How Get Levied Money Back After Filing Chapter 7

Surprising Bankruptcy Benefits: Make Creditors Return Your Money

Bankruptcy doesn't just stop garnishments and other collections. Sometimes y'all tin can brand a creditor return coin information technology recently took from y'all.

Bankruptcy's "automated stay" is one of the most immediate and powerful benefits of bankruptcy. Information technology immediately stops nearly all creditor collection deportment confronting you, your income, and your assets. See Section 362 of the U.Southward. Bankruptcy Code.

But it does non go into outcome until the moment you file your bankruptcy instance. What if a creditor garnishes or otherwise gets your money right Earlier y'all file defalcation?

Sometimes the creditor can be forced to give up such recently received money also.

The Law of Preferences

This happens through the surprising and easily misunderstood constabulary of "preferences."

This law says that if a creditor takes money (or some other asset) from y'all within the 90 days before you file your bankruptcy case, the creditor may need to pay information technology back. It has to do so if keeping that money results in that creditor receiving a greater share of its debt than the residue of your creditors would go out of your defalcation case. See Section 547(b) of the Bankruptcy Code.

That 2nd condition would often exist met, especially in a consumer Chapter 7 "straight defalcation instance." Then, most money grabbed by an unsecured creditor inside 90 days before your bankruptcy filing tin can exist "avoided." The creditor tin be forced to return it.

For example, permit's say an aggressive unsecured medical debt collector garnishes your checking business relationship. You've merely deposited your paycheck and the creditor grabs $two,000. You owed $5,000 so this creditor simply got paid 40% of its debt. Then you file your Chapter 7 case a twenty-four hour period afterward the creditor garnished your money. Presume you owe a total of $75,000 in general unsecured debts. If in that Chapter 7 case—as in most—all your assets were "exempt" (protected), those debts would receive cipher. So, the garnished $2,000 would exist a preferential payment that could be reversed. That'south considering it happened within 90 days before filing and resulted in the creditor getting xl% instead of null.

(There are a number of other weather condition and exceptions to a preference, but they often don't apply to consumer cases. Notwithstanding, preference law tin sometimes get quite complicated. You need to talk with your bankruptcy lawyer to find out if you lot really have an avoidable "preferential payment.")

The Principles behind Preference Police

Preference constabulary serves two principles important to bankruptcy.

Beginning, bankruptcy police tries to discourage overaggressive creditors. The risk that a creditor would have to render money grabbed just before the debtor files defalcation is supposed to be a disincentive for such a money grab.

2nd, a lot of bankruptcy law focuses on maintaining fairness among creditors. Similarly situated creditors should be treated the same. No playing favorites unless there is a legally appropriate reason to practise then. (On such reason would be if the debt is secured by collateral).

This fairness means that legally similar creditors demand to be treated the same not just during your bankruptcy example but also shortly before the filing of your case. The menstruation of fairness extends a bit earlier the defalcation filing so that overly aggressive creditors aren't favored. Whatsoever bachelor money or assets are spread among all the creditors more evenly and thus more fairly.

A Preference Benefitting You

It's all well and good to punish a creditor for grabbing money from you before long before yous file bankruptcy. But what expert does it exercise you lot if that coin just goes to your Chapter seven trustee? The trustee would only distribute that money amongst your other creditors, correct?

Generally, yes. But in many circumstances this preference money helps you very directly. Adjacent fourth dimension we'll show you how.

Call Today for a Gratuitous Consultation

210-342-3400

Source: https://www.chancemcgheelaw.com/sanantoniobankruptcyblog/surprising-bankruptcy-benefits-make-creditors-return-your-money

Posted by: blacktheressuard.blogspot.com

Share this post