Salem, Oregon Bankruptcy Attorney

A bankruptcy will generally show up on your credit report for a period of 10 years. However, we generally find that a bankruptcy has a meaningful effect on an individual’s credit for approximately five years.

Although you can file for bankruptcy without a lawyer, it is not generally advised because of the complexity of the Bankruptcy laws. Mistakes can be very costly. The cost to hire Gunn & Gunn to assist you with your bankruptcy case is a good investment in your financial future. We tailor our fees around your individual circumstances, and work with you to allow payments that are affordable and meet your individual financial circumstances.

Chapter 7 bankruptcy is the most widely known form of bankruptcy. It is designed to eliminate unmanageable, unsecured debt to give you a fresh start. It is for the most part a liquidation proceeding. This does not mean all of your property is liquidated, however, liquidation of non-exempt assets is the overall structure of a Chapter 7.

Most debts can be discharged or eliminated in a Chapter 7. Some debts cannot be eliminated such as child support and alimony, debts arising from drunk driving or fraud, some student loans and some tax debts. Some of these debts can be handled more appropriately through a Chapter 13 bankruptcy case

As soon as a Chapter 7 is filed, the federal court issues a stay requiring all creditors to stop contacting you. A trustee is appointed to review your financial affairs and sell any unprotected assets, but you normally get to keep everything you own, such as your home, car, household goods, and pensions. If the trustee finds no assets to sell, which is true about most of the time, it is reported as a ‘no asset’ case and the case is closed. The court then issues you a discharge. The creditors whose debts have been discharged, or canceled, are forever prohibited from taking any action to collect the debt.

Chapter 13 is a type of bankruptcy proceeding available to individuals and sole proprietorship businesses to reorganize and eliminate debts. A Chapter 13 is a restructuring plan, designed to restructure your financial affairs. With the assistance of an attorney, you will prepare a reorganization plan, by which you will pay your debt. The plan usually lasts for three to five years. During that time you under the protection of the Bankruptcy Court, and payments are made to a court-appointed trustee who then pays your creditors according to the plan.

You do not need to pay all of your creditors in a Chapter 13 case. Certain types of debt must be paid in full, but most debt can be eliminated. The amount you pay over the life of the plan will depend upon your income level, the nature and character of your debt, the nature and extent of your assets, and other individual factors. Each Chapter 13 case is individual, and as such there is no “one size fits all” Chapter 13 plan.

Chapter 13 can often solve problems and offer relief not available under a Chapter 7 bankruptcy. You can keep your assets, stop home foreclosures and take up to five years to get caught up on back mortgage payments, protect co-signers, and modify contracts with secured creditors such as car or furniture loans. You may also be able to eliminate a second mortgage on a home, or do a “lien strip”, which can improve your equity position in your home. Chapter 13 can also release you from certain debts that cannot be eliminated in Chapter 7.

Although Congress has made extensive changes to the Bankruptcy Laws in 2005, they did NOT eliminate your right to file bankruptcy should you need it.

All individuals must obtain budget and credit counseling before they file bankruptcy. In other words, you need a ticket to get into the process. The certificate issued by the agency will be valid for 180 days. After you have filed your bankruptcy (Chapter 7 or Chapter 13), you must take and complete an approved financial management course in order to receive your discharge. Both of these sessions can be obtained in person, via telephone, or by the internet and usually cost anywhere from $5.00 to $50. The list of approved agencies for the counseling and financial management tickets can be viewed here: USDOJ.gov/ust/eo/bapcpa/ccde/index.htm

To determine if you qualify for Chapter 7, you may need to pass a “means test” if your income exceeds the median income for the same size family in your state. If you don’t qualify for Chapter 7, a Chapter 13 plan may still be a good option. Although there are many new rules and requirements, bankruptcy is still designed to help you obtain a fresh start. Your attorney can assist you in determining if you”qualify” for a Chapter 7, or if there are other alternatives that are better suited to your individual needs.

Once you call us for your no obligation consultation, we will provide you with a short list of items to bring to your appointment. We also have a short questionnaire that you can complete in our office immediately prior to your appointment. If you would like to complete this information in advance, we can provide you with the form via email or you can pick it up prior to your meeting. Most clients complete the questionnaire within about 10 minutes.

It is also helpful, though not imperative, if you bring the following documents to your first meeting:,

1. Pay stubs for the last 6 months
2. A recent credit report – you can get one free at www.annualcreditreport.com
3. Copies of any foreclosure notices, garnishments, law suits or judgments
4. Your tax returns for the last year.

very bankruptcy case has a Court filing fee: Chapter 7 is $306. Chapter 13 is $281. These fees are paid to our office and we forward the funds to the court when the case is filed.

The attorney fees vary on a case-by-case basis. Naturally, bankruptcy cases with secured creditor issues (e.g., mortgage arrears) or tax issues are more involved and may have higher attorney fees. Thus, it is difficult to accurately estimate the cost of a bankruptcy without a full consultation with one of our attorneys. However, you should know that the attorney costs associated with your bankruptcy are modest when compared to the amount of debt that will be eliminated through the bankruptcy process.

When analyzing bankruptcy costs, remember you are purchasing a service and not a product. You cannot purchase bankruptcies at the local store. If this were the case, you could easily compare the identical product from store to store. Bankruptcy representation is a service and you should choose an attorney and firm with which you are comfortable and confident. This means the lowest priced bankruptcy may not be your best value and, conversely, the highest priced representation does not necessarily mean the best for you.

We offer a free consultation with one of our attorneys who will discuss your personal situation and let you know what we will charge to handle your case. During your initial visit, you will get to know your attorney, and can then decide if we are the right law firm to help you through this difficult process.

Everyone is entitled to file and defend any legal proceeding without a lawyer, and bankruptcy is no exception. However, bankruptcy is often misunderstood as being a simple process, when it is, in fact, a very complicated area of law. The more complicated your problem, the more important it is to get a qualified (i.e., “specialized”) attorney. The area of bankruptcy and business reorganization is one of those areas where proper qualification is especially important, given the costs, the complexity, and the consequences of incorrect action.

Be sure to get as much information and ask as many questions as possible. Ask each attorney about their experience in practicing bankruptcy law; ask how many years they have done bankruptcy work; what percentage of their practice is bankruptcy; how many business reorganizations have they handled for debtors, and how successful those cases have been.

You should also meet with any attorney you are considering retaining. When you schedule the appointment, you should make sure that you will be meeting with one of the attorneys, and not simply with a paralegal or other staff member. You and your attorney will be working together in this process, and therefore, you need to have a face to face meeting to ensure that you are comfortable with the attorney and the law firm to whom you will be trusting your important financial affairs.

Even if you are married, you are not required to file a joint case with your spouse. Married people can file a joint case, two separate cases or one spouse can file for bankruptcy alone. However, if both a husband and wife are responsible for a debt and only one spouse files bankruptcy, the creditor has the right to come after the other spouse for the debt. This problem can often be avoided through Chapter 13.

If you have recently married and most of the debts were incurred by your new spouse prior to your marriage, you are not legally responsible those pre-existing debts. When you marry someone, you do not marry their bills.

Individuals who file bankruptcy are entitled to keep certain items of property. Businesses who file are not entitled to exemptions, and therefore do not claim property as “exempt.” The property that individuals are entitled to protect from creditors is often referred to as “exempt property.” If property is exempt, that means it cannot be sold or taken by creditors, the trustee or the court for the purpose of paying debts. What items are exempt varies from state to state. In Oregon, there are two sets of exemptions that individuals may use when filing for bankruptcy. First, individuals may claim the Oregon State Exemptions. Some examples of exempt property under Oregon State Exemptions are as follows:

• Homestead (House with Land) with a value to $40,000.00 in equity for an individual and $50,000.00 for a married couple
• Vehicles with a value of $3,000.00 in equity for each individual (i.e. total of $6,000.00 combined for married couple)
• Clothing, Jewelry, and other personal items with a value of up to $1,800.00 each individual
• Household Furnishings and Appliances with a value of up to $3,000.00
• A Pistol and rifle or shotgun with a value up to $1,000.00
• Books, pictures, musical instruments, art and other similar items with a value up to $600.00 each individual
• 100% of Retirement accounts, 401(k), IRA, PERS, Pensions, and other similar retirement plans
• Cash, money in bank accounts, or other similar property up to $400.00 each individual
• Tools of a business or trade to a value of $5,000.00

Some examples of property that is not exempt would include the following:

• Value in property to the extent that it is greater than the “exempt” amount
• Accounts receivable
• Cash Value in insurance policies (unless the beneficiary is other than the debtor or the debtor’s estate)
• Tax refunds, except that the portion of the refund attributable to the ECI may be exempt
• Claims for recovery of money or property unless otherwise exempt

Individuals may also elect protection of assets under the Federal Bankruptcy Exemptions. For individuals who do not own a home, or who have no equity in their home, the federal exemptions offer a much larger “wild card” exemption. Election of Federal Exemptions may allow individuals to retain significantly more value in personal property than under the Oregon State Exemptions. Some of the Federal Bankruptcy Exemptions are as follows:

• $22,975.00 Homestead
• $3,675.00 of value in a motor vehicle
• $1,550 for jewelry
• $12,250 aggregate value in household goods, furnishings and appliances, clothes, books, animals, crops, or musical instruments (up to $575.00 per individual item)
• $2,300 for tools of trade including implements and books
• Unused Portion of the Homestead exemption – “wildcard” (up to $11,500.00 each debtor)

There are also other exempt items of property as well as non-exempt property. What is exempt and what is not is best determined by consultation with an attorney.

Most retirement plans are protected in bankruptcy. The Supreme Court has ruled that retirement plans which qualify under a federal law called ERISA are not property of the estate for bankruptcy purposes. This means that the bankruptcy trustee has to leave these assets alone. Most retirement plans qualify under ERISA, and even if they don’t, they may be protected by other provisions in the bankruptcy laws. IRA accounts, for example, are protected under Oregon law. Since there are always exceptions, you should consult with an attorney who has expertise in bankruptcy law to ensure that your retirement plan is protected.

Under Oregon law, if you give, sell, or transfer an asset within four years before filing for bankruptcy, the trustee in bankruptcy can reverse that transfer and deem it fraudulent if it was made for less than the fair market value of the assets. The Bankruptcy Code and forms require disclosure of all transfers made within the 2 years prior to filing a case. For example, if you give away a piece of property to a family member within two years before filing bankruptcy, the Chapter 7 trustee may be able to reverse that transaction and bring the property back into your bankruptcy estate.

If you have already engaged in such transactions as gifting, selling, filing a quit claim deed to real estate, or otherwise transferring a vehicle or other major asset, it is imperative that you talk to one of our attorneys.

Though a certain amount of “exemption planning” is allowed and appropriate prior to filing bankruptcy, due to the complexity of the rules governing such transactions, you should consult with an attorney before engaging in any “pre-bankruptcy planning”.

As a general rule, you should not transfer anything or pay any debts (other than normal monthly bills) before consulting a bankruptcy lawyer.

Your employer generally has no way of knowing that you filed a Chapter 7 bankruptcy proceeding. The Bankruptcy Court will not contact your employer, nor will your attorney. Usually the only way your employer will know you filed bankruptcy is if your employer is also a creditor, or if you are being garnished and your attorney needs to notify your employer about the bankruptcy in order to get the garnishment stopped.

The Bankruptcy Court generally requires that Chapter 13 payments be paid by a wage deduction. Employers are prohibited from discriminating against employees who file bankruptcy. In some cases, it is possible to make Chapter 13 payments directly to the trustee, particularly if a wage deduction will jeopardize your employment.

The bankruptcy laws require that you list all debts. You can continue to pay home and car loans, and you are free to voluntarily pay any debt which has been discharged in bankruptcy. If you forget to list a creditor, it is usually possible to amend your bankruptcy to add the omitted debt. This should be done as soon as possible, as time limitations may apply.

A debt will not be discharged in bankruptcy (meaning you will not be released from the debt) unless the creditor receives notice of your bankruptcy filing. Notice is provided by the Bankruptcy Court, and will be sent to the address you provide. This is why it is so important to list all possible creditors, and provide complete, accurate addresses.

As for determining who you owe, think of everyone who could possibly claim that you owe them money and list them, even if you don’t think you owe them. In some cases, it is not necessary to know the exact amounts that you owe. You can also request a copy of your credit report, but credit bureaus only list those creditors who have sent information to them. Their list will not cover all of your creditors. You can get a free credit report each year at www.annualcreditreport.com

A Chapter 7 bankruptcy releases you from your debts, but does not release your cosigners. The creditors will demand payment from them if you don’t pay. Lenders want cosigners so they can have someone else to pursue if you fail to make the payments or discharge the debt in bankruptcy.

One way to protect your cosigners is to continue to pay the debt after you file bankruptcy. If you are too far in default or the payments are too high, you can use a Chapter 13 proceeding to protect the cosigner. Chapter 13 lets you rewrite the debt and take up to five years to pay it while protecting your cosigners from the creditor. As long as you are paying a cosigned consumer debt in full through a Chapter 13 plan, your cosigners are protected, even though the loan is not being paid off as fast as originally required. This is only one of the ways Chapter 13 can help you.

A Chapter 7 bankruptcy usually takes 4 months to complete. In a Chapter 13, you may be making payments for three to five years. However, both Chapter 7 and Chapter 13 cases take effect the instant you file them. All bankruptcies start with a court order called an automatic stay, which stops all collection activity against you. As soon as the case is filed, your creditors cannot sue or garnish you, repossess your car, foreclose on your home, or take any other collection action.

Bankruptcies are generally finalized with a discharge, which is a court order that says you will never have to pay the bills. This order comes about three months after you file a Chapter 7, or 3 to 5 years after filing a Chapter 13. During the 3 to 5 year payment period of a Chapter 13, you are protected from creditors by the automatic stay.

If divorcing couples believe that bankruptcy is a possibility, they should consider filing a joint bankruptcy case before the divorce is final. This not only saves legal expenses by avoiding the necessity of two separate bankruptcies, but may save some of the expenses you might incur in your divorce proceeding while arguing about who pays which bills.

If one of you files a bankruptcy after being divorced, the bankruptcy filing does nothing to protect the other spouse from joint debts, regardless of what the divorce decree says. A divorce decree is an agreement between the two spouses and is not binding on their creditors. The creditors will pursue the spouse who didn’t file bankruptcy.

However, a requirement in a divorce decree that one spouse protect the other spouse from joint creditors may survive the bankruptcy under certain circumstances. This is a complex area. It is extremely important you talk to one of our attorneys about your options. You may also want your divorce attorney to call one of our attorneys to make sure you are protected as far as possible in the divorce case.

There are many “debt consolidation” or “debt workout” agencies which claim to help individuals restructure or consolidate credit card obligations. Unfortunately, many of these outfits ultimately do not help individuals resolve their financial problems. If a consolidation or workout plan seems too good to be true, it probably is. If you pursue this method of resolving your financial situation, pay close attention to the terms of any agreement and the fees associated with the program.

Debt settlements are another way to resolve problems with defaulted loans. This is typically accomplished by a lump sum payment at a discount from the total amount owed. To accomplish settlements, an individual must have access to, or acquire, a lump sum of cash and contact the creditor with a settlement proposal. Some creditors will accept a low percentage of the balance owed while other creditors will demand a much higher percentage of the balance due. The creditor will typically issue a tax form 1099 for the amount of the debt they did not receive in the settlement. The balance “written off” is called discharge of indebtedness income and may result in a tax burden for the individual that settled the debt at a discount.

You can also get some relief by simply getting better control over how you spend your money; you may wish to take a course in money management. Also, there are non-profit consumer credit counseling services which may be able to help you restructure your debt.

If these ideas don’t help, consider filing a Chapter 13 proceeding to set up your own payment plan enforced by the federal Bankruptcy Court. These plans run from three to five years. You pay your creditors what you can afford each month while you remain under the protection of the court. When the plan is complete, your obligation to pay anything more to your creditors is eliminated, even if they have not been paid in full.

Taxes cannot be discharged unless the returns were filed more than 2 years before the bankruptcy is filed. Other technical rules apply even if you have not filed your taxes. There are ways to deal with your tax debts that can help you reduce or eliminate it all together. It is critical that you discuss your situation with our bankruptcy attorneys before you file any returns or contact the IRS.

Taxes can often be discharged through bankruptcy. If they cannot be eliminated, you can still use the bankruptcy laws to force the IRS or the State to accept a payment plan through Chapter 13 that you can afford, rather than what they demand. Income taxes are usually dischargeable if you filed the returns more than 2 years ago and the return was due more than 3 years ago.

There are other rules which apply to tax dischargeability, and whether your taxes are completely eliminated will depend upon a variety of factors such as whether or not you have filed returns, the date you filed the returns, the date the taxes were assessed, the value of your assets, etc. If the taxes can’t be eliminated, the bankruptcy laws will give you up to five years to pay them without any further penalties being charged. This can significantly reduce the amount you would have to pay the IRS if you attempted to pay the taxes on your own without using the bankruptcy laws.

The rules concerning taxes and bankruptcy are very technical. To find out how they apply to your situation, you should talk to one of our attorneys.

When you get behind on your house payments, your mortgage holder will start foreclosure and refuse to accept any further payments unless you pay the full amount of the delinquency. If you are unable to do so, the mortgage company may demand that you payoff the debt in full. However, you can use the bankruptcy laws to stop the foreclosure by filing a case prior to the foreclosure sale. A Chapter 13 plan gives you three to five years to catch-up the back payments while you maintain the regular payment. This law can also be used to stop tax foreclosure filed by the county for delinquent property taxes.

If you are not paying your bills on time, creditors are allowed to call you at reasonable times in order to collect the debt. However, federal and state laws prohibit creditors from engaging in abusive or harassing behavior such as calling at unreasonable hours, calling you at work, telling third parties about your late payments, etc. You should demand that they stop, keep records of the harassment, and file a lawsuit if appropriate. However, if your circumstances are leading you towards a bankruptcy filing, contact us. The filing of any type of bankruptcy immediately stops all collection efforts against you and your property. Once you file for bankruptcy, creditors must leave you alone, stopping all phone calls, lawsuits, collection notices, and garnishments. Once you hire our firm to represent you in a bankruptcy case, most creditors will stop calling. This can give you some peace of mind while you put together the necessary information and funds to file your case.

The IRS may target specific individuals or business with payroll or income tax liability by implementing immediate and aggressive collection. This means that they will pursue more garnishments, more asset seizures and more business shut-downs and generally try to make your life miserable until the taxes are paid. That is the bad news. The good news is that you can use the bankruptcy laws to stop all collections by the IRS, and any other tax agency, and force them to accept a repayment plan that allows you to remain in business. This is accomplished by using a Chapter 13 for sole proprietorships or a Chapter 11 for corporations.

Your business can use the bankruptcy laws to get protection from all creditors while you work out a repayment plan you can afford. Your business stays open and you remain in control. All lawsuits, garnishments, and collection actions, including any actions by the IRS, are immediately stopped when a proceeding is filed in Bankruptcy Court.

For sole proprietorships, a Chapter 13 bankruptcy can be used to restructure the business debts, often resulting in a significant reduction of the debt to be repaid. For corporations and partnerships, a Chapter 11 proceeding can be used to accomplish these same results.

The stigma associated with bankruptcy has dramatically decreased over the last decade. A bankruptcy filing will show on your credit record for ten years. Keep in mind, however, that delinquent payments, defaults on loans, etc., already appear on your credit record for seven years. In other words, the filing of a Chapter 13 or Chapter 7 may not damage your record anymore than it has already been damaged.

While maintaining a “clean” credit record is a good idea, it should not be done at the expense of your health, or the health of your family. Compare the relief that you will feel if you file bankruptcy against the amount of distress that you and your family currently feel while you are trying to maintain that clean record by living beyond your means. Once you have obtained the relief Congress has made available to you, many things can be done to reestablish your credit.

It may be possible to reduce the amount of some of your loan payments through a Chapter 13 bankruptcy. Chapter 13 allows you to rewrite some loans on terms that you can afford. You can usually lower your payments, cut the interest rate, spread out the payments over time or catch up on back payments, all under the protection of the Bankruptcy Court. Chapter 13 often allows you to reduce the balance on your loan. For example, if your car is worth less than you owe, you may only need to pay the creditor the market value of the car, not the loan balance. This is a procedure called “cram down”, and it can be used to modify other types of secured loans, such as those on furniture, appliances, and business equipment. If you are behind in mortgage payments or other long-term debts, a Chapter 13 plan may help you catch up and get back on track.

Unfortunately, a bankruptcy court cannot reduce the interest rate, or the balance owed on a mortgage secured by your residence. However, in certain circumstances, it may be possible to eliminate a second mortgage on the residence. It may also be possible to allow time to bring payments current over an extended period of time. If you are concerned about your home loan, you should speak to one of our attorneys about your individual situation.

For most people, all of their debts can be eliminated in bankruptcy. There are exceptions, and the rules are complex. Although there are some differences in the types of debts that can be eliminated in Chapter 7 and Chapter 13, certain debts are not discharged in either proceeding such as child support & alimony, criminal restitution, student loans, and debts arising from drunk driving. Other types of debts are discharged unless the creditor files an objection with 60 days of your hearing. These include debts based on inaccurate credit applications or fraud, embezzlement, willful or malicious injuries, debts which arose from a fiduciary responsibility, or debts which arose from substantial abuses of credit right before bankruptcy. Tax debts are not eliminated if the taxes are less than three years old, you have not filed tax returns or you tried to evade or defeat the tax. However, when determining if taxes can be discharged, the only real option is to have an experienced bankruptcy attorney review the IRS and Department of Revenue tax records. The rules regarding the elimination of debts through bankruptcy are quite complex and you should have one of our experienced bankruptcy attorneys on your side.

In October 1998, Congress changed the laws relating to student loans. As a result, student loans are generally not dischargeable in bankruptcy no matter how old they are. Student loans can only be discharged if the court finds that paying the loan will impose an undue hardship. However, the courts very rarely grant the hardship exception. Financial inability to pay is normally not enough to be considered a hardship. Chapter 13 can still be used to structure a new payment plan or to cure defaults in student loans.

Taxes can often be discharged through bankruptcy. If they cannot be eliminated, you can still use the bankruptcy laws to force the IRS or the State to accept a payment plan through Chapter 13 that you can afford, rather than what they demand. Income taxes are usually dischargeable if you filed the returns more than 2 years ago and the return was due more than 3 years ago.

There are other rules which apply to tax dischargeability, and whether your taxes are completely eliminated will depend upon a variety of factors such as whether or not you have filed returns, the date you filed the returns, the date the taxes were assessed, the value of your assets, etc. If the taxes can’t be eliminated, the bankruptcy laws will give you up to five years to pay them without any further penalties being charged. This can significantly reduce the amount you would have to pay the IRS if you attempted to pay the taxes on your own without using the bankruptcy laws.

The rules concerning taxes and bankruptcy are very technical. To find out how they apply to your situation, you should talk to one of our attorneys.

There is no special “medical” bankruptcy, but medical bills are discharged in bankruptcy. You may file either a Chapter 7, often called straight bankruptcy, or a Chapter 13, where you work out a plan to pay your debts under the protection of the Bankruptcy Court, based upon what you can afford to pay. Which bankruptcy is best for you depends upon a variety of factors including the value of your assets, the amount of your income and the size of your debts.

Taxes cannot be discharged unless the returns were filed more than 2 years before the bankruptcy is filed. Other technical rules apply even if your have not filed your taxes. There are ways to deal with your tax debts that can help you reduce or eliminate it all together. It is critical that you discuss your situation with our bankruptcy attorneys before you file any returns or contact the IRS.

As you can see, criminal cases can carry serious short term and long term consequences. Though the constitution is designed to protect individuals charged with crimes, it is only through the assistance of experienced defense attorneys that the maximum benefit of those constitutional rights may be obtained. Reputation and experience matter more in criminal defense cases than in most other types of legal matters. Ask around, and you will find that the attorneys at Gunn & Gunn have a reputation as excellent criminal defense attorneys. We give our clients the individual attention each case deserves, combined with years of experience, and an excellent reputation. And besides, when you hire one of our attorneys you can honestly say you have a “Hired Gunn” on your side . . . and that counts for something!

A garnishment is one method that creditors can use to collect debts owed. Before a creditor is entitled to garnish, however, the creditor must obtain a judgment from a court declaring that the debt is owed. Though there are some exceptions, for example a garnishment or tax levy, until a judgment has been entered, you do not need to fear a garnishment.

Upon a creditor obtaining a judgment, that creditor can apply to the court clerk for the issuance of a garnishment. The debtor (person who owes the debt) is not notified of the garnishment until the garnishment is sent to the garnishee (i.e. bank or employer). A creditor’s attorney can also issue a garnishment. A garnishment is a court order directing a garnishee (i.e. your employer or your bank) to seize funds owed by the debtor and pay those funds to the creditor. When a garnishee receives a garnishment, the garnishee must send the creditor a response indicating what funds the garnishee holds (or will hold) belonging to the debtor. In the case of a bank account, for example, the bank (as garnishee) is required to seize or place a hold on the funds held on deposit and is then required to forward those funds to the creditor or to the court clerk to pay the amount owed on the judgment. In the case of an employer as garnishee, the employer is required to notify the creditor of when the debtor will be paid, and is then obligated to withhold 25% of the debtor’s wages and send the funds to the creditor to be applied to the debt.

Because a creditor is not required to notify a debtor of the garnishment until it is served on the garnishee, it is often the case that the debtor first learns of the garnishment from an employer or from the bank. Among the paperwork that is provided to the debtor will be a form indicating the name and address of the creditor, and providing a calculation of the amount owed to the creditor. The creditor is also required to provide the debtor with a copy of a form that can be used to challenge the garnishment as well as a notice of what property is exempt (protected) from garnishment. Upon receipt of this form, if the property being seized is “exempt” then the debtor may wish to fill out and file the Challenge to Garnishment form. For example, if the creditor is trying to seize money in a bank account that came from unemployment, those funds are completely (100%) exempt. By filing the Challenge to Garnishment form, and declaring that the money in the bank is, in this example, unemployment, the debtor can have the court declare that the money cannot be garnished and must be returned to the debtor. A Challenge to Garnishment form is included under our Free Legal Forms on our Client Resources page.

In many cases, the property being garnished is either not exempt, or is not fully exempt. For example, in the case of a garnishment of wages, 75% if the wages are “exempt” but the remaining 25% must be turned over to the creditor. The garnishment form provided to the employer contains the necessary information to make this calculation, so there is no need for the debtor to file a Challenge to assert the exemption. In such cases, there are relatively few ways to stop a garnishment. Three methods have proven effective in the past.

The first way to stop a garnishment is to contact the creditor and to fully pay the judgment. In most cases, the debtor does not have sufficient income or other resources readily available to fully pay the debt. However, if the debtor can pay the debt in full, that will satisfy the garnishment and resolve the case.

The second way to stop a garnishment is to contact the creditor and see if the creditor will agree to a negotiated settlement payment. Sometimes creditors will agree to accept regular payments from a debtor, or will agree to reduce the amount of the debt in exchange for a lump sum payment. Realize, however, that a creditor is not likely to accept less than the creditor can get by way of garnishment. In otherwords, if a creditor can garnish $250.00 each month the creditor will probably not accept less than $250.00 per month in payments.

The third way to stop a garnishment is to file a bankruptcy case. The filing of a bankruptcy creates an automatic stay, which prevents creditors from continuing collection efforts, including garnishments. Only the actual filing with the bankruptcy court creates the automatic stay. In other words, simply retaining an attorney, or telling a creditor you intend to file bankruptcy is not enough. The case must actually be filed with the court. This generally means that all necessary information has been provided to the bankrutpcy attorney, the fees and court filing fees have been paid, and the paperwork has been signed by the debtor (client). Because we file all bankruptcy cases electronically with the court, we obtain a case number immediately and are able to send a notice immediately to a garnishee (i.e. employer) once the case is ready to file.

If you are facing a garnishment, you should immediately speak to an attorney. We can help you decide which alternative is the best way to resolve the outstanding debt, and get a fresh start. You can call our office to speak to an attorney at (503) 362-6528.

In short, the answer is “no.” You are not required to reaffirm any debt. However, in some cases reaffirming a debt can be helpful. You should speak to your attorney prior to reaffirming any debt, and determine if there is an advantage to you in reaffirming the debt.