3 Ways to stop a garnishment WITHOUT having to file for bankruptcy (Part III)

As previously discussed, one way to deal with a garnishment is by using a Homestead Deed. Another possible method, if the facts are on your side, is to challenge the underlying judgment that preceded the garnishment.

If the foregoing options are not available to you, and if bankruptcy, for one reason or another, is simply not an option, you may be able to persuade the creditor to release the garnishment if you simply pay them a reduced amount then actually owed. Why would a creditor agree to a reduced amount than actually owed? Well, because all creditors are aware that most people have bankruptcy as an option so they would rather get something, rather than nothing. Moreover, all creditors prefer to get paid now, rather than later. Do not get me wrong, for this to work they will almost always expect a pretty hefty lump sum payment. So, you may be able to negotiate something like a $2,000 lump sum payment on a $8,000 judgment for instance.

Just to be clear, please understand that there are many creditors out there who may not be willing to “play ball” since they know that they have all the leverage in the world at this point. They can garnish your wages for a good five or six months, and then turn around and do it all over again until they have been paid in full. So, if that is the creditor you are up against, or if you simply do not have a couple of thousand dollars to offer them, then at this point you may have no other choice then to file for bankruptcy.

Finally, this strategy that I propose here makes senses if you credit score and credit report is looking pretty good. If the garnishment at hand is pretty much the only creditor chasing you down at this point and you have minimal other delinquent accounts, then by all means, see if you can buy them out. However, if your credit report looks as bad as my 8th grade school report (I was a mediocre student back then) and you owe thousands of dollars to a whole slew of creditors, then the above advice would not make sense. At that point, just cut you losses and file for bankruptcy.

3 Ways to Stop a Garnishment in Virginia WITHOUT filing bankruptcy (Part II)

Were you just informed by your employer that you are facing a garnishment of your wages? Has your bank just put you on notice that your bank account is frozen due to a garnishment summon that they have just received? Have you reviewed the garnishment summons and concluded that you have never heard of the creditor that is requesting the garnishment? Or, if you have heard of this creditor, you certainly do not recall being sued by them? Don’t despair. You may have an option available to you other than bankruptcy!

Before anyone can garnish your wages or bank account they have to sue you first (unless that person is the IRS. They can skip this step). And if you live in Virginia then that lawsuit will most commonly arrive by way of a Warrant in Debt.  Please see my other article specifically on the topic of Warrant in Debts in Virginia titled What is a Warrant in Debt?

The key thing to remember is that the party suing you has to ensure that you are properly served with the lawsuit. And properly served either means that a process server walks up to you and says “are you John Doe?” and then hands you the Warrant in Debt (Yup, just like on Law & Order). Or, a more common way to properly serve someone with a lawsuit in Virginia is to simply post the Warrant in Debt on the front door of the home where that person resides. That last part of the previous sentence is important. The person taking you to court has to make sure that you are served with the lawsuit at your current place of residence, and not where you used to live!

So what seems to occur quite often or at least often enough? The person being sued no longer lives at the address where they were served with the Warrant in Debt. Since they do not know about the lawsuit the creditor simply shows up in court and gets a default judgment.  Once the creditor has obtained a judgment, they can begin garnishing you. And the person does not realize what has happened until such time as they are being garnished.

So, what have I done for several clients in this instance? I file a Motion to Reopen Case and to Set Aside Default Judgment with the court where the garnishment is pending and show up for the Hearing on my motion. I then have my client testify that the reason that they never responded to the original lawsuit –that would be the Warrant in Debt- that lead to the judgment is because they have not lived at the address where they were served for months or years. I present evidence to back up my story. As long as the judge is convinced of the facts he will then enter an Order making the previous default judgment void. And since there is no longer any judgment, then the garnishment has to be set aside as well. Meaning, the judgment is made to disappear and the garnishment is quashed.

What’s the downside? Well, under these circumstances the judge will in essence give the creditor a second bite at the apple. Meaning, instead of the lawsuit simply going away, the judge will “make you” answer the lawsuit. But now, instead of the creditor simply getting a judgment against you behind your back and without you knowing what is going on, this time you will have your day in court. You will be able to defend yourself against the lawsuit.

3 Ways to Stop a Garnishment in Virginia WITHOUT Filing for Bankruptcy!

Did you just receive a garnishment summons? Wondering how you might be able to deal with a bank or wage garnishment without having to resort to filing for bankruptcy? Surprised that a bankruptcy lawyer is offering you advice about dealing with garnishments without filing for bankruptcy? Don’t be. I like my clients to be as informed as possible and to have all options on the table. Besides, “there is more than one way to skin a cat” (kind of a disgusting saying don’t you think?).

So, here it is. Here is one way that you can deal with a garnishment summons without bankruptcy. Notice I said “deal” with a garnishment, as opposed to necessarily “stop” a garnishment.

File a Homestead Deed- After the garnishment is already underway you will be served with the garnishment summons. Note that there will be no advance warning. You will either notice some bounced checks if it is a bank garnishment or you will get a call from HR if it is a wage garnishment. On the garnishment summons, in the upper right hand corner, will appear a hearing date and time, normally referred to as the “return date.” On a wage garnishment that date may be as far out as six months from the time the garnishment is issued by the court.

At that point you can prepare this relatively simple document called a homestead deed, take it to the land records of the county where the garnishment is pending, file it there and then, on the “return date” on your garnishment advise the judge that you have filed a homestead deed. Do that correctly, and you should be able to get back all the money that has been garnished so far and take out of your paycheck or that was sitting in you bank account.

So, what is the problem with using a homestead deed in Virginia to deal with a garnishment? Why have you not heard more about it? Well, for starters, unlike a bankruptcy, it does not actually stop a garnishment. To the contrary, the garnishment will be in place for months typically before you get before the judge and get your money back. Meanwhile you have to live with your bank account being frozen and checks bouncing or your wages being deducted. Can you go for six months while your paycheck is slashed by 25%?!

Second problem with the homestead deed is that it offers a “band aid approach” to treating a wound, or as a colleague of mine is fond of saying…it is just lazy lawyering. Why? Because in the great state of Virginia, the homestead deed, your “get out of jail card” can protect only up to $5,000 of cash or garnished funds during the entire course of your life time. Meaning, if $3,000 has been garnished from your wages during the past 6 months and you file a homestead deed and present it at the “return date” you may have won a battle, but you will lose the war. Why? Because all the creditor has to do is issue another wage garnishment the very next day and start the garnishment all over again. Eventually, that $5,000 protection that you get will be exhausted. Again, that’s 5K of protection for life. Those over the age of 65 or disabled veterans in fact get $10,000 over the course of their lifetime.

Finally, the last major disadvantage to using up your entire homestead deed is that eventually you will probably have no choice but to file for bankruptcy and some of your assets my now be exposed. Most folks need at least some of that $5,000 under the homestead deed when they file their bankruptcy case.

Having said all that, if you have waited until the day before your “return date” to address your garnishment, and if there is no time to file a bankruptcy, or you simply do not want to file for bankruptcy, a homestead deed may be just what the doctor ordered!

In my next blog article I will address the second method for dealing with a garnishment without filing for bankruptcy.