query: Too many judgments?

[treehugger1]

As I head down this path of who to pay and who not to pay, I was recently served with a small claims paper. There is no doubt that I will receive a default judgment and will probably see my wages garnished. I can live with a 25% garnishment of wages for a while. My question related to whether or not it looks bad if I need to bite the bullet and file in 6-7 months if I have a dozen judgments against me.

Many posters have stated "just go and file." As I've posted elsewhere on this board, if I file within the next 6 months, I will be on a very high monthly payment that will have to be modified once a "rolling" six month average shows a decrease in "annual salary." By September or October, my six-month average salary will decrease from the current $5500 to approximately $4000. My monthly schedule I expenses are approxmately $3000.00 and I have no assests. I will figuratively "starve to death" if I file BK 13 now at a payback of $2500 and have to do this for several months while earning only $4000. My research on the local trustee, while very kind to debtors, is that he will not consider a modified plan until six-months show my decreased income. This is a dilemma. The good thing is that if I file in 6 months, my payback will be about $1000 - $1200 per month. I am in a salaried position with "overload," and if I stopped accepting the "overload" work at this time, I could lose my job. I've already accepted overload assignments for the next several months and I see no purpose in losing my job.

So, my question is, "Should I just let judgments slowly build up over the next 6 months?" I can live through an occasional garnishment. Will this look as if I acted in bad faith and didn't "file" when I should have? Is there any civic obligation to file for BK 13 when you know there is probably no other option?All legal counsel I've met with are reluctant to suggest one way or the other. They do claim that all judgments can be addressed in a BK 13. Does anyone have any suggestions?

I am paying all secured creditors, and living expenses (rent, utility, etc). My student loan company gave me another 3 months of "forebearance." Does it look bad to pay only the secured and leave the unsecured to do what they want, file claims, send to debt collectors, seek garnishment of wages, etc?

[HHM]

The drawback to allowing judgments against in a chapter 13, is I believe that judgments are not treated as unsecured debt. Since, as a general matter, judgments become a type lien on all non-exempt assets. If I am correct, then it means you will have to pay them in your chapter 13.

[lrprn]

TH, go read this excellent review about liens before and after filing bankruptcy - http://moranlaw.net/lawsuits.htm . Cathy Moran is a very well-respected bk lawyer in California - she answers a lot of your questions.

Here's her thoughts about lawsuits and bk:
"In general a debt represented by a judgment is just as dischargeable as the same debt prior to entry of judgment. Note, however:

A judgment lien that attaches to assets is only avoidable by the debtor if it impairs an exemption.

If the complaint alleged fraud or other grounds that would make a debt non dischargeable in bankruptcy, entry of a judgment against you may prevent you from later contesting the facts (i.e. you may be unable to get a bankruptcy court to hear your side of the fraud charge in a non dischargeability action).

In the case of debts that are unliquidated (uncertain in amount), a judgment will liquidate the debt: that may have the effect of increasing your debts beyond the eligibility requirements of Chapter 13, with its expanded discharge and inexpensive reorganization possibilities."

There's more info to read at the link. Be sure to check out her answer for "will filing bankruptcy stop garnishment on a judgment against me?" HTH!

[treehugger1]

Thanks for both of the replies. HHH, my take on the judgments is that they only apply to any value I have in items above my exemption value. Thank you for pointing this out. Lrprn, I did read the "moran law" site info. I am a no asset case with only wages. In my state, anything above a $5000.00 claim from a creditor requires action from a circuit court. This takes a great deal of time to get a judgment and very few creditors in my state will opt for this. The small claims that I am expecting are less than $1000.00, so garnishment will settle these judgments on a monthly basis, if the creditor wishes to act on a judgment. I will have one of these judgments in 14 days. I might be better off "self-garnishing" my wages and working a deal with the creditor the end of the month to settle the judgment. I migh also be better off encouraging the small claims creditors to garnish my wages. What a strange system. I suppose this could constitute a preference down the road, but at least I can negotiate these and include any credit reporting criteria with my negotiations with the creditor.

I do have two vehicles, one worth a "good" value of $7000.00 that I owe $7800 on (no worry about an exemption issue here, as I owe more than the vehicle is worth), and the other is a four month old vehicle that values at $14500 and I owe $15600.00 on (again no value to worry about for exemption reasons). I suppose there is some possibility that a nasty creditor would go for a "lien" as eventually the cars will be "worth something," but I doubt that any equity will be gained in the next 6 - 7 months, and I believe a judgment lien would be removed under the chapter 13. In terms of household goods, I own an old mountain bike, a bed, a five-year old washer and drier, a few "goodwill" pieces of furniture, some cooking utensils, a dresser, etc. All of these value far below my state exemptions (exemptions in Oregon are almost identical for BK and judgments).

I guess at this poin tin time, I'm trying to approach the problem from the point of view of someone who is not considering BK. What are good choices when paying creditors, and what are bad choices? I noted on the "moran law" site there was good advice about who to pay first when you are in a financial crisis. I'll start there, and see what happens.

I also made another appointment with the non-profit conceumer credit services here. they just opened an office in my small community, and I will be veyr open and honest with them about my situation. I would hate to overlook any option for the next few months.

I also read Catchme's post in another area with the article about the creation of "permanent debtors" due to the choice of costs in a chapter 13 and continuing garnishment of wages. Boy, this described my situation to perfection. I do need financial relief, but how and when I approach this is becoming more and more complicated. s

You guys are great, and I hope others in my position might share their thoughts.

[sofarindebt]

Can I ask how long it took

for them to sue you and what creditor it was? You mentioned in an above post that you have a judgement in 13 days. How long after you stopped paying did this occur?

[treehugger1]

This was a local payday loan company. I originally owed them $1385 (September) and had this paid down to $900.00 as of the beginning of February. I couldn't make the payment on Feb. 1 and called them. They said as long as I made a payment by the end of the month, that would be okay. I should have recorded the call, but didn't. They filed a small claim Feb 23. I was served on Feb 26. I have 14 days to respond. The fact is that I owe the money and a judge would only add the payday loans local attorney fees to the amount if I requested a hearing (I cannot win). There is no reason for me to "answer" the small claim. After 14 days of receipt (March 12th in my case), the clerk of the court will enter a default judgment if the plaintiff shows I did not pay (I can't), and the next step is for the creditor to submit a writ of garnishment to my employer and me. I believe the garnishment could reach my employer by the 25th of March and could be taken from my paycheck the last day of March. I think this is somewhat unlikely, and suspect the garnishment to be taken the last day of April. In hindsight, I should have kept as current as possible with all local creditors, as they can easily file a small claim in my county. They can a small claim judgment for any value under $5000.00. If the amount is above $5000.00, the process is more complicated (moves from local small claims court to County Circuit court) and takes a bit more time. Keep in mind these are the statutes for Oregon.