Ghost (Forgotten) Debt, Or Debt You Can’t See That Can Bite Hard, Real Hard. The Surprise You Really Don’t Want.
I am a Ft. Lauderdale Bankruptcy Attorney. A lot of potential clients call me for an initial phone consultation about maybe filing bankruptcy. I give them the benefit of my advice & offer a free in-person confidential consultation where we can go more in depth. But then something happens: Nothing. Nothing happens. That is, since all is quiet & appears well as time goes on, the person doesn’t call back or come in & the notes I make from any such contact just get taped into my calendar for future reference. If someone has inquired though, there is always a reason, & that reason’s name is debt. Read on & see that silence isn’t always golden.
Case in point. I received a frantic call recently from a nice lady who I’d spoken to by phone some 8 months earlier. She had old debts and a judgment but had not been seriously contacted (harassed?) by any of the creditors, for years now. But then, so suddenly, Surprise!: Her bank account had been frozen because the judgment creditor had served her bank a Writ of Garnishment. I located my notes and we met that day. A judgment creditor does not have to give you notice or forewarning, I explained, of a garnishment, and her bank will now wait for direction from the court from which the judgment emanated years ago, for who to give the funds to. And the winner will be (other things being equal): the judgment creditor. She had forgotten all about this judgment &, as alluded to above, now we were surprised.
So I began to prepare an emergency bankruptcy filing, which would have in a matter of weeks resulted in the bank account being unfrozen and the money being released back to her.
But alas, it was not to be. Why? Because she had a pending auto accident personal injury case, which is not exempt in a chapter 7 bankruptcy. That is, upon filing, the future recovery would now belong to the bankruptcy trustee, and no longer be hers. Unlike the “million dollar cases” we see ads for on T.V. all the time, she was not seriously injured (a truism which the T.V. ads don’t mention), but she would likely recover $10-$20K or so from the case when it was resolved.
Uh, maybe just “forget” to mention the auto case in her bankruptcy? No. As in, really, no. That is committing perjury and I am aware of a case where someone went to prison, for perjury, under these exact facts.
I might add that in my view the most valuable counseling I did for her was to ask what a seasoned Ft. Lauderdale bankruptcy attorney would know to ask in preparing a case: do you have any type of pending claim where you can recover money? If so, it is an asset that must be disclosed in the bankruptcy petition. So while she was understandably upset that we couldn’t file without giving up the accident case, I’d definitely would not wish to see how upset she would have been had I filed the bankruptcy - then learned about the auto case.
Once filed, you can’t just do a “nevermind” & dismiss a bankruptcy. You must file a motion to dismiss & give notice to all creditors & have a hearing before the bankruptcy judge. With a potential decent money recovery for the auto accident case, as opposed to it being a no-asset case (all the debtor’s property is exempt & there will be nada for creditors, which is usually the case), creditors are going to like you much, much better in bankruptcy, & they will object to a dismissal, as with you in bankruptcy, they will each receive some of the recovery. The bankruptcy judge will likely deny the dismissal, or you can maybe work something out with the trustee to turn over some of the recovery, but once filed you can’t just walk away. I earned my keep there for sure.
The hard lesson for this nice lady was that if she had followed through with me months ago, she would have cleanly discharged the judgment creditor, as well as all other debts, & I would have been a hero! If she had an auto accident anytime after the date we filed the bankruptcy, it would not be part of the bankruptcy & all hers to keep.
If you know you have debts that you didn’t pay and especially if a creditor has sued & has possibly obtained a judgment against you, no matter how long ago, you might be in for a bad surprise anytime, guaranteed to ruin your day.
If you think this might be the case, go to annualcreditreport.com & you can see & print any or all of the three credit reports, for free.
As a Ft. Lauderdale bankruptcy attorney I specialize in helping people have a life again and avoiding bad surprises.