Garnishment & Execution

Can you Keep your House if you file bankruptcy? – Alabama Bankruptcy Lawyer Judson E Crump

January 20, 2015 by Attorney Judson E Crump Leave a Comment

Can you keep your house if you file bankruptcy in Alabama?

Sometimes. Yes, that’s a disappointingly lawyerish answer and I hate that for you. I really do. Because i love straight answers as much as anyone else, and if you’re considering filing bankruptcy then things are probably not great in your life right now and the one thing you do need from a lawyer is a little bit of certainty. So what is the deal?

First, what sort of bankruptcy are you talking about? The kind where you get rid of everything but the bare necessities and come out fresh like a newborn baby? (Chapter 7).

Or the kind where you make payments for up to 5 years, but you get to keep most all of your stuff? (Chapter 13.)

In Chapter 7 bankruptcy, the amount of assets you get to keep depends on the law of your state. Some states like Florida have laws that are very generous to people in financial trouble. Other states, like Alabama, have laws that are very harsh on people in financial trouble. Here, we have a $5,000 homestead exemption. That means that you can keep your creditors from ever touching your home — if it is worth less than $5,000.

But who on Earth lives in a home worth less than $5,000? A lot of people, really. Because most people nowadays don’t own their homes. A bank owns their homes and most people, even those whose names are on their deeds, are virtually renting. See, if your home is worth $100,000, and the bank’s mortgage lien is $97,000, then your home is not a $100,000 asset, but a $3,000 asset.

So in Chapter 7, you can generally keep your home if you have less than $5,000 of equity. And generally you need to be current on the mortgage. And you’ll have to keep making those payments. And you may have to reaffirm the debt. NOTE: if you’re married and you and your spouse are both on the deed (not the Note, but the deed – this is a distinction that matters), then you each get a $5,000 exemption that you can combine into one awesome $10,000 exemption, so you can protect twice as much equity. Yay!

What happens if you have more equity than Alabama’s 1940 exemption statute allows?

Well, in Chapter 7, you have two options: 1. Surrender the property to the Trustee. Or 2: pay the amount of non-exempt equity to the Trustee from some other source of funds. Like borrowing from family after the bankruptcy is filed or using exempt money (like a 401k, which gets special federal protection and isn’t subject to Alabama’s crappy exemption statute).

The Chapter 7 trustee’s job is to gather up all your valuable stuff and sell it for the benefit of your creditors. He’ll do that if you have anything worth taking that isn’t specifically protected.

So can you lose your home by filing bankruptcy? Absolutely. It doesn’t always happen, and everybody seems to know somebody who filed bankruptcy and got to keep everything.

Now what about Chapter 13?

A thirteen gives you more flexibility than a seven, and you’re allowed to keep more assets. The trade-off is that you’re stuck making payments to the bankruptcy court for years to come. And Chapter 13 can really limit your financial freedom.

But, if you do have a little bit of equity, Chapter 13 lets you pay that off over time instead of just losing it outright. So in essence, you’re telling your creditors: “You know that $5,000 of home equity that you’ll theoretically get if I filed Chapter 7 and liquidated everything? Why don’t I pay you that amount over the next three years instead?”

And that’s basically what you can do. Chapter 13 has its drawbacks, to be sure. Your debts aren’t discharged until you finish paying, and if you don’t finish paying, then they basically pop right back up in your face. And you have very limited financial freedom. And the attorney’s fees are higher, and your credit takes longer to rebuild. I’m making it sound great, right?

But for some people, its the right move. In all honesty.

Alabama’s Exemption Statute – Why so stingy? – Alabama Debtor’s Lawyer Judson E Crump

January 13, 2015 by Attorney Judson E Crump 2 Comments

DID YOU KNOW? Alabama (No Longer) has the weakest exemption statute in the country.

This is a correction to a previous article I wrote, which has been made necessary by a positive change in Alabama law.

In January of 2015, I wrote the following article about Alabama’s exemption statute:

“What’s an exemption statute?

Say you get sued for a credit card bill. Or a medical bill. You either fail to answer the complaint or you lose a trial, and the court enters a judgment against you for $10,000. What can that creditor now take from you to get it? Wages can be garnished. But what if you have no wages? They can zap your bank account, but there is a limit: you are allowed to claim up to $3,000 of your property as exempt from execution. This means they can’t take it. You have to file a document with the court called a Claim of Exemption to ensure that this specific item of property (the bank account) is protected. But once you do that, they’ll have to look elsewhere to satisfy a judgment.

The law that allows you to protect a chosen $3,000 of personal property is called the exemption statute. Ours is found at Alabama Code Section 6-10-1, et seq.

Our exemption statute was written in 1876. It was part of the Alabama Constitution, really. Article XIV of the Alabama Constitution of 1876 provided that “the personal property of any resident of this state to the value of one thousand dollars, to be selected by such resident, shall be exempted from sale on execution, or other final process of any court…”

So back in 1876, Alabama citizens could protect $1,000 of personal property from their creditors. What is that today? $21,000. Yet our exemption statute today allows us to protect only $3,000. So during the past 138 years, our protections for people in financial trouble have dropped to 1/7th (that’s 14.2%) of what we gave struggling working folks back in 1876. We like to think that legal rights and government regulation have only increased since 1876. Not so, my dear friends.

Similarly, the homestead exemption was $2,000. In today’s money, that is $43,000. Today it is $5,000. So the past 138 years has been even worse for people trying to protect their homes. Their protections have gone down to less than 1/8 of what they were back in the days of Jim Crow.

I hereby call on the legislature to pass a law that automatically updates the state’s exemption statutes each time the Crimson Tide wins a national championship, such that for every crystal football (or historical equivalent) added to the collection in Tuscaloosa, the amount of exempt personal and real property increases by $1,000. If this policy were enacted in 1900, the citizens of this fair state would enjoy not the bullshit $3,000 and $5,000 (personalty and realty, respectively) exemptions that now drive them into penury, but $15,000 of personal property and $15,000 of homestead exemptions. This would put us about right in the middle of the pack nationwide as far as debtor-friendliness goes. And it would be attributable to the Bear and Saint Nick. Roll Tide.”

To my shock and delight, the Alabama Legislature has changed the law. On June 11, 2015, Governor Bentley signed Ala. Act No. 2015-484, which raised the homestead exemption to $15,000, and the personalty exemption to $7,500. Even better, the law now requires these amounts to be adjusted for inflation every three years. This improves the protections that our laws provide to struggling working folks. Now, Alabama debtors have protections that are similar to those in the rest of the country.

At this point, I wonder something: the legislature re-wrote the exemption statute in June 2015 – five months after I published my article. Coincidence? Probably. I’m 99% sure that no member of the Alabama legislature cares what I think. But I’m happy for all of our working folks nonetheless. A few years ago, I’d have never believed Robert Bentley would do anything for the poor. Turns out, I was wrong on that. Thank God.

What is Garnishment? Part 2 of “Dealing with Default Judgments” – Alabama Collection Defense Lawyer Judson E. Crump

August 15, 2014 by Attorney Judson E Crump 1 Comment

What is a garnishment?

Let’s start with the judgment – because for everything except student loans and taxes, no* garnishment can happen without first obtaining a judgment. At least, not in Alabama. If you get sued and lose, or don’t bother to answer, then the person who sues you gets a judgment against you. What is a judgment? It is a piece of paper saying that Mr. X owes Mr. Y $####. But it doesn’t magically teleport money from your bank account to Capital One. It has to be enforced against something that you have. If you own real property, they can place a lien on that property. If you have money in a bank account, they can garnish the bank account. If you own a vehicle, they can request that the sheriff take it and sell it and give the money to your creditors (this is called a “levy”). If you have a job, then they can take some of your paycheck each month. This is a garnishment.

Garnishment is the process of intercepting money that is owed to a judgment debtor by a third party. For instance, a bank account is a debt owed by your bank to you. You deposit money at Regions Bank, and pursuant to their depository account agreement with you, they are obliged to pay you back upon request. A bank account garnishment intercepts the money the bank owes you and takes it to pay to the creditor.

A wage garnishment intercepts the money that your employer owes you and takes it to pay the creditor. There are limits to what can be garnished. They cannot take more than 25% of your paycheck, and if you make minimum wage or something close to that, they cannot take more than 30 hours of minimum wage per week – nowadays about $217/week. What a relief.

Some streams of income are utterly exempt from garnishment: Social Security & VA benefits, child support, most public pensions. And these funds should always be kept in an account separate from that of your other income – If you mix exempt money with nonexempt money, your creditors can take it all.

Furthermore, the Alabama Constitution provides a special protection for any regular paycheck under $1,000.

Exemption rights other than the 25% limit do not enforce themselves. You have to claim them. You do this by filing a declaration and claim of exemption with the court. You can find a form for it here: http://eforms.alacourt.gov/Do%20It%20Yourself%20Forms/Declaration%20and%20Claim%20of%20Exemption%20for%20Wages.pdf

How do you avoid a garnishment?

Undoubtedly, the best way to avoid a garnishment is to not let it get there in the first place. This means that you should fight them for every dollar. Like I said, they can’t get a garnishment until they first get a judgment. They can’t get a judgment without filing the lawsuit and serving it on you personally, your agent, or at your home address. So if you receive a lawsuit, YOU MUST ANSWER THE COMPLAINT.

You may be able to answer the complaint yourself, but you should not go to trial without a lawyer. In fact, that’s a straight-up bad idea. Collection defense is not that expensive.

Some people are afraid to fight, thinking that if you fight them and lose, they’ll add attorneys fees to what you already owe. NEWS FLASH: they’re charging you their attorney’s fees anyway! And you have a better chance of winning than you think.

And if you’re just a frightened, risk-averse person who is deathly afraid of a trial, then you can always negotiate after you’ve sued. If you have a good collection defense lawyer on your side, your chances of getting away with a good deal are better than they were before you got sued. It’s only after they’ve gotten a judgment that you’ve lost much of your bargaining power.

So if you really want to be proactive about protecting your wages, you will fight your creditors and collectors from the start. Call me at 251.272.9148 if you want to talk about beating your creditors in court.

Continue to Part III: Responding to Garnishments After the Fact.

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Page 1: The Shock of Garnishment <<< Page 2 >>> Page 3: Responding to Garnishments

*There are some occasions where it may be possible to garnish a debt or bank account pre-judgment, but it is something I have NEVER seen actually done.  Like some of those laws that exist on the books but nobody ever enforces.

The Shock of Garnishment: Part 1 of “Dealing with Default Judgments” – Alabama Collection Defense Attorney Judson E. Crump

August 12, 2014 by Attorney Judson E Crump Leave a Comment

It’s Friday. You get off work at a way earlier-than-it-feels like 4:27 PM. And thank God. Really. TGIF means much, much more to you than it does to those 20-year olds without kids or real responsibilities, those who, when they say “TGIF,” mean “Yay, I can now go out drinking with my girlfriends!” Friday for you is payday.

And though something like 90% of your paycheck has already been promised to other people who have provided you the goods and services you and your little ones required to survive the preceding 13 days, it is still a relief to be able to actually pay those people off, and thereby guarantee their continued willingness to deal with you for the next 13 days. So as you’re thinking about how to spend the next 30 minutes in a manner that will avoid the most late fees and overdraft charges, and trying also to remember the exact amount of the phone bill so that you don’t get a late fee, and also don’t overpay them by too much, your eyes drop down to look at the check stub you got from Payroll. Even though you know that this check will be for the exact same $826 you’ve been bringing home biweekly since you first had to go back to work after your second child was born, you still have to look down and see the actual check.

Every human does this. Even blind people. You can’t not do it. It is so satisfying to see the money you’ve been paid. That reward for spending the greater portion of your very limited-in-number conscious hours doing the bidding of someone else, someone (or something, if your employer is a corporation) whose interests may very well be quite different from your own. It is not so much satisfying (though we talk and hear about the satisfaction of a hard day’s work, but in reality that sort of thing is just a linguistic holdover from the days when most of us were farmers and farmers’ wives, and the length and hardness of each day’s work bore an almost 100% directly proportional relationship to the reward of the work – back then, literally the “fruits of your labors.”) as it is relieving.

Because deep down you know that God did not place you – the sole and utterly unique version of you in the entire universe and its entire history – here on this specific place, on this specific speck in the universe, at this specific point in time, because he thought the world needed this particular unprecedented and unrepeated specimen of humanity to sit at a desk answering phone calls from 8:30 AM to 4:30 PM.

And because you know that those hours you spend slaving (quite literally, slaving, as in completely subordinating your own will to that of another) away for someone else are not your true calling and purpose, but really just a necessary compromise with the unfortunate fact that your presence in this universe requires a large amount of physical resources, resources you cannot produce on your own and therefore must somehow earn by subordinating yourself for large portions of your life to others, because you know this deep down, you must know that your daily sacrifice of self is at least getting you somewhere, right?

So you look down to confirm that this week, you’re getting the same $826 as you did 2 weeks ago, and then your eyes appear to be mistaken, but no, on second glance, they’re not mistaken, and what the fuck? $619.50? $206.50 to a “garnishment!” A GARNISHMENT? WHAT! THE! FUCK!

Yeah. You’ve been garnished. Out of nowhere. Somebody swooped in between you and your paycheck and took a chunk. Like a seagull with a pogey.

So then to your mind comes the #1 Question asked of lawyers everwhere: Can they do that?

Continue to Part 2: What is Garnishment? How do you get one?

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>>> Next Page 2: What is a Garnishment?

$19,000 Default Judgment Vacated – Alabama Collection Defense Attorney Judson E. Crump

July 11, 2014 by Attorney Judson E Crump 3 Comments

If you are not served with the Summons and Complaint in a collection lawsuit, then a default judgment entered against you in that lawsuit is void. That was the point I made to the Mobile County Circuit Court at a hearing on my Motion for Relief from a default judgment on July 11th. My client had apparently been sued by Credit Acceptance Corp. back in 2010. They were unable to serve process (meaning deliver a copy of the lawsuit papers) upon her directly, so they sent a copy by certified mail to the address they had on file for her. The U.S. Postal Service delivered it and someone signed for delivery.

The collection attorneys filed a copy of the signed return receipt with the court and moved for a default judgment. It was granted without opposition. There was one problem, though: my client didn’t live at that address. She had lived there briefly back in 2006, but had long since moved away. So the person who signed for it was not capable of receiving service for her.

It is possible to "undo" a default judgment after it has been entered, but only if you can show that you never had a chance to see the Complaint. — It is possible to “undo” a default judgment after it has been entered, but only if you can show that you never had a chance to see the Complaint.

She didn’t even know about the judgment until one day out of the blue, her paycheck was missing some of its dollars. She found out that she’d been garnished on a judgment she never knew existed. So she came to me for help. I filed a motion for relief from the judgment. It was granted and now my client will have her chance to defend herself from this suit.

Normally, default judgments are permanent. They are only reversed in specific circumstances, and if the complaint was received by an adult at your address, or someone who is your agent (like a spouse), you’re stuck with it. But when you can show that you’ve never been served with the complaint in the first place, your constitutional right to due process of law provides that you can reverse the default judgment and get your day in court.