement plans
• court fines and penalties, including criminal restitution.

SHOULD YOU FILE BANKRUPTCY?

      Your debt-to-income ratio is a useful tool in analyzing whether considering bankruptcy is appropriate for you.

DEBT-TO-INCOME RATIO

Your debt to income ratio is the relationship between the amount of your monthly debt payments (excluding mortgage or rent) and the amount of your income. For example, if your net income is $2,000 and you make $400 in payments on loans and credit cards, then your debt to income ratio would be 20% ($400 divided by $2,000 = .20).

According to American Consumer Credit Counseling (ACCC) below is a chart of the level of risk associated with various debt to income ratios.

Less than 10%	Great Shape
10-20%	Good Credit Risk
20-35%	Questionable Credit
35% or Higher	High Credit Risk

An increase in debt is the same as a decrease in income.

The ratio can also be calculated with gross annual income and total debt.

DO YOU QUALIFY FOR CHAPTER 7?

      Qualification for Chapter 7 requires satisfying 3 criteria: (I) income; (II) assets; and (II) prior discharge.

                           I. Income Relative to the Median for Your Family Size

Below is a chart of the median income by family size from data compiled by the US Census Bureau applicable to cases filed after 11/01/2015.

Family Size	1	2	3	4	5	6
Annual Gross	$56,365	$68505	$78,227	$86,782	$94,882	$102,982
Monthly Gross	$4,697	$5,709	$6,519	$7,232	$7,907	$8,582

      If your income is below the median for your family size then you are income qualified for Chapter 7. If your income is above the median then, you must take and pass the “Means Test” in order to qualify for Chapter 7. The Means Test is a formula of average living expenses by category for this region from data compiled by the IRS. The factors that influence the Means Test the most are mortgages, car payments, child support & spousal support.

                                             II. Assets (Exempt or Non-Exempt?)

      More than 98% of Chapter 7 filers in Washington State have no non-exempt assets. Exempt assets are the assets that Debtors get to keep. Non-Exempt Assets are luxury goods such as boats, aircraft, horses, expensive jewelry or antiques. Debtors have a choice of either surrendering the Non-Exempt Asset or paying the Non-Exempt value that the creditors would have received if the asset had been sold. Frequently, this results in a conversion to Chapter 13 to pay the amount over 5 years. Below are the Federal Exemption amounts and statute citations.

Federal Exemption Statutes	Statute	Individual	Joint
Household Goods	11 USC § 522(d)(3)	12,250	24,500
Jewelry	11 USC § 522(d)(7)	1,550	3,100
Life Insurance Proceeds	11 USC § 522(d)(8)	12,250	24,500
Motor Vehicle	11 USC § 522(d)(2)	3,675	7,350
Personal Injury Payments	11 USC § 522(d)(11)	22,975	45,950
Real Property	11 USC § 522(d)(1)	22,975	45,950
Tools of the Trade	11 USC § 522(d)(6)	2,300	4,600
Wildcard - Unused amount of 522(d)(1)	11 USC § 522(d)(5)	11,500	23,000
Retirement Accounts	11 USC § 522(d)(12)	Unlimited	Unlimited

                                

             III. Prior Discharge Could = Ineligible for Another Discharge   

Debtors are only eligible for a Chapter 7 discharge after 8 years have passed since filing a previous chapter 7 in which the Debtor received a discharge.

11 USC 727(a)(9) sets forth the 6-year bar rule for a Chapter 7 discharge following a Chapter 13 discharge, unless the debtor repaid 100% of unsecured claims or paid 70% and the Court finds that the plan “was proposed by the debtor in good faith, and was the debtor’s best effort.”

 14205 SE 36th St Ste 100
Bellevue, WA 98006-1553
www.mulvaneylawoffices.com
Phone: 425-649-1190
Fax: 425-223-3197

chris@mulvaneylawoffices.com

 

Mulvaney Law Offices, PLLC, is a "debt relief agency" under federal law because we help people file cases under the U.S. Bankruptcy Code.