Finally Found a Job? Now May Be The Best Time to File Bankruptcy

Stop a wage garnishment in San Jose by Filing BankruptcyAs the recession has worn on, prolonged economic hardship has sometimes led people to feel that even bankruptcy will not offer much immediate relief. In the last year, I’ve met with an increasing number of folks considering filing bankruptcy in San Jose, who decide to put off filing despite their eligibility for Chapter 7 bankruptcy because they feel so defeated that they cannot even muster the hope and energy required to file for bankruptcy. That may sound counterintuitive, but seeking a fresh start free from debt through bankruptcy is an act of hope for the future. The fresh start offered by bankruptcy, particularly Chapter 7, is the light at the end of the tunnel.

Sadly, some have been unemployed for so long now that their unemployment benefits have run out. They may have already lost their home to foreclosure, and are in many cases living with parents, adult children, and even ex-spouses. Some of their creditors have already sued them after many months of nonpayment, but so what? They have no wages to garnish, no bank account to levy, and no property to attach with a lien. They are effectively, for the time being, “judgment proof.” Why even bother filing bankruptcy now?

While it is true that judgments creditors can’t squeeze blood from a stone, they will patiently wait and collect again once the judgment debtor gets a job. In California, judgments are renewable every ten years, and they accrue post-judgment interest at ten percent per year. Once a debtor allows a creditor to obtain a judgment against him, that creditor has an array of tools available to collect on that judgment, including attaching judgment liens to any real estate the debtor might own anywhere in California, garnishing wages, and levying the debtor’s bank account.

When the person with a judgment against her finally secures a steady job, the judgment creditor is ready to pounce with a wage garnishment. That is why now may be the best time to file for personal bankruptcy. Now that you finally have a steady job, why not get the fresh financial start by getting rid of old debts and judgments through bankruptcy? Getting out of debt is always the first step toward getting ahead.

For bankruptcy eligibility, whether in Chapter 7 or Chapter 13, the debtor’s monthly income is analyzed in comparison to his monthly necessary living expenses. Because “current monthly income” in bankruptcy is derived from the average of the six months immediately before filing bankruptcy, it is often advantageous for the debtor to file bankruptcy promptly after getting a new job if she has been unemployed for a long period of time, before her income from the new job causes a dramatic rise in her average current monthly income. And remember, as I wrote recently on this blog, employers are prohibited from firing you just because you file for bankruptcy protection.

If you have judgments that creditors have been unable to collect because you’ve been out of work for a long time, and you’ve recently secured a steady job, now may be the best time to consider filing personal bankruptcy, before your creditors can start garnishing your wages and taking your hard earned money out of your bank accounts. If you live in the Bay Area, call us for a free consultation with a bankruptcy attorney.


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