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What is a Warrant in Debt?

What is a Warrant in Debt? As a bankruptcy lawyer here in Alexandria, Virginia dealing with Warrant in Debts is something that I am all too familiar with. A Warrant in Debt is simply a legal document that advises you that someone, called the plaintiff, is suing you in court for money that they claim are owed to them. You are being taken to court in other words.

Once a Warrant in Debt is filed it usually means that a judgment and possibly a garnishment is not too far behind!

What should you do when you receive a Warrant in Debt? Take a look at the upper right hand corner of the Warrant in Debt. There you will find a date, known as the “return date”, which advises you of the day and time that you are being summoned to appear in court. At that point you have a choice, deal with this matter on your own, or contact a lawyer.

What happens when I go to court on the “return date”? The judge will eventually call the case at which time you simply want to tell him or her that you do not believe you owe this money and that you want to set this case for trial. I repeat: do not admit that you owe the money if you want a trial date. At that point a trial date will be given, typically about 8 weeks down the line and usually “pleadings” will be ordered as well. Meaning, the judge will state that the plaintiff is obligated to file Bill of Particulars by such and such a date, and that you, the defendant, the person being sued, must respond in kind with Grounds of Defense, by a certain date.

The Bill of Particulars is simply a document in which the plaintiff lays out his version of the facts to support his claim that money is owed to him. The Grounds of Defense is a written response to the assertions made by the plaintiff. In this document you are supposed to admit or deny each of those assertions made by the plaintiff and also introduce any affirmative defenses you may possibly have. Bottom line: be sure to file your Grounds of Defense with the court and mail a copy to the plaintiff. Failure to do so my result in a judgment being entered against you even before the trial date.

What happens if I ignore the Warrant in Debt and do not go to court on the date specified in the Warrant? If you do not go to court then you just made the plaintiff’s life very easy. At that point, a judgment will be entered against you by the judge. What’s a judgment? It is a legal determination by the court that you now do in fact owe the money to the plaintiff. Once a judgment has been entered your credit score takes a major hit. In addition, you have now opened up the door for the plaintiff to begin garnishing your bank accounts, or better yet, garnishing your wages. The person who sued you can now also record that judgment in the county where you live, thereby creating a judgment lien on your property. That last part, the judgment lien on your home, is something that not even bankruptcy may be able to help you with.

How will I find out about the Warrant in Debt? Since a lawsuit is obviously a very serious matter, after the Warrant in Debt is filed with the court, service of process must be executed. What does that mean? That means that you must be legally served with the Warrant in Debt. That means that the Warrant in Debt cannot be merely mailed to you, but rather, the Warrant must either be handed to you by the Sheriff or a third party process server, or it must be posted on the main entrance to your home. The court wants to make sure that you know that someone is suing you and they figure that if someone like the Sheriff personally delivers the Warrant to you or at least tapes it to your front door then you will know you are being sued.

Will I always be aware of the Warrant in Debt? In other words, will you always know when someone is suing you? You would think the answer is a resounding “absolutely,” but in fact, there are many instances where the individual will not find out about the Warrant in Debt/the lawsuit until months or even years down the line. All of a sudden, seemingly out of the blue, they will come to find out that their bank account has been frozen or their wages are being garnished. Then, upon further inquiry, they will discover that Capital One or some collection agency for instance took them to court 14 months ago and got a judgment in their absence.

What happens many times is that the company taking you to court will accidentally, or perhaps not so accidentally, rely on a outdated address of yours in order to serve you with the Warrant in Debt. They then go to court claiming that you were property served with the lawsuit, and voila, a judgment is entered.

Is there any way to undo a judgment that was entered against me without my knowledge? Yes! If you can prove that you were served at a “bad address” like your former residence, place of employment, etc. and not your current address where you reside, then a Motion to Vacate the Judgment might be in order. If successful, the judge can determine that the judgment against you should be removed.

I fought the Warrant in Debt as hard as I could but a judgment was still entered against me, now what? Well, if there is no sense in appealing this matter from General District Court (which is where Warrant in Debts are filed) to the Circuit Court since you clearly owe this money and have no viable defenses, if you are not “judgment proof,” and if you have a significant amount of debt in addition to the amount you are being sued for, then bankruptcy at this point is certainly something you will want to consider. When all else fails, you have the “nuclear option” at your disposal, which will typically wipe out almost all of your creditors.


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Do I have to include all my debts in bankruptcy?

Do you have to include your house in bankruptcy? How about your car, does the car loan have to be included in the bankruptcy? The answers are yes on both counts. The bankruptcy law, in this regard, is pretty straight forward. Any debt that you have on the day of the filing of your bankruptcy case must be included in your bankruptcy petition.

So, while you may want to bankrupt only your credit card debt and leave the house and car out of it, the bankruptcy law says otherwise; all debt must be listed.  BUT, just because you have to list the creditors that you do not want to bankrupt like your mortgage and car loan that should not cause you any alarm.  Putting aside the issue of Reaffirmation Agreements (to be discussed in different blog) and assuming that the car/home does not have a ton of equity that cannot be exempted as part of your bankruptcy case, then the fact that the mortgage/car loan were included will not have any negative consequence.  At the end of the day, as long as you continue to make your car/mortgage payments, then you will be able to retain your car/home. The filing of your bankruptcy case will not change that.

Same goes for student loans. While they are almost always non-dischargeable –meaning, you are stuck with them despite the bankruptcy filing- they still have to be listed in your bankruptcy case.

As for money owed to friends or family members, believe it or not, they are considered creditors just like everyone else and must be listed in your bankruptcy petition. If on the other hand, the money given to you by that person was considered by them to be a gift, then there is no loan, they are not a creditor, and they need not be listed.

Also keep in mind that just because you listed your cousin as a creditor because you owe him some money, does not mean that you cannot pay him back. After your bankruptcy case has concluded you are free to pay back any creditor you like, including your cousin.

You should NOT however try to pay back money owed to family members prior to the filing of your bankruptcy case!

Finally, bear in mind that at the meeting of creditors the trustee will ask you if you have listed all of your debts and all of your assets? By debts he means creditors. Can you lie to him at that point? Sure you can. Is it advisable? Absolutely not!  If you get caught in that lie then your bankruptcy case can get dismissed with prejudice and you are now stuck with all that debt. In addition, if the US Attorney’s Office has some free time on their hands, you may also be prosecuted for bankruptcy fraud.

The morale of the story: regardless of what type of debt it is or who it is owed to, each creditor is entitled to notice and must be listed in your bankruptcy petition.


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Why People Declare Bankruptcy?

There are many misconceptions as to why people declare bankruptcy.  For starters, filing for bankruptcy is anything but an easy decision for folks. As just about any bankruptcy lawyer will tell you, the vast majority of people dread declaring bankruptcy. This is not a decision people choose to make, but rather one they have resigned themselves to make.  How do I know this to be true? Because my clients have repeatedly told me this. When they recount their stories and what has led them to their financial difficulties, I see the pain and shame in their faces and hear the heartbreak in their voices. Declaring bankruptcy is a very difficult decision to make for them.

Another misconception that you frequently encounter is that “these people are working the system,” as if they have planned their bankruptcy filing for months, if not years.  My clients have desperately tried everything in their power to avoid filing for bankruptcy. They have called their credit card companies to try to work out a payment plan, they have tried credit counseling with Money Management or some other company, they have cleaned out their retirement accounts, they have moved in with their parents or some other relative.  In short, my clients have done everything under the sun to avoid having to sit in my office chair and declare bankruptcy.

Finally, as for the assertion that “these people” simply do not know how to mange their money and live within their means, I can assure you, trips to Europe or shopping sprees is not what is leading the vast majority of my clients to file for bankruptcy. Yes, of course, there is always the “rotten apple,” the individual who takes advantage of the system, but for the other 90%, the following are the real reasons that push people into declaring bankruptcy.

Illness or disability – If you have managed to make it through your entire career without being seriously injured for a prolonged period of time or permanently disabled to the point that you can no longer perform most jobs, then consider yourself lucky.  By the time your Social Security disability income finally kicks in, you will be fortunate to receive half of your previous salary, making it nearly impossible to survive.

Unemployment –  Unless you have been living under a rock, you know that the unemployment rate is pretty darn high these days. Been out of work for 1.5 years like my father was a couple of decades ago, and well, it becomes pretty hard to pay your bills. And even then, people will usually avoid filing for bankruptcy, will rejoin the workforce and will try to climb out of the hole. Problem is, at some point, it becomes the point of no return.  It becomes nearly impossible to pay off $30,000 in credit card debt at 20% APR when all you are making is $60,000 per year.

Divorce – I would say that about one third of my clients have divorced within five years prior to arriving in my office or are in the midst of divorcing. The ramifications of divorce are not always instantly felt. However, the fact of the matter is, for most people (women in particular), the writing is already on the wall.  With no alimony, kids to raise, and a merely a decent pay check, these newly divorced folks become more and more dependent on credit cards, pay day loans, car title loans, and personal loans. Eventually, the music stops.

Failed businesses – Once the government contracts dry up or the economy slows down, the LLC or Corporation begins to fail. Unfortunately, some individuals go down with their sinking ship. Business owners have guaranteed personal loans or have used their personal credit cards in a desperate attempt to save their business.  As the business is no longer profitable and the debt begins to mount, creditors begin to pursue these folks personally and bankruptcy is typically the only way out.

Underemployment – People like to talk a lot about unemployment numbers, but I think the statistic that hides in the shadows and is often overlooked is the fact that millions of people in this country, particularly those living in more expensive parts of the country like Alexandria, VA and Fairfax, VA, simply do not earn enough money.  They can barely cover their bills, but when it comes to anything “extra,” like a trip to the dentist, the basement floods, or the car has to be taken to the mechanic for major repairs, there simply is not enough money in the bank.  That is when credit cards and personal loans become relied upon out of mere necessity.  This typically goes on for years as the individual faithfully pays at least the minimum balance each month.  Eventually, the amount of debt becomes insurmountable and the only way to escape is to file for bankruptcy.

We need to stop referring to people who have filed for bankruptcy as “deadbeats.”  It not only demonstrates insensitivity, but also a great deal of ignorance as to why people declare bankruptcy in the first place.  So, my advice is “judge not, lest you be judged.”

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Should I File for Bankruptcy?

So you are sitting there in front of your computer and doing a search online as you contemplate hiring a bankruptcy attorney. You have decided it is finally time for you to file for bankruptcy. Now it is just a matter of deciding which bankruptcy route to take and which lawyer to hire. You stumble onto my web site. You call and make an appointment and then walk into my Alexandria, VA office, present your financial situation, and then ask me, “Do I qualify for bankruptcy relief? Which bankruptcy option is best for me?” At that point, you may very hear me say, “Hey, slow down there cowboy (Well, I won’t actually say that out loud). Who says it is in your best interest to file for bankruptcy in the first place?”  The fact of the matter is that just because you have some debt that is troubling you and have the ability to file for bankruptcy does not mean you should.

A few months ago, a young doctor met with me for a bankruptcy consultation (yes, even doctors have to rely on bankruptcy sometimes, as do lawyers for that matter).  She had seen two other bankruptcy attorneys in the Alexandria, VA area and wanted to know if she could indeed qualify for a chapter 7 bankruptcy.  One attorney had said yes and the other had said no.  I was the deciding vote. The doctor went on to inform me that she had one primary large business debt that she could no longer afford and was now being threatened by a lawsuit. Other than this one business debt, she was current with all of her other creditors. What was my diagnosis? Well, the doctor could indeed file for a chapter 7 bankruptcy. But what did I tell her? I said, “Doctor, while I would love to take your money, the fact of the matter is you may not need to utilize bankruptcy at this point.”

Filing for bankruptcy is something that you do as a means of last resort.  Filing for bankruptcy is like using the nuclear option; when you use it, you want to be darn sure that this is the only and best option at your disposal.  I went on to explain to the doctor that she may be better off hiring an attorney that does primarily civil litigation and who might be able to negotiate a reasonable deal with her creditor if a lawsuit was indeed filed. I went on to state that in my professional opinion, if she could reach a reasonable deal with her creditor, using the threat of filing for bankruptcy as leverage in her negotiations, then it would be in her best interest to take the deal rather than file for bankruptcy. If, and only if, the creditor was not willing to work with her, then she could come back and hire me as her bankruptcy lawyer.

I told the doctor that coming to a bankruptcy attorney is like going to a surgeon and asking him/her to perform open heart surgery without even considering other forms of treatment such as medication, exercise, and diet. Sometimes open heart surgery is absolutely necessary and vital, but not always.  Just because you are over your head with financial troubles does not always mean that bankruptcy is your best option.  Sometimes there are other options that will better serve you. Sometimes, you need to stop and ask yourself, “Do I even need to file for bankruptcy in the first place?”  And if the answer to this question is an indeed and emphatic, “Yes!” then by all means, do schedule an appointment to come and see me for a free consultation. 🙂


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Can I avoid Bankruptcy with a Loan Modification?

This blog is a follow up to my previous article titled, “Loan Modifications, Foreclosure and Bankruptcy.” In this article, I would like to focus on the fact that the HAMP program goes beyond merely offering false hope, but in fact leads to what could have been a preventable chapter 13 bankruptcy filing. Allow me to explain.

The process of getting a loan modification almost always takes months and months. First, comes the grueling process of getting the bank to actually consider you for a temporary loan modification. Then, theoretically after three months of on-time payments, the bank is supposed to decide on whether or not you have been approved for a permanent loan modification. I say theoretically because a loan modification approval/denial can take as long as one year to receive. And after ten months of phone calls, letters, pleas, a tremendous amount of stress, and not to mention timely reduced mortgage payments, the bank will most likely tell you that you do not qualify for a permanent loan modification. In addition, the bank will tell you that you now have 30 days to catch up on your arrears. So, if you cannot come up with thousands of dollars to make up the arrears, the foreclosure proceedings will immediately begin.

Take for example “Jane.”Jane is a self-employed, single mother who up until recently had very good credit.Jane’s business begins to suffer as the economy takes a turn for the worse.Money is now tight.Despite her financial set-back, Jane is able to keep up with her mortgage payments as long as she cuts back in other areas.However, Jane begins to hear more and more about loan modifications. One day, she runs into a “nice gentleman” who promises her that he will be able to get her the magical permanent loan modification for a fee of only $2,000. Jane signs up with the nice man.Ten months later, Jane is sitting in my Alexandria, VA bankruptcy office talking to a bankruptcy attorney for the first time in her life. And here finally comes my point— The travesty is that Jane, while she suffered a financial set-back, still could have managed to cut back on her expenses and continue paying her original mortgage payments had she not been lured in by the banks with their proverbial “pot of gold” known as loan modification.

What could Jane have done in order to avoid having to file a chapter 13 bankruptcy case? For starters, she should have never paid any money up front to that “nice gentleman” who promised her a loan modification. Jane should have gone to see a Housing and Urban Development (HUD) certified counselor who would have helped her free of charge. Second, she should have consulted with a lawyer, perhaps an Alexandria, VA bankruptcy attorney, who would have offered her some honest advice.Such an attorney could have warned Jane of the dangers of what she was about to do.Such an attorney could have explained to her that she was now taking a gamble and that she needed to cover her losses; the eventual likely scenario of her permanent modification being denied.Jane would have been told that she should save the money she was not spending due to the reduced mortgage payments. This way, if the permanent loan modification was not granted, she would have the money to immediately catch up on the arrears and not face a looming foreclosure and eventual chapter 13 bankruptcy filing.

Well, at this point you might be saying, hey genius, most of us simply do not have the means to put aside every month the difference between the reduced mortgage payment and the original mortgage payment. If we had that kind of money we would not have bothered with a loan modification in the first place. You are absolutely correct.Though, and here comes my next point, had you been warned from the outset that you would likely face ten months of reduced monthly mortgage payments only to face the denial of your loan modification application and subsequent foreclosure on your house, then you would not have “donated” all that money to the bank.Rather, you could have cut your losses, rented a much cheaper apartment, and moved on with your life.

It is almost like the bank intentionally lured you down the path of reduced monthly payments knowing full well that in the end they would deny your application. After all, mathematically speaking, what results in more money for the banks? Ten months of reduced mortgage payments followed by a foreclosure or putting an end to their cash flow by immediately moving in for foreclosure? And besides, they have the Treasury Department and the White House to impress.And that is why many pundits refer to the loan modification program as “extend and pretend.”As in, banks extend temporary loan modifications for a while, take some photo ops, all the while pretending that they will grant you a permanent loan modification.