When financial pressure squeezes your brain
Debts and liens are not the same! This week I had a consumer call me with a real problem. The consumer had gone through filing a Chapter 7 bankruptcy, then tried selling their home to cash out the equity and start over.
Not so fast: There was a lien against the property.
A successful bankruptcy can be like a magic wand. Bankruptcy can eliminate your responsibility for paying a particular debt. The wand only affects debts, however, not liens created by them — they’re two separate things. If you owe someone money and he goes to court and gets a judgment against you, and if he then uses the judgment to create a lien against your property, your bankruptcy discharge removes only your liability for the underlying debt, not necessarily the lien. Unless your bankruptcy includes the granting, by the court, of a “Motion to Avoid Lien,” you could be on the receiving end of a nasty surprise down the road. Removing the lien — called “avoiding” it in bankruptcy terms — involves taking an extra step.
I am not an attorney; hence I do not give legal advice. If you are contemplating bankruptcy, my advice is to seek out a competent local attorney who works regularly in this area of law.
BILL’S HINT: Just because your debts and bills seem overwhelming, don’t assume that bankruptcy is the only and best way out of your dilemma. Bankruptcy is a long-lasting blot on your credit report. It takes years to overcome. There are many legal and creative solutions to getting back on the right financial track. One of many (and the one I recommend) is Dave Ramsey’s course “Financial Peace University.” The course costs a little over $100, but could change your financial life. Many local churches offer the course. If you need some direction — call me.
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JUDGMENT-PROOF: While we’re talking about finances, I’ve heard many “jailhouse lawyers” brag about being “judgment-proof” and explaining that if you have no assets, you really can’t be successfully sued. WRONG!
You can be sued and the person or company you owe money to, even though they can’t collect it now, can often file a lien against you. In many jurisdictions, liens last for seven years and can be easily renewed just before they expire.
Judgments and liens will severely and negatively affect your credit rating. And just to add insult to injury, a company or individual to whom you owe money resulting from litigation can demand and get the right to call you (and your spouse or business partners) in for a Debtor Judgment Examination. Once the creditor has obtained a judgment and the court orders you to appear at a debtor’s examination, you must do so.
You cannot go to jail because you owe a debt. However, you can go to jail if you refuse to appear for a debtor’s exam. If you do not show up, the court will most likely find you in civil contempt for disobeying its order. If you ignore the court’s summons, it may also issue a warrant for your arrest. If you are found in contempt, the court may issue sanctions against you, which can include fines and jail time.
If you do appear for the debtor’s exam, you must answer the judgment creditor’s questions honestly. If you give false or misleading answers, you could be punished for perjury.
In some jurisdictions this examination goes by other names, but it is essentially the same thing. The debtor is required to provide records like tax returns, employment records and bank records, sometime for as far back as seven years.
LESSON: Creditors may not be able to get any money from you, but they can make your life miserable.
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SMALL CLAIMS COURT IN IDAHO: This week there seem to be a lot of questions about debts, collections and consumer law. A very useful tool for consumers is filing a small claims suit against a company or an individual.
In Small Claims Court, the rules are simpler and procedures less formal. Judges and magistrates are more interested in justice than procedure. Licensed attorneys are generally not permitted to argue a case in Small Claims Court. You get to tell your story. The person or company you are suing gets to tell their story. You both get to question each other regarding the facts. The judge or magistrate gets to ask questions and then render a judgment. Judgments can be appealed, but only in what I call “big people’s” court (i.e. regular court, with attorneys, and adherence to rather strict rules of civil procedure).
In Small Claims Court, you cannot ask for more than $5,000. You cannot avoid the $5,000 limit by filing more than one claim against the same defendant about the same transaction or occurrence.
There are laws that put a time limit on filing claims. There are different limits for different types of claims. Many of the time limits are in Idaho Code Title 5, Chapter 2. The court clerk will not be able to tell you the time limit that applies in your case. The judge will decide what time limit applies in your case at the hearing on your claim. The cost to file a small claims suit in Kootenai County is currently $69. Go to my website at https://bit.ly/2MXKuWF to see a sample of the Small Claims packet.
Often, by filing a Small Claims lawsuit, you’ll “get the attention” of the person or company that you feel has wronged you. At this point you have an opportunity to open a dialogue. My advice: be firm but courteous. Remember — “You get more flies with ...”
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RANSOMWARE, A VIRUS OR A POP–UP: A consumer called a few days ago and informed me that his computer had been infected with ransomware and that he was told the only thing he could do was throw out the infected computer, buy a new one and start over, losing all his files, photographs and data.
It turns out, he was reading and believing the scammers’ pop-ups on his computer. Luckily he called me. His computer had not been taken over by ransomware. His computer wasn’t even infected with a virus. I saved him thousands of dollars and hours of trouble. I instructed him to turn off his computer, wait five minutes, plug it back in and start the computer again, allowing it to reboot. All was back to normal once he followed these easy instructions. He had been ready to believe the pop-up of the scammer instead of calling me or our local Computer Guy in Hayden. Don’t panic, pick up the phone!
More next column on ransomware, viruses and pop-ups.
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REMEMBER BILL BROOKS: “He’s On Your Side”
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I have many more tips and interesting cases that I’m working on. Call me at (208) 699-BILL. You can follow me at www.billbrooks.us. I am available to speak about consumerism to schools and civic groups. Bill Brooks is a consumer advocate who lives in Coeur d’Alene with his proofreader, Bobbi (who is also his wife).