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  Do I Need to File Bankruptcy? I do not have a job. Print   Close
  by: Legal Aid Services of Oklahoma, Inc.
 
 
Q.

Do I have to file bankruptcy if I have debt that I cannot pay and creditors are trying to collect from me?

A.

If you do not have a job and cannot pay off your debts, you can file bankruptcy.  That can be an expensive and long process.  
In come cases, you may be "collection proof."  You may not have to file Bankrutpcy. 

This Q & A is legal information, not legal advice, about debt collection and bankruptcy.  Every situation is different.

This information is for people who:

  • do not have a job; and,
  • do not have any income from a job or wages; and,
  • have debt that cannot be paid.

If you are unemployed or if your only income is social security, SSI or other exempt money, the first thing you need to think about is setting priorities for what you can pay.  

If you do not pay your rent, you can be evicted.  If you do not make your car payment, you can loose your car and have to pay money.

If you do not pay your utility bills, the company can cut off service.

Information at this link will help you set basic priorities for what debts to pay first:
http://www.oklaw.org/link.cfm?3224  

Q.

There are different kinds of debt.  Secured, unsecured and other kinds of loans and debt. 
What is the difference between "secured" and "unsecured" debt?

A.

Unsecured debt:  Unsecured debts are usually credit cards or medical bills.  An unsecured debt can be from the government, if you owe fines or taxes.  For example, a bank or credit card company, may loan you money or sell you something based only on your promise to repay the loan.  If you do not make a payment or repay the loan or credit card company, the creditor cannot repossess anything. 

When you only give your promise to pay, the bank, credit card company, hospital or government is called an unsecured creditor.

Secured debt:  A secured debt is when you borrow money and with the promise to repay, and you give some rights to some property you own as a guarantee of repayment.  The property you "collateral" use in addition to the promise is the word to describe the  you use to get a loan that is secured.

When you buy a car, the lender or creditor puts a lien on the car.  The car is collateral for the loan or debt.  If you do not pay the loan, the creditor can take back the car, sell it and sue you for the amount of the debt not collected by the sale of the car. 

When you buy a house, the lender takes a mortgage on your house as collateral.
When you give a promise to pay and collateral the creditor is called a secured creditor.

 

 
 

Q.

What can happen if I do not make a payment or re-pay a secured debt?

A.

If you do not make your payments on your car, the lender can take back your car, sell it and then sue you for the rest of the debt if you owed more than the car sold for.
The creditor will then try to collect the rest of the debt like an unsecured debt.

Q.

What can happen if I do not make a payment or re-pay an unsecured debt?

A.

The creditor will try to collect the bill by suing you and then garnishing your paycheck, if you have one.  If you do not have a job or are not employed for wages, then your creditors can try to garnish your paycheck.

Creditors CANNOT garnish:

  • social security,
  • SSI,
  • unemployment compensation
  • workers' compensation
  • TANF benefits
  • Veterans benefits, or
  • pension payments.

If you are not working and your income only comes from one of these types of checks, your creditors cannot garnish your bank account.  These types of income are "exempt" from garnishment.  They cannot be taken from your bank account. 

The creditor may try to garnish your bank account and you may have to go to court to show the judge that your income is from one of these sources.

If you do not pay your unsecured debts, the creditors will not be able to collect from you until you money to pay them from another source, like a job.

Q.

Are there other types of debt?

A.

Yes, and other types of debts have special rules that apply to collections.

Student Loans:
Student loan lenders can "attach" your wages and tax refunds.  This is like a garnishment, but there are no exemptions, except for special "hardship" rules.  You will need to talk to a lawyer about any student loan debt.

IRS/State Taxes:
The IRS and state tax commissions have special rights to collect taxes. 

Bad checks:
Of you owe money for bad checks, you may be charged with a crime and face criminal penalties in addition to owing the money.

Court Fines:
Court fines and costs are unsecured debts, but not paying them may cause you problems with the law.  A bench warrant can be issued and if stopped by the police or sheriff, you might be taken to jail or face other criminal penalties.  If you cannot pay court fines and costs, you can go to a court hearing, tell the judge why you cannot pay and set up a different payment schedule until you are able to pay more or pay them off.

Child Support:
Collection of child support debt also has special rules.  If you owe back child support, you can be charged with a crime or help in contempt of court.  You may go to jail.  Your tax refund can be "attached."  You could have your drivers' license suspended.  Other types of licenses' that you need for work can also be suspended.

Q.
A.
Q.

 What does "garnishing" mean?  What is a "garnishment" of a bank account or pay check?

A.

A creditor can take funds from your bank account after they have sued you and get a judgment against you.  A judgment is a ruling by a judge that you owe the money to the creditor.

Creditors CANNOT garnish:

  • social security,
  • SSI,
  • unemployment compensation
  • workers' compensation
  • TANF benefits
  • Veterans benefits, or
  • pension payments.

If you are not working and your income only comes from one of these types of checks, your creditors cannot garnish or take money from your bank account.  These types of income are "exempt" from garnishment.  They cannot be taken from your bank account. 

The creditor may try to garnish your bank account and you may have to go to court to show the judge that your income is from one of these sources.

If a creditor gets a judgment and takes it to a bank, the bank will freeze your account.  You have the right to go to court and explain why the bank cannot take money from your account. 

You must be able to show that the money comes from "exempt" or protected sources like these:

  • social security,
  • SSI,
  • unemployment compensation
  • workers' compensation
  • TANF benefits
  • Veterans benefits, or
  • pension payments.

The judge will tell the bank to allow you to have the money in your account.

If you have money from a job, or wages, the creditor can sue you, get a judgment and have your employer take money from your paycheck.  Some of the money from your paycheck may be exempt if it is money you need to support your family.  You have the right to go to court and explain why the bank cannot take money from your account. 

Either way, you have to go to court to get your funds returned to you!

 

Q.

How will the creditor know where my bank account is?

A.

The creditor gets your account information from payments that you make.

If you are sued and the creditor gets a judgment against you, the creditor can also file for a Hearing on Assets.  You will be required to go to court and give the creditor information about all your bank accounts and other things of value you own.

Please call Legal Aid immediately if you are sued!

Q.

What happens if I do not have a bank account?

A.

If you do not have a bank account your creditor cannot garnish you.

If you do not have a job, there are no wages for the creditor to garnish.
 

Q.

Are there other ways a creditor can get to any other property?

A.

Yes.  A creditor can go to court after he gets a judgment and ask the judge to "attach" or allow the sheriff to take your property.

If the debt is secured by property as collateral, the creditor can "attach" that property. 

If the debt is unsecured, the creditor may try to attach something else of value.
Some things you own are "exempt" from attachment so a creditor cannot take them to sell.  For example, a creditor cannot force you to sell your home (if you live there) to pay your debts.

In some circumstances a creditor can place a lien on your property so that when you do decide to sell it, the creditor will be paid out of the proceeds.

In Oklahoma, there is a list of "exempt" property that a creditor cannot take from you to sell.    Generally a creditor cannot take or make you sell your household items, your car (up to a value of $7,500), clothing (up to a $4,000 value) or wedding or anniversary rings (up to a $3,000 value).  Tools that you use for you job are also exempt.

A list of exempt property can be found at the following link:  http://www.oscn.net/applications/oscn/deliverdocument.asp?citeID=71487

Q.

Can my creditors keep calling me and sending me letters?

A.

Yes!  Creditors can keep calling and sending you letters.  This can be aggravating and turn into harrassment.

What can you do?

Talk to them:

  • Tell the creditor that your only income is social security (or one of the other exempt types of income), but ONLY IF THIS IS TRUE.
  • Tell them you will pay the debt when you are able.

Send them a letter:

  • If the creditor that is harrassing you is a collection agency or a lawyer you can send a letter telling them to stop calling and writing you.
  • It must be in writing.  It is called a "cease communications" letter.
  • Send the letter by certified mail and keep a copy in case you have to prove it later.
  • Information about the letter and an example is found at this link:
    http://www.oklaw.org/link.cfm?3225
Q.

What if the creditor is NOT from a collection agency or a lawyer?  What if the creditor or someone from that company or bank calls?

A.

The "cease communications" letter only stops communications from someone collecting on behalf of someone else, like a collection agency or a lawyer.

If you owe a department store money from their credit card and someone from the department store calls, you cannot send a "cease communications" letter.
You can tell them that you cannot pay.  They will probably sue you, but if you have exempt income or assets, they will not be able to take your money or assets.  BUT only if you go to court when you get the court papers.

You must go to court when someone garnishes a bank account or a paycheck.

Call Legal Aid immediatly when you get court papers!

 
 
 

Information Not Legal Advice. This web site has been prepared for general information purposes only. The information on this web site is not legal advice. Legal advice is dependent upon the specific circumstances of each situation.

 


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