Wage Garnishment: FAQ

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What is wage garnishment?

If you owe money to a person or company that you have failed to repay or even begin to repay, the creditor (entity to whom you are indebted) can obtain a court order against you. This court document will order your current employer to take a specific amount of money out of each of your paychecks. This money will go directly to the creditor to whom you owe money.

How much of my paycheck can be garnished?

There are federal laws in place that limit the amount of money that can be garnished from anyone’s paycheck so that the debtor can still manage their monthly expenses. Generally, no more than 25% of your income (after deductions) can be garnished by any combination of creditors who may be seeking money from you.

Can I lose my job because of a wage garnishment?

If you have only one garnishment against your wages, your employer does not have the right to terminate your employment, nor can they punish you or treat you any differently because of a wage garnishment.

Multiple wage garnishments filed against you will give your employer some rights to take action. For example, suppose your employer discovers that you are neck-deep in unpaid debt and your job duties include dealing with company finances. Your severely disordered finances at home send up a red flag, and many times employers do have rights against you when the garnishments keep rolling in.

What can I do to eliminate a wage garnishment?

If you feel that a wage garnishment has been filed against you erroneously, you can protest the garnishment at a court hearing. You may also have rights if you cannot manage your bills with the wage garnishments set as they are.

Additionally, you can immediately eliminate any and all wage garnishments by simply paying off the debts in full. If you are starting a new job and don’t want your new employer to know that you owe money to a creditor, your best bet is to try to work with your debt negotiation lawyer to lower the amount you owe so that you can pay it all off in one fell swoop.

Can I eliminate all wage garnishments?

While you can “cancel out” a wage garnishment for say, credit card debt, defaulted loans or medical debt, some garnishments are harder (and sometimes impossible) to remove. For legal reasons, if you owe child support, your NJ county court will automatically set a wage garnishment action in place once your Final Judgement of Divorce has been entered. This guarantees that your children will always be cared for appropriately with no missed payments.

The same is true if you owe money to the federal or state government in the form of back taxes, or if you have delinquent student loans. In fact, wage garnishments for child support, taxes and student loans can even be initiated without a court order.

If you are facing a wage garnishment in New Jersey that you feel is inaccurate or that is preventing you from meeting your other basic financial obligations, work with your NJ debt relief attorney to either modify the wage garnishment order(s) or eliminate them if they are unlawful.

 

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Can I File for Chapter 7 and Chapter 13 at the Same Time?

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“Sometimes one bankruptcy isn’t enough.” – George Veitengruber, Esq.

As we’ve discussed before on our blog, there are time limitations put into place that prevent a debtor from receiving a second chapter 7 discharge unless at least eight years have passed since their first chapter 7 discharge. You also cannot be granted a chapter 13 discharge unless at least four years have passed since you filed for chapter 7, so where on earth can we possibly be going with this?

Bankruptcy law disallows back to back bankruptcy discharges in order to avoid people abusing the bankruptcy system. With no restrictions, any debtor could theoretically bounce from one bankruptcy discharge to another, and that wouldn’t be fair to creditors, nor would the debtor learn any valuable lessons regarding their finances.

There are situations, however, wherein a debtor can file consecutive bankruptcy cases, but only when the desired outcome is not a second discharge.

Most people associate bankruptcy with ridding themselves of all of their debt, the closest thing to a financial “do-over” that exists in the real world. While a bankruptcy discharge can indeed be akin to a capital tabula rasa, giving debtors a clean slate isn’t the only function of the bankruptcy system.

For example, one of the most beneficial (and immediate) effects of filing for any type of bankruptcy is the automatic stay:

Automatic stay \noun\  a judicial order known as an injunction that halts any and all lawsuits as well as actions by creditors attempting to collect money from someone who has filed for bankruptcy

Many people file for chapter 7 when they have a significant amount of unsecured debt.

Unsecured debt \noun\ a debt that doesn’t have any collateral attached to it that a creditor could take for payment if the debtor defaults
Examples of unsecured debt: credit card debt, student loans, utility bills, medical bills, some taxes, and most personal loans

In filing for chapter 7 relief, many or all unsecured debts can be discharged at the end of the bankruptcy case, as long as the applicant meets the filing requirements and no fraud is at play.

Frequently, a discharge of all unsecured debts so significantly reduces the financial strain on the debtor that they are then able to resume paying their monthly living expenses without difficulty.

Sometimes, though, even after a chapter 7 wipes out a huge chunk of their debt, some people are still left facing a significant amount of non-dischargeable debts.

Non-dischargeable debt \noun\ money owed that can almost never be discharged via any type of bankruptcy proceeding
Examples of non-dischargeable debt: child support, alimony, student loans, income tax debt

Still other people, after filing for chapter 7 and receiving a discharge, are left with secured debt(s) that they want to continue making payments on in order to keep the property that secures the debt(s) in question.

Secured debt \noun\ a debt that has collateral attached to it that a creditor could take for payment if the debtor defaults
Examples of secured debt: home mortgage, auto loan, valuable personal property loan (mechanical equipment, furniture, tools, etc)

Whether the debtor is left with substantial non-dischargeable debt or secured debt(s) that hold important value (usually a mortgage and/or auto loan), filing for chapter 13 immediately after a chapter 7 discharge will allow for a reorganization of any subsequent arrears owed, allowing the debtor to bring the loan(s) current.

Veitengruber Law can navigate your path through multiple bankruptcies! If you thought your financial situation was too “messed up” to be fixed – think again. Even better – we want to help you. Please give our office a call if your debts have gotten out of control. Your consultation won’t cost you thing, so you’ve got nothing to lose.

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Do My Brother’s Creditors Have a Claim to My Inheritance?

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If you have recently learned that you are to be the recipient of an inheritance, you may very well have a number of questions. After all, it’s not every day that one must make sense of the confusing rules and laws regarding NJ estates.

Oftentimes, you will find that the deceased has divided their estate among several of their closest relatives and/or friends. Everyone who is named in the deceased’s will is known as an heir or beneficiary. Frequently, when a parent passes away, they will leave at least part of their estate to their adult child(ren).

A question that we encountered recently involved a New Jersey estate wherein the decedent left her entire estate, including her home to be divided among her three children. The home was to be sold and the proceeds also then split between the three heirs. The rest of her estate included a moderate amount of money along with some additional valuable assets that would, again, be liquidated and divided equally.

It was discovered that one of the three beneficiaries was in over his head in debt. He had debt collectors calling him constantly, and liens were placed on any money that he may receive via judgements or inheritance. This made the other two heirs extremely nervous about the security of their own portions of the estate.

They wondered, “Will our brother’s creditors have a claim to the entire estate?”

This is a very legitimate fear, but luckily one beneficiary’s poor financial decisions will almost never affect his co-beneficiaries. While it’s true that his creditors do indeed have a cause of action against his portion of the inheritance, they have no claim whatsoever to anything that was willed to any other beneficiaries.

The exception here would be if one of the other beneficiaries was the spouse of the indebted heir, and even then, creditors would only be able to take the spouse’s portion of the inheritance in community property states, which are: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. Alaska leaves the decision about community property up to the couple.

In New Jersey, debts that were incurred (by the beneficiary in question) jointly with a spouse who is also named as a beneficiary of the estate at hand may leave the spouse responsible for debt repayment.

Additionally, even if the debtor/beneficiary incurred his debts without his spouse as a co-signer, his spouse may still be held responsible if some or all of the debts were acquired for family necessities.

Other than those nuanced situations, an indebted beneficiary’s creditors will not be able to come after any assets willed to other heirs of the same estate. If any property is left to the indebted beneficiary with the intent that he share the physical property with you and/or one of the other heirs (where the property is not to be sold and divided), it’s in your best interest to work with an estate planning attorney in New Jersey so that your interests are protected.

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How to Convert a Bankruptcy from Chapter 13 to Chapter 7

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In a chapter 13 bankruptcy, debtors are able to reorganize their current debt load in order to make their monthly payments feasible. You should consider filing for chapter 13 if you have a steady  income but your debts are too much for you to handle. Chapter 13 bankruptcies allow you to keep all of your assets. You will still have to continue making payments on all of your debts; however, your debt timelines will be extended (typically over a three to five year period).

Sometimes debtors file for chapter 13 only to realize that they cannot even manage their agreed upon payments. If this happens, you should be able to modify your chapter 13 plan. For example, if part of your reorganization plan involves a monthly car payment – you could surrender your vehicle and your plan payment amount will go down. Of course, this is only possible if you can get by without a car, or if you have another vehicle that you can use.

If there are no effective ways to significantly modify your chapter 13 plan, you still have another option: bankruptcy conversion.

What is bankruptcy conversion?

A bankruptcy conversion equates to changing bankruptcy chapters.

How does a bankruptcy conversion work?

The first step in converting your bankruptcy is to speak with your bankruptcy attorney. This should always be your initial reaction whenever making any changes to your finances if you’re currently in bankruptcy. Your NJ bankruptcy attorney will be able to determine whether you will qualify for a chapter 7 or if it would be more beneficial for you to modify your existing chapter 13 plan.

As long as you have not received a chapter 7 discharge within the past eight years, you can “convert” a chapter 13 to a chapter 7 bankruptcy by re-filing some of your bankruptcy forms. You’ll be assigned a new trustee, and some of your assets will be sold in order to lower your debt total. At the end of a chapter 7 case, you’ll (ideally) be granted a discharge of all or most of your remaining debts that were not paid by liquidating some of your assets.

Will I qualify for chapter 7?

If you already successfully filed for and were granted a chapter 13 reorganization bankruptcy, you should be able to voluntarily switch to a chapter 7 at any time. You and your attorney will have to file a Notice of Voluntary Conversion with the court.

When a debtor is interested in converting their chapter 13 to a chapter 7, it is typically due to a significant life event that has altered their ability to make their previously agreed-upon payments. These life events include (but are not limited to) things like:

  • Divorce
  • Job loss
  • Foreclosure
  • Injury
  • Disability
  • Natural disaster
  • Eviction

If you’ve experienced one of more of the above situations, converting your chapter 13 bankruptcy to a chapter 7 liquidation bankruptcy makes sense and the bankruptcy court will likely grant you a conversion with no problems.

What if I previously filed for chapter 7 and was denied?

In the event that you have recently filed for chapter 7 but didn’t qualify, you may have to take the NJ Means Test. If your jurisdiction doesn’t require that you pass the Means Test, the court will request a written explanation from you disclosing why you need to convert to a chapter 7.

How much paperwork is involved in converting a chapter 13 into a chapter 7 bankruptcy?

Luckily, you do not have to completely start over if you want to convert to a chapter 7 bankruptcy. Some forms will need to be re-filed so that the court has your updated financial information, but your original bankruptcy petition will remain in place.

To learn more about converting from a chapter 13 to a chapter 7 bankruptcy, talk to an experienced New Jersey bankruptcy lawyer. Your specific case details are important and your attorney will be able to steer you in the direction that will get you to your desired financial destination as quickly as possible.

 

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What are Creditors Entitled to After my Bankruptcy Discharge?

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You received your bankruptcy discharge – congratulations on a fresh financial start! Ridding yourself of the debts that were weighing you down can be extremely liberating and is cause for a gigantic sigh of relief.

After your debts are discharged,  there are still certain protocols to follow so that you don’t make an expensive mistake. These rules were created to prevent bankruptcy fraud. For example, a debtor cannot give someone a large sum of money that they will then retrieve after the case is over. The reason for this would be to hide money from the trustee so that it cannot be used to pay creditors. That is a blatant example of bankruptcy fraud, and any debtor who attempts to outsmart the bankruptcy court in this manner has little chance of “getting away with it.” Punishment for bankruptcy fraud is harsh.

There are certainly situations that arise naturally, are totally unplanned, and involve a (former) debtor legally coming into money after their bankruptcy has been discharged. In this case, there are some time limits set to further prevent foul play:

  • Inheritance – If someone close to you passes away within 180 days of the date on your bankruptcy petition, you are obligated to alert the bankruptcy court and that money will then go to your creditors. This rule was instated to prevent people from filing for bankruptcy when they knew someone close to them was on their death bed. By filing for bankruptcy before their death, the inheritance money would be protected and the debtor would have essentially scammed the system. Creepy and illegal.
  • Insurance proceeds – The same rules apply to life insurance proceeds that you become entitled to within 180 days of filing for bankruptcy. It is imperative that you keep careful track of the specific dates of important events surrounding your case. The important date in this case is when your family member or loved one passed away and you became entitled to any life insurance proceeds. If the date of death is within 180 days of the date that you filed for bankruptcy, the life insurance money will go to paying off your debts.
  • Lawsuit settlements – All of your legal claims and lawsuits pending must be listed in your bankruptcy paperwork. If you receive a payout from a lawsuit you initiated before you filed for bankruptcy, that money will generally become part of your bankruptcy estate and will go towards paying your creditors. In New Jersey bankruptcy cases, you can choose to follow either NJ or federal exemption guidelines. NJ exemptions allow you to keep $1000 of any money received via lawsuit. Federal exemptions regarding lawsuit settlements during bankruptcy can be found here.
  • Divorce settlements – While child and marital support obligations will not be affected by a bankruptcy (filed by either spouse), part or all of the marital property settlement, if established within the 180 days following the initial bankruptcy petition, may be liquidated and used to pay your (or your spouse’s) creditors. Your divorce lawyer should discuss the specifics of this with your bankruptcy attorney to ensure that you and your ex-spouse are able to keep as much of your marital assets as possible.

Always consult with your bankruptcy lawyer if you have any questions about the rules following your bankruptcy discharge to ensure that you make wise decisions that won’t end up costing you a significant amount of money.

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Asset Protection in NJ: How We Can Help

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You may find yourself wondering, “What exactly is an asset and why does it need to be protected?” As always, we like to start with the basics when explaining a legal concept or idea so that all of our readers and clients accurately understand the topic at hand.

Assets are anything that you own that has a monetary value now and especially in the future. Typically, assets increase in value with time, and most people invest in (buy) assets expecting that they will be a form of income in the years to come.

Some examples of common tangible assets include: cash, inventory (related to your business), real estate property (buildings, houses or land), vehicles (business, personal and collectible), and equipment (technology, software, machinery, office devices).

Assets that are intangible can be just as valuable as the concrete assets mentioned above. Some intangible assets include: patents, trademarks, royalty agreements, copyrights, licenses, brand names, domains, permits, contracts and various types of investments (bonds, money markets, commercial, stock in other companies).

There are a number of assets not covered here, but for the most part, these are the kinds of assets that most of our clients are interested in protecting. Failure to adequately protect your assets will undoubtedly lead to a very unpleasant financial struggle in your future.

It can often be difficult to look far enough into the future to be able to effectively strategize regarding your valuable assets. The rising popularity of the practice of “mindfulness” encourages us to live in the moment. Terms like “YOLO” (You Only Live Once) are tossed around and used as excuses for poor money decisions.

Without a doubt, being present in all of the moments of your life is something to strive for, but it doesn’t mean you have to empty your bank account on a whim or cash in all of your investments to take an extravagant trip to Fiji.

Finding a comfortable balance between living mindfully, spending wisely and protecting assets for your future is the option that will allow you to fully enjoy life today and tomorrow as well as many years in the future.

When we talk about “asset protection” or “asset management,” we’re referring to ensuring that your investments (both tangible and intangible) won’t be lost as the years roll by. As you enter your later years and begin to look toward retirement, the planning and asset management you do now will allow you to continue providing for yourself and your family.

Foreclosure and bankruptcy are real issues faced by many seniors today. The bottom line is that we can help you avoid these pitfalls by creating an estate plan that incorporates unique asset protection strategies tailored specifically for your life and your goals.

We help our clients feel confident about their futures, and we do it because we care. Veitengruber Law provides reliable asset protection in New Jersey – both in our Wall and Cherry Hill offices and by appointment in Bordentown. As always, we do not charge a fee for initial consultations.

Get informed about your future by working with the legal team that will treat you like family from the minute we meet!

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