Bankruptcy when you are Judgment Proof  

7 members have voted

  1. 1. Should you still file for bankruptcy when you are a judgment proof senior?

    • yes
      1
    • no
      4
    • unsure
      2


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Hello,

 

I am new here but I see that there are lots of very active and knowledgable users here so I thought I'd seek some friendly advice.

 

I am trying to help out my 80+ year old grandparents that have gotten themselves in some seriously unmanageable debt while trying to help another family member's difficult financial situation. Bless their hearts, but shame on them for digging themselves in a financial hole.

  • They have a total of about $31k in credit card debts in 22 accounts.
  • They have no real assets - not homeowners (rent), no business or properties, only have a pretty old car.
  • Their only source of income is their social security retirement income.
  • All payments to creditors have ceased as of this month (so the calls have just started).
  • We have closed all the accounts (for some reason I thought this would stop late fees, but now I know thats not the case).

I seeked free legal advice considering bankruptcy from a pro bono lawyer and I was informed that they are "judgement proof" and it is pointless to file a bankruptcy. Their income is protected and even if the creditor wins, they can't collect. While this may be true, I am concerned about the 6yr statue of limitations in NJ. This is not something I want to have to keep an eye out for such lengthy period of time. Perhaps if it was maybe a few accounts, but since its so many it would just be stressful answering to all of them.

 

The biggest bankruptcy filing con is the cost - approx. $1200 with a lawyer. I am wondering if I may be able to do the paperwork myself. A friend of mines recently filed and I have reviewed the paperwork. Though it was alot of legal terminology, I have found help online and software programs that make it pretty straighforward. Is this something any of you would consider doing without a lawyer though? Am I being too confident here?

 

Also while searching through another forum, I saw an old post where a user in a similar situation with her elderly mom said she was able dismiss the accounts directly with the creditors by sending them letters explaining to them her situation and that she was judgment proof along with a copy of her SS award letter. Should I do this as well? Has anyone tried this or had any success writing-off an account directly with a creditor? I guess it can't hurt to try or can it? Maybe if they knew it was going to be pointless to persue these accounts, they would just move their efforts towards onto other more successful accounts to collect on.

 

Please let me know your thoughts and experiences. Thanks :-)

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The biggest pro with bankruptcy is that it will stop the creditors from calling your grandparents. If they have health or memory issues (or could so in the future) or are easily bullied, then this will stop that.

 

The biggest con is that if some medical expenses comes up in the future, they cannot use BK again which will cause huge issues.

If they decide to do the BK route, I suggest getting a lawyer. I did it myself 10 years ago when things were simpler and after that, I would not recommend it to anyone. Too many things can go wrong.

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Just a side note. No one is judgement proof. They can get all 22 judgements if sued upon. What they are is collection proof. Creditors can't take their money from SSI, disability, etc. If they were to win the lotto, the creditors could take their money. Judgements have much longer than a 6 year sol in most states, and can be renewed, and will be reported on their credit.

Then you need to look at what it will cost to answer all those lawsuits, which they could probably qualify for a fee waiver, but the stress of it all is high.

You might look into if your court has some legal aide that would help you with filing for bk. You could do all the paperwork, and that would bring the cost down to about 300.00 to file.

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First, let me say how sorry I am for your grandparents problems. I can give you an example of my situation to answer some of your concerns. I'm just shy of 70 and my journey started back in 2012 after a serious illness, hospitalization and a $11,000 copay, spanning 2 years. I was retired with my only income from my retirement. In my case I had $15,000 in credit card debt, representing 7 unsecured accounts. I called each one and asked for help with the interest rate and hope of reducing my balances, only one would work with me. The others flatly refused.

 

I didn't file BK as yet, I'm still waiting for the other shoe to fall, the lawyer I talked to gave me my options and indicated I was also 'collection proof' I decided to play the debt game, (DV - C&D all CMRRR) time and poverty are my allies. I have zero assets and nothing is in my name other than rent and utilities. I am unemployable, living on borrowed time and have no desire or need for credit. I haven't had a hard inquiry on my CR since late 2012, pay everything in cash no current credit cards or debt, (except the remaining balances of the 6 accounts). My state's SOL is 6 years, I'm half way to 'Zombie' collections and/or judgments, none have been filed but if they are I plan to attend court if I'm aware of them. If one slips through or I lose, I will immediately file for BK that will prevent my spouse dealing with them after my demise.

 

If I was in your grandparents situation I would definitely have them consider BK 7. If you do follow that route or not then you will still need a net worth showing ending or current balances of all their accounts - EVERYTHING!!!. The cost to file BK in my state is roughly $1,200 - $1,400. As one poster said you can only file on their current debts so any unexpected later bills will need to be taken care of. Taxes and any other government debts can't be dismissed by BK so if there are any they will have to be paid. They should have Medicare so they can expect to pay any future co-pays as needed, depending on their health conditions they may want to consider a supplemental rider to cover co-pays. If you and they decide to go with DV and C&D's it could get costly. I was paying $6.12(?) to send them CMRRR so dealing with 22 you could get into a substantial cost. 22 X $12.24 = $269.28 just for the first wave.

 

First and foremost, you need to get a handle on their financial position, get all the statements from the 22 accounts as well as any other statements, rents, utilities, insurances, medical,,,everything! Sit down with them and create a net worth as of the date of their last payments, this will establish an ending balance, insolvency claim and the SOL. Next query their state homestead rules, my state allows a $3,000 limit on a single auto equity, since I also rent there is a homestead rule for residences but I never worried about that. Keep the budget current along with the net worth and balances of all accounts, for any other unseen events.

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Taxes can be discharged in bankruptcy if the following conditions are met:

 

  • The taxes must come due 3 years before the filing;
  • the original tax return was late (and more than 2 years before filing BK);
  • the tax must be assessed 240 days before filing BK and there is no fraud or attempt to evade taxes.

 

 

Additionally, you cannot be missing returns - in other words, you have to have filed your returns prior to filing BK.

If one can meet the requirements, then the income tax can be discharged.

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Legalnewbie07107:

You did not mention how your grandparents feel about the prospect of filing for bk. I am married to an older person (84) and I can tell you that just the talk

about bk can be very upsetting to some. It was not exactly something that folks did often in the 'olden days', and there is that issue of pride.....

 

Another consideration is what kind of vehicle they have and what the NJ State exemption is.

 

As to filing yourself (on their behalf), yes it can be done and if they are truly indigent then bk will wave the filing fee if applied for. I would suggest to get onto the BK forum where you can get a lot of tips, if they chose to take that avenue. You can download all the forms online and they are (I think ) relatively easy to fill out. They would have to take a financial course prior to filing and prior to discharge (courses are available online, are (I think) stupid, no problem to answer (and nobody is watching as to who actually filled the answers in (of course they have to attest that they completed the courses  ( ha.... that could, or could not be an issue IF the trustee asks them if they completed it themselves. I know at that age sometimes folks forget what they did last week. So it does depend on their mental state, and if they can be coached IF needed.

 

Instead of doing it yourself, or paying an attorney, around here (FL) it's easy to have somebody competent and familiar with BK to fill out all of the papers for around $ 250 - $ 300 (there are places that just fill out legal papers).

 

IF they decide to take the advice of the pro bono attorney and want to ride it out I hope that they have a cell phone and screen incoming phone calls and block all unwanted ones. Around my house we utilize the policy of not answering a call if we don't recognize the number. The idea is, that IF it's an important call, they can leave a message.

Also, though it can be considered a waste of time (but is useful to stop the calls ) I would send all creditors a simple standard letter , with detailed cease and desist instruction pertaining to contacts and phone call, as well as 3rd party calls, etc., etc. (you can get good sample letter samples online). Yes, I would (and have included a statement in LARGE letters that my income consist of SS, that all of my other meager belongings are exempt by State Law and Bankruptcy Rules, and that I am COLLECTION PROOF.

I would however NOT send them any actual paper statement !!!!!!!!!!! (NO, NO, NO )

 

Personally we decided not to file ......... Good Luck !

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