Debt Relief and Lawsuit Negotiation

1. Collections in General

When you first become overdue in a credit card payment, medical bill, or other debt, you are likely to get collection calls or letters from the creditor. Since this is the company or person you actually originally dealt with, they can collect under a different set of rules than collection agencies; generally, there are not so many regulations they have to follow as they would have to if they were a law firm or collection agency. They will keep up writing and/or calling you for a while, but if you continually do not pay, or are unable to pay, they may (depending on that creditor’s policies) do any of the following:

1) They may turn the account over directly to a collections attorney; 2) They may turn the debt over to a separate collections department which they own; 3) They may contract with a separate third- party collection agency collect for them, while retaining ownership of the original account, so they can get the lion’s share of any amounts collected; or 4) They may “write off” the debt and sell the account to an unaffiliated separate collection agency, which may or may not be affiliated with a particular law firm.

If they turn the account over directly to a collections attorney, the law firm will notify you that you must pay, and if you do not respond favorably within a reasonable time, they will file a lawsuit against you. For full details about what this involves, see our article Dealing with Lawsuits, elsewhere on this web site.

If they “write off” the debt, this does not mean that there will not be any further attempts to collect it. Usually, it means they have turned it over to their internal collection department, or to an outside attorney or collections agency. This may be right away after it is written off, or it may be a year or two later. These collection agencies often find they can pester debtors enough to get payments out of some of them, without the expense of an attorney filing suit.

Filing a lawsuit is not cheap for collectors. Just the filing fees with the court can run from $53 to $300, depending on what court and what state. For example, the fee to file a case in the State Court where we are located in Georgia costs $206.00; in the Magistrate Court (for debts up to $15,000.00) it costs $53.00. To each of these, a $50.00 Sheriff’s Service fee must be added. On top of this, the collector’s attorney(s) will charge the collector perhaps $200 to $600 to file and prosecute the lawsuit, which may or may not succeed. And even if they win, they or their attorneys need to do yet more work to collect the judgment, through garnishment, FiFas, asset discovery & seizure, or other means. For example, garnishment costs in Georgia Magistrate Courts costs $103.00 including the Sheriff’s Service fee, and the attorney may well charge another $150 to $300 to do the garnishment. So, as you can see, to sue a debtor, then garnish his wages can easily cost the collector at least $400 to $1,000, perhaps much more; again, with no guarantee of success. This is why collectors would prefer to collect without involving the law; they would rather have that money in their pockets. Generally, they only actually sue when other methods fail, and when the amount at stake is large enough to be worthwhile. The larger the amount of the debt, the more likely they are to go to court over it; but they may threaten to file suit for a much smaller amount, when they really do not intend to take it to court.

Some collection agencies use their pressure tactics on debtors and collect from the fairly easy cases, and sell more resistant cases to another collection agency. This is why a debt listed on a credit report – say, a store credit card debt – may show up two or three or four times, under different collectors. As a rule, the more often a debt is sold to another collection agency, the less collectable it is considered, and the less it is sold for. Uncollected debt usually ends up being sold for a few pennies on the dollar – or even a fraction of one cent. These lower-rung collection agencies are usually the most likely to be abusive, intrusive, and rude. When they are paying so little for the debt, they only need a few out of every batch to end up paying off to make a good living. Starting with the first time the debt is sold, collectors buy all rights to the debt if they can collect it; therefore, if you end up paying one of these collectors, the original creditor does not receive anything; only the collection agency profits.

If you have many debts and the collectors are driving you crazy, it may be that lawsuits and garnishments are not far behind. Could you keep up with your mortgage, car payments, utilities, gas, and food if a wage garnishment started taking 25% of every paycheck? If not, it’s time you consider alternatives before your situation becomes worse. The answer may or may not involve bankruptcy, to get a fresh start. Call us for a free consultation to explore the possibilities.

2. What Collectors Cannot Do Legally

Collectors CANNOT legally keep calling and writing you if you order them not to.

All you need to do is send a certified letter, return receipt requested, in which you say, “Please cease all further communication with me, pursuant to section 1692c(c) of the Fair Debt Collection Practices Act.” They are required by Federal law to stop all further communication except 1) a statement that they will comply with your request, and 2) a statement that they will seek to invoke the remedy or remedies normally used by that collector, which means either suing you or turning the case over to an outside law firm. So if you do this, realize a lawsuit is the possible result, unless it is a very small amount. (If this happens, see our article Dealing with Lawsuits, elsewhere on this web site.) By the way, if they continue collection calls or letters after this, keep them for use as evidence, because you will have grounds for an easy Fair Debt Collection Practices Act case against them.

Collectors CANNOT legally threaten to swear out a warrant for your arrest, come to your house to force you to pay, or call the police on you.

You cannot be jailed for not paying a bill. (However, you can be jailed for contempt of court for not paying child support, or some other court-ordered payment such as a fine or restitution.) But collectors have zero authority under the criminal justice system; all they can do is sue you in a civil court proceeding; and if you are filing bankruptcy, they cannot even do that.

In addition to certain sleazy American collectors, there are several rings of thieves in India, Russia, and elsewhere that make menacing calls threatening immediate arrest if you do not give a wire or check-by- phone or credit card payment right away. Do not give these lying clowns the time of day; just hang up.

Collectors CANNOT legally contact your friends, relatives, neighbors, or work associates and speak with them about your debt.

They are only allowed to ask them how to get in touch with you, without disclosing that they are a collector.

Collectors CANNOT legally call you at work if you tell them not to.



Tell them your employer does not permit collection calls, and send them a certified letter, return receipt

requested, to prove you requested this if they violate your request.

Collectors CANNOT legally threaten to sue or garnish you if they do not actually intend to do so.

Collectors CANNOT legally phone repeatedly, or at inconvenient times.

Collectors CANNOT legally continue collection efforts after you dispute them in writing, without first verifying them in writing.

Collectors CANNOT legally use profane or obscene language.

Collectors CANNOT legally continue collection attempts without giving you written notice within five days of the first phone call.

Collectors CANNOT legally contact you by phone or by mail without telling you that the communication is from a debt collector.

Collectors CANNOT legally force you to settle with them without Court involvement.

They can sue you for the debt in court, however, and you can go before a judge or jury to prove you do not owe the debt, if you can afford to hire a lawyer. (Fighting a debt case without a lawyer is very foolish; the debtor almost always loses – not always because he does not have a winning case, but because he doesn’t know proper legal procedure. For example, if the other side filed a “Motion for Judgment on the Pleadings” or written discovery requests for admission, you would lose automatically before you could even go to court if you didn’t handle these properly.)

If collectors do any of the forbidden things listed above, and you can prove it, you can sue them.

3. Common Tricks and Shady Practices of Some Collectors

SOME COLLECTORS SUE FOR A DEBT THAT IS TOO OLD TO COLLECT LEGALLY.

Here in Georgia, either four six years after you first failed to pay (depending on the type of debt), the debt is no longer collectable, as it is past the Statute of Limitations (SOL). So, some collectors just report the old debt as though it were a current account. We attorneys often call this “Zombie Debt” – it’s dead, but sleazy collection firms which buy old debt very cheap attempt to bring it back to life.

Even worse, they may claim that you contacted them about the debt, or made a payment (yes, sometimes they actually report that you “made a payment” – most typically, for $25) within the SOL. (Note: if you do make a payment by check on an old debt, which mentions the account number, or says “payment on account,” etc., the collector can introduce that check into evidence as a “writing” testifying to the validity of a debt which can, in fact, revive the debt; so be very careful.)

Why would a collector’s law firm try to collect zombie debt which could be easily defended against in court? Because so many people don’t bother to answer and fight the lawsuit, either being in denial, or not wanting to deal with it, or assuming they’ll lose anyway, or not being properly served and having no notice. So, in such cases, the age of the debt never comes before the court as an issue. Literally thousands of people lose these lawsuits every year because they don’t answer and fight them, so the other side wins an easy default judgment against them on an old debt that could have easily been defended against. The next thing you know, your wages are garnished or your bank account drained, based on the default judgment because you didn’t bother to get an attorney to fight it on time. There is a whole industry of bottom-dweller collectors who live off “zombie debt” which is by law non- collectable, because so many people do not fight it.

SOME COLLECTORS WILL SUE YOU WITHOUT GIVING YOU PROPER NOTICE.

They may file a false affidavit stating you were served. Or, they may serve you “by publication,” which means they swear to the Court they could not find your current address, or that you fled the county, etc., so they put a legal notice you are being sued in the county’s legal newspaper. Depending on what county you live in, this legal newspaper may be a major paper, or it may be a tiny obscure paper nobody much reads that makes most of its revenue publishing legal notices. Worse yet, we have seen cases where they “served by publication” in a county the debtor has never lived in.

Since you have no effective notice of the lawsuit, you cannot file an answer within 30 days and then have an attorney argue successfully at trial, so they can and will get a default judgment against you. Then they get a Writ of Fieri Facias (FiFa) issued, and miraculously find your correct address, and garnish your bank account, or maybe put a lien on your house. Or, they locate your employer’s address, and garnish your wages.

Usually, in these cases, the first you are aware that there ever was a lawsuit is when your employer is served with garnishment papers or you find that the bank has frozen the funds in your account. If you try to fight the garnishment, they just tell the court that they have a FiFa based on a default judgment. If you try to protest that you sent them a certified letter, that you were not served, etc., they will just say that you had a chance to argue all that in court before, and didn’t bother to answer, so those things are irrelevant to the garnishment. So if you become aware of a garnishment, immediately hire an experienced lawyer to see if it can be stopped. Sometimes it can. (Statistics tell us that if you attempt to fight this without an attorney, you will almost certainly lose.) If you need to know more about garnishments, see our article Stopping Garnishments, elsewhere on this web site.

SOME COLLECTORS WILL PRETEND TO “REALLY CARE” ABOUT YOU AND SAY THEY “WANT TO HELP YOU WORK THINGS OUT.”

This is not the time to tell them your life story. Don’t waste your breath. In fact, the less you say to them, the better. They don’t care two flips about your case, or your overall financial situation. They won’t “understand” and back off if you tell them a good sob story. They just want your money. They’ll never tell you that you should pay your mortgage, taxes and insurance first, then your car note and utilities, then gas, food, etc., then all other debts. They don’t care if you are a blind, crippled abandoned spouse living alone on Social Security. They just want your money because most collectors get paid a percentage of every dollar they wheedle out of you.

SOME COLLECTORS WILL TRY TO PUT YOU ON A GUILT TRIP.

They will play on your sense on duty to pay your bills, even when it isn’t possible. Yes, decent people want to pay their bills, but sometimes a layoff, cut hours, an extended illness, being deserted by your spouse, or other unplanned events can leave you very short. Even if you don’t have anything left to pay them after providing shelter, food, and the basics for your family, they will play on the fact that you already feel bad about being behind, and say that “good people pay their bills; you’re not a bad person, are you?” They don’t care if your mortgage or rent is due and the baby needs milk or you need your medicine; they just want your money now.

SOME COLLECTORS WILL GIVE YOU FALSE INFORMATION.

Collectors sometimes deliberately give you incorrect information about filing bankruptcy, court or garnishment procedures, your legal rights, etc.. in an attempt to get more money out of you. For example, they may tell you that you do not qualify for bankruptcy, or that they are going to garnish your wages if you don’t make a payment right away, when they have not even filed a lawsuit against you, which they must do, and win, before any garnishment is even possible. Never take a collector’s word for it regarding any of your legal rights, obligations, or possibilities. Speak to an attorney who’s on your side to get correct information.

SOME COLLECTORS WILL EXAGGERATE, LIE, OR THREATEN YOU.

They are not under oath, and they do not have to follow through on any verbal promises they may make to you.

SOME “COLLECTORS” ARE NOT EVEN REAL COLLECTORS, BUT CROOKS.

Sometimes you get “collection” calls from a very pushy person who demands you wire him an immediate payment. He knows your name, address, Social Security number, perhaps bank account or credit card numbers, and he insists on payment the same day, perhaps even within the hour. He is probably an identity thief, pretending to be a collector. Simply tell him to put his demands in writing within five days, as required by the Fair Debt Collection Practices Act. Then tell him not to call you anymore, and hang up. (Or, if you prefer, laugh at him, or tell him off, or let him overhear you saying, “Yes, Sergeant, this is the caller I want traced.”) The gall of these scumbags is amazing.

4. Do’s and Don’ts of Dealing Effectively with Debt Collectors

DO hire an experienced debt attorney if a law firm contacts you. It is best to never talk to a law firm that is attempting to collect a debt from you. They know the game better than you ever will.

DON’T waste one minute talking with unreasonable, abusive, argumentative, or threatening collectors. There is no reason on earth to put up with their browbeating calls. You are under no legal, moral, or ethical obligation to tolerate this. Tell such people to put their demands in writing, and tell them to never call again. Just hang up immediately if they call back. If necessary, send them a notice to stop calling by certified mail, return receipt requested.

DO keep proof of all payments that have been made, whether statements from the creditor listing payments made or cancelled checks, etc.. Keep payoff letters for loans, satisfaction of mortgage papers, etc. indefinitely.

DON’T agree to anything with a collector – a settlement for a smaller amount, a payment plan in return for dropping a pending lawsuit or garnishment, etc. — unless they put it in writing, signed, with a notarized statement swearing under oath that that person has authority to sign for that collection company. Don’t send them a penny until you have that in hand. And if a lawsuit or a garnishment has been filed, and they agreed to drop it, demand proof it has been dismissed, then verify with the Court that it has been cancelled.

DON’T EVER give them a “check by phone,” regardless of how much they pressure you. Even if they say it’s “the only form of payment they will accept,” tell them absolutely no way. If they get your checking account number, as is needed for a “check by phone,” they might take more than you authorized, or even drain your checking account completely. They may not care about possible legal consequences; they know that you can’t afford to hire an attorney in their state to sue them, and that you can’t afford to take time off work to travel to their state to testify. In addition, if you give them your bank account number, then after they get a judgment against you, they can then file a garnishment and empty your bank account legally. Do not even tell them where you bank, for the same reason.

DON’T EVER give them a credit card or debit card number. You don’t know if they can be trusted to only take the amount you authorize.

DON’T EVER send creditors money through Western Union or other wire transfers. Make any payments you agree to by money order only, no matter what they tell you, so you have proof of payment.

DON’T believe any promises to “take bad accounts off your credit report” when they are not the original debtor. Once a bad debt is reported, the credit bureaus are the only ones who can change it, and they very rarely do, unless given convincing proof the original report was in error.

DO realize that if a creditor has written off your account and sold it to an outside debt collector, usually you can negotiate to pay a much lower amount in cash, as many collectors pay only pennies on the dollar to take over the rights to collect a debt. If you are a fearless negotiator and not a pushover, settlements of 50% to 75 % of the original amount are easily possible, and sometimes you can even settle for 30% or 40%. (You may wish to hire a good debt attorney with experience negotiating with debt collectors for this.)

5. Turning the Tables on Collectors – Suing Them Under the FDCPA or FCRA

The Fair Debt Collection Practices Act and the Fair Credit Reporting Act are two Federal statutes which spell out what debt collectors and credit reporting agencies can and can’t do. They make it possible for a consumer to easily sue, in the consumer’s own state, any debt collector which uses unfair, deceptive, or abusive methods, or any credit bureau which continues to report incorrect information. These Acts make losing companies pay your lawyers’ fees, so it does not cost you anything up front to file a suit. If you think you may have been subjected to unfair or abusive treatment, give us a call.

Dealing with Lawsuits

Many people go into panic mode when they are served with a lawsuit by a sheriff’s deputy. Others just try to drive it from their mind, like a kid putting their head under the covers, and hope it will just go away. (It won’t.) Either way, when you get served, you need to take action sooner, rather than later.

Who May Sue You?

Where Can They Sue You?

In Georgia, any case involving up to $15,000 can be heard in Magistrate Court; cases involving a larger sum must be heard in a State or Superior Court. (In some rural counties, the only choices are Magistrate Court or Superior Court.) Usually, most smaller debtor lawsuits are brought in Magistrate Court.

How Long Do I Have to Answer?

The suit may have been filed a day or two before any attempts to serve you, or maybe as long as a month or two earlier, depending on how work is backed up, how on the ball the local Sheriff’s Department is, etc.. Sooner or later, the Sheriff’s Department makes three attempts to serve you, either at home or at work or both. They may either serve you personally, or serve “a person of suitable age and discretion” who knows you, such as a secretary, a teenage relative, a spouse, etc. who they find at your home or workplace.

Contrary to what some believe, you cannot just refuse to accept service once they find you; if you attempt this, the deputy can legally simply drop the papers at your feet and report that you were served. If the deputy makes three unsuccessful attempts to find you or “a person of suitable age and discretion,” they give up, and inform the creditor, who may then hire a private process server, who may make many more attempts. If you have moved and they cannot locate you, they can even serve you “by publication” – by publishing notices in the legal newspaper for your last known county of residence.

Once you are served, the clock begins to run. The papers you are served with will include a Summons, which (in part) says these or similar words:

TO THE ABOVE NAMED DEFENDANT(S): You are hereby summoned and required to file with the Clerk of said Court and serve upon plaintiff’s attorney, whose name and address is: XXXXXXXXXXXXXX an answer to the complaint which is herewith served upon you, within 30 days after service of this summons upon you, exclusive of the day of service. IF YOU FAIL TO DO SO, JUDGMENT BY DEFAULT WILL BE TAKEN AGAINST YOU FOR THE RELIEF DEMANDED IN THE COMPLAINT.

This means that you have 30 days from the date you actually received the summons to produce a written response or you will automatically lose the case without a hearing, and have a judgment entered against you. If you or your attorney files an answer with the court within the 30 days, then the matter is put on the court calendar for a trial. This may put off matters for anywhere from a week or so to several months, depending on which court, how busy they are, etc. (usually the lower the court, the quicker the response.) But eventually the case proceeds to trial. (In Magistrate Court, the case is heard only by a judge– no jury trials are allowed.)

What Happens Next?

One of the biggest mistakes you can make is just ignoring a lawsuit. A default judgment, which is sure to result if you do nothing, will hurt your credit even more than getting sued in the first place. It enables the creditor to get a FiFa (Writ of Fieri Facias) issued against you and any property you own, which means anything you own can be seized or have a lien put against it. They can also garnish your bank account, up to the full amount of the judgment, and/or garnish up to 25% of your take-home pay.

Another huge mistake many people make is trying to fight a debt case by themselves. Even though Magistrate Court is meant to be easier for people without a lawyer, the cold, hard fact is, almost all people who try to fight creditors’ attorneys in debt cases end up losing. The cost of hiring a competent debtor’s attorney is usually money well spent in all but the smallest cases, especially if they find you have some good defenses available.

If you lose your case, the other side is allowed to serve you with “Post Judgment Discovery” papers. These mean that you are required by law to list your bank accounts, stocks, bonds, employer, property, or anything else that will help them collect the debt. If they can show you did not comply fully or are hiding some of your assets, the court can fine or imprison you for noncompliance (“Contempt of Court”).

How can a lawsuit be stopped?

Usually, it can’t, except by a negotiated settlement or by bankruptcy. You can hire an attorney to fight it for you; they may or may not be able to find grounds to settle or stop the suit, depending on the facts. It is highly recommended that you not try to negotiate without an attorney once the other side has an attorney.

If you have one or more lawsuits filed against you, or will soon, you may already be in debt more than you want to admit. Will you be able to pay your basic living expenses if the court orders that one- fourth of your take-home pay be garnished to pay creditors? Will this just mean that you will be getting further and further behind?

If, at any point in this process, you decide you are fighting a losing war and decide to file bankruptcy, all collection efforts in the lawsuit must stop immediately. The very day you file bankruptcy, we fax to the court and to the opposing attorneys a copy of the bankruptcy filing date and case number, and that is the end of the matter for good.

• If the thirty days from time of service has not run, no default judgment may be entered, and your credit score will not be harmed further.
• If the case has been scheduled to go to trial, it must be cancelled.
• If default judgment has already been entered, its effects are nullified (except for liens already in place).
• If the other side has already won the case and is attempting to collect, they must stop at once.
• If they have started garnishing your wages, they most stop, and the garnishment is cancelled.

It is best to stop a lawsuit before the time to file an answer has run. This way, you will not also have a default judgment listed on your credit report, so you can build up your credit score in the years following bankruptcy faster (See our article on rebuilding credit, LIFE AFTER BANKRUPTCY, elsewhere on this web site. Also see FIGHTING BILL COLLECTORS).

Let us know if we can help you. You may have defenses available in your case, or it may even be time to seriously consider whether bankruptcy would be wise. Feel free to call for a no-obligation consultation.

If your wages or bank account are being garnished, you probably have a financial emergency. Can you keep up with all your other bills if 25% is deducted from every paycheck?  After reading the information below, you may want to call us for a free consultation to explore your options.

What Does Garnishment Mean?

Who Can File A Garnishment?

Any of your creditors, or any collection agency who has bought the rights to collect an old debt of yours, can file a garnishment against you once they have a judgment against you.  It may be an old credit card or medical bill with a balance, a former landlord you didn’t pay, or a court judgment that you never paid. It may even be a bill from a friend or relative’s debt where you were a co-signer, and they stopped paying regularly or declared bankruptcy. Whatever the source of the debt, if you receive the bad news that your wages or your bank account are being garnished, it means they sued you, you lost, and now they’re garnishing you.

How Can I Have Been Sued Without Knowing About It?

If you have always lived at the same address all your adult life, it’s very unlikely. However, if you have ever moved, creditors may not have your current address. Under certain circumstances they can “serve you by publication” in your last known county of residence—that is, they print a notice informing you of the lawsuit in that county’s legal notices newspaper. Depending on local politics, that may be an obscure little paper that almost no one gets, or it may be a main newspaper.  If you did not see the notice or receive word of it, you could have been sued and lost automatically for not answering. 

Also, perhaps your household was served, and you were never told. A deputy sheriff can serve you by leaving the summons with “a person of suitable age and discretion” who is a member of your household; it may be your teenager or spouse forgot (or chose not) to tell you.

Worse, some sleazy collectors may even sue you in another county (perhaps one you have never lived in) just to get a judgment against you, then later file to garnish your wages (miraculously, they have your correct address this time), knowing that a lot of people will not bother (or cannot afford) to hire a lawyer to question this.

Is There Any Other Way Someone Could Have A Judgment Against Me That I Never Went To Court About?

Often when people are served by a deputy sheriff with a lawsuit summons, they just ignore it, hoping it will go away, or not realizing its gravity, or just not wanting to deal with it. All civil summonses have language in them that says you must file an answer to the lawsuit within 30 days of the date you received the summons, or else “judgment by default will be taken against you.”  This means that if you do not answer, you will automatically lose the case without a hearing, and have a judgment entered against you.  You can also automatically lose in court if you do answer within 30 days, but then miss the later court date.

How Long Do Creditors Have To File A Garnishment Against Me?

Once a creditor obtains a court decision against you, a FiFa (Writ of Fieri Facias) can be issued, which in Georgia is good for seven years. A FiFa is a court document stating there is a judgment against you, which the holder can collect on. They can use it to garnish your bank account or wages, to put a lien on your property, or even to make the local sheriff seize any of your paid-for personal property — such as a car, a boat, expensive equipment or tools, work inventory, etc. -- and auction it off to satisfy the debt.  Even if they cannot find you for six years, if they locate an address for you the seventh year, they can garnish your wages or bank account for a court suit you lost seven years ago. And that’s not all. The FiFa can be renewed every seven years. So, you could conceivably be garnished for a debt 10 or 20 years old or more! People protest, “But that’s a lot longer than the six-year Statute of Limitations in Georgia! How can this be legal?”  The answer is, the Statute of Limitations only applies to when a lawsuit can be brought; once there is a judgment, it can be collected as long as the holder is willing to renew the FiFa!

How a Garnishment Can Cost Your Employer Plenty?

If a garnishment against your wages is served to your employer, and he/her/they either forgets or refuses to answer in the time allotted, or in some other way messes up the paperwork, the Court will force your employer to pay the entire amount of your past due debt (the garnishment) (Georgia Code 18-4-90, 18-4-92)! Wouldn’t that make them happy with you!

What Can I Do About A Garnishment?

Garnishments don’t go away by themselves. Although sometimes we can find legal problems with them, usually garnishments are a done deal. Here in Georgia, a judge from the court garnishing you won’t cut you any slack because “you can’t afford it” or “you didn’t realize you owed that” or “you can’t pay the mortgage.” They won’t want to waste time listening to any arguments you could have used had you answered and argued the case you already lost in which the judgment was issued against you. Their attitude generally is, “That’s too bad, but you should have thought of that before you ran up the debt.”  When they take 25% out of your paycheck, you may not have enough to pay for housing, your car note, utilities, food, and gas. It may force you to miss mortgage or car payments, or even force you into foreclosure or repossession. Don’t ignore a garnishment.

There are only a few ways to stop garnishment. First, some people quit their job. This will stop a garnishment, but it is like cutting off your nose to spite your face. Why stop making 100% of your salary to keep from losing 25%? Besides, when you get another job, sooner or later they will garnish your paycheck there, too, so you will be right back where you started.

Occasionally the creditor will be willing to negotiate, especially if you go to them through an attorney. But they often want a large lump-sum payment.  (If you had that, you probably wouldn’t be in financial trouble to begin with.) And many creditors are happy to just sit back and collect the garnishment, and not bother with any further negotiation.

The easiest and most foolproof way to stop a garnishment is to file bankruptcy. If the garnishment means you can’t keep up with your other bills, you already have a genuine financial emergency, whether you want to admit it or not. Is the alternative losing the roof over your family’s head? How will you get to work if your car is repossessed? Can you live safely if your electricity, gas, or water is shut off?

If you can scrape by on 75% of your salary until the garnishment is paid in full, good for you; if you can’t, deal with it now before you get behind on the mortgage or your car note. And also consider: do you also have other unpaid debt, or other lawsuits pending?  The very day we file a bankruptcy for you, the creditor, the Court, and your employer are required by Federal law to stop any garnishment activity at once. All other pending lawsuits and collection activity must also stop. Call us if we can help you get out of your bind.

Undoing The Damage

If we file bankruptcy for you, it is sometimes possible (depending on the circumstances) for us to get back money that was already garnished from your wages. 11 USC §§ 522(h) and 547 provide that debtors can recover any money that was taken from them during the 90 days before they filed bankruptcy,  if  1)  the amount totals $600.00 or more, and 2) your attorney is able to show that the recovered funds can be claimed as exempt. Also, any funds that have been sent to the Court by your employer, but have not yet been sent on to the Creditor, can be returned to you.                                                 

Hint: To see if you have any legal notices — lawsuits, storage unit auctions, foreclosures, etc. — you can search for free on the statewide database of legal notices from Georgia’s legal organ newspapers. Just go to http://georgiapublicnotice.com/ and type in your name under “Keywords.” This works for most counties. (This does not work for Walton County, as their legal newspaper chooses not to participate. There may be others.)

To many people with large student loans, their financial future looks bleak, especially if their expensive education has not led to a good-paying job. Often the debt collectors for these loans are unusually ruthless and inflexible, and in most cases, the indebtedness cannot be discharged in bankruptcy like most other debt can.

In response to lender’s lobbyists, Congress gave special powers to student loan collectors. Depending on the lender, they can garnish wages without a court order, intercept your IRS refund, take money from Social Security checks, charge collection fees of 25% of the loan, charge commission fees of 28%, etc.

BUT don’t give up all hope yet- there are several things that you can do. Here are four:

1. For breathing room, you may want to pursue a student loan “deferment” or “forbearance” through your lender. These typically last from one to three years, though a few have longer maximums. There are many kinds of these – for unemployment, economic hardship, temporary disability, military service, rehab training programs, in-school time, discretionary forbearance for poor health (no maximum), mandatory forbearance for living in a disaster area, etc. The main differences are that a “deferment” normally requires paperwork, whereas forbearance can normally be done by phone; and the government will pay interest on a subsidized loan during a deferment, but will have an interest bill waiting for you after a forbearance.
2. If you have a lot of other debt, filing either Chapter 7 or Chapter 13 bankruptcy may cut down your debt enough to allow you to put a much greater share of your income into paying down your student loan. It is illogical to be drowning in student loan debt, credit card bills, and medical bills, just getting in deeper and deeper, destroying your credit and getting sued and garnished when it is possible to reduce or eliminate fully the cards and medical bills and pay the student loan once and for all.
3. If you can qualify for Chapter 13 bankruptcy (starting point: a regular income of some type), then upon filing your 13, all collection efforts, such as lawsuits and wage garnishments, must stop by law, including on student loans. Under your Chapter 13 plan, you then calculate what payment you can afford, and make that payment for 3 or 5 years. (Unfortunately, at the end of your Chapter 13 you will get a bill for the interest they had to stop collecting during the bankruptcy.) Hopefully, after that, you will be in a better position to resume the full loan payment on the remaining balance. But if you are not . . .
4. If your student loan payment after completing a Chapter 13 (or a Chapter 7) bankruptcy is still too large an expense for a reasonable budget, you can probably file another Chapter 13 bankruptcy immediately after the first one, if you meet all the other requirements to do so. (You can include the accumulated interest from the last bankruptcy in this one.) This time it will not discharge your debts, but it may give badly-needed breathing room by letting you make an affordable payment for several years to bring the balance down.

These are complicated areas with many nuances; although most people can handle point #1 above by themselves, for #2, #3, and #4, you need to consult with an experienced bankruptcy attorney.

Can I save my house from foreclosure?

Many people file bankruptcy as a last-ditch effort to save their house from foreclosure. Georgia is one of the few states which allows “non-judicial foreclosure.”  This means the lender can auction off your house if you are in default, after giving notice, without the courts having anything to do with it,  not even so much as a hearing.

Typically, once your house payments are three months or more behind, the lender may turn the account over to an attorney, who will send you a letter informing you all of the balance is now due, and you must pay it at once or the home will be sold at auction.  The law firm publishes a legal notice that your home is up for auction in the appropriate newspaper for your county for four weeks preceding the auction date, which is almost always the first Tuesday of the month.  Then the house is sold; if there are no other bidders, usually the lender buys it back.

IF YOU FILE BANKRUPTCY, ALL FORECLOSURE ACTIVITY MUST CEASE AT ONCE, BY LAW, AND YOUR HOUSE CANNOT BE AUCTIONED OFF WITHOUT FURTHER LEGAL PROCEEDINGS. However, this does not always stop foreclosure indefinitely. It may only provide some breathing room to work out a better solution.

A word about loan modifications

Some lenders will grant loan modifications. However, for every modification we know of which went through, we know of several which did not. Worse, we constantly hear of people who were told by their bank or other lender that a modification was being actively considered, even while the bank was taking steps to foreclose on the house! Why lenders often tell the homeowner a “loan modification” is being considered when they are (for example) already advertising the house for foreclosure auction is a mystery to us – Poor communication between different departments of the bank? Deliberate deception to make the foreclosure sale go smoother? General incompetence? Some other reason? It is hard to say; many in the legal community believe the second is the answer. Some things will remain hidden until the Day of Judgment (Luke 12:2-3, Ecclesiastes 12:13-14). Be careful. As President Reagan said, “Trust, but verify.”