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Bankruptcy Handbook ©

A Guide to Debt Collection and Bankruptcy

*The information in this handbook is not meant to substitute for the advice of an Attorney.  You should speak with an Attorney regarding your specific problem.

INTRODUCTION

Don't think you are alone if you are having problems paying your bills.  High prices, high interest rates, lack of jobs, all are making it hard for people to make ends meet.  More and more people are being sued.  This can be confusing and frightening.
 
In this Handbook, we will tell you what your rights are and what rights your creditors have.  We will tell you how to get a fresh start if you just can't seem to solve your financial problems in other ways.

We have tried to explain things in ways so that you can help yourself.  However, if you are sued, you will be dealing with a confusing legal system.  If you are not sure how to handle things yourself, see a lawyer (the sooner the better).  It may cost you, but might save you money and problems in the long run.  If you cannot afford to pay a lawyer, you can try calling the local Legal Aid of Nebraska office.  They may be able to help you.  

 WHO'S WHO  AND  WHAT'S WHAT

DEBTOR
Any time you owe someone money, you are a debtor.  This means every time you use a credit card, you are a debtor.  Every time you sign loan papers, you are a debtor.  When you go to the doctor, then ask that the charges be billed, you are a debtor.  In all of the above, you owe someone for things or services you received.
 
CREDITOR
The person you owe money to is your creditor.  This might be the bank, a loan company, a utility company, your doctor, a relative, or a department store.  If you do not pay the money you owe, your creditor may hire a special company to collect the money from you.  Your creditor gives this company, called a "collection agency", the right to collect the money you owe.  In exchange, the collection agency keeps part of the money they get from you.  When this happens, the collection agency is called the creditor's assignee.  Whenever we talk about what a creditor can do to collect money from you or to take your property, we are also talking about what a collection agency can do.

Sometimes the money you owe is due all at once by a certain date.  A good example of this would be your  monthly electric bill.  Sometimes the money you owe is to be paid back in small amounts over many months.  A good example of this might be the loan on your car.  When you pay your bills this way, you are paying in installments.  The way the money is to be paid back depends on what you and your creditor agreed to do.  Whenever you do not pay your bills, or you miss an installment payment, you are in default.  In other words, you have not lived up to your agreement with the creditor to pay.  Once you are in default, your creditor has the right to try to collect from you.
 

SECURED VS. UNSECURED
How the creditor will try to get back his money depends on the type of debt.  A debt can be secured or unsecured.  If a debt is secured, it means that you signed a paper which says that if you do not pay the loan, the creditor can take or repossess the property which is described in the paper.  The paper is called a security agreement.  The property described in the security agreement is called collateral or security.  The creditor is called a secured creditor.
 
In many cases the collateral or security will be property that you are buying from the secured creditor, like a car or furniture.  In other cases you agree to put up property you already own as collateral for a new debt.
 
In either case the secured creditor can take the collateral if you do not make the payments on time.  The secured creditor can sell the property to get his money.  If your property does not sell for enough to pay off your debt, the secured creditor can sue you for the difference.
 
An unsecured debt is any debt in which there's no collateral or security.  Medical debts and utility bills are usually unsecured debts.  If the debt is unsecured, the creditor must sue you and win before he can take any of your property.

For the next several pages, we will be talking about what the creditor can do if you do not pay the money you owe.  As you are reading, remember that this is how a creditor collects an unsecured debt. If a creditor has security in your property, he can take it as long as he follows the rules.  (See Repossession on Pg. 9 .)  After he takes and sells your property, he can collect the rest that you owe in the same way he would collect an unsecured debt.

  WHAT HAPPENS WHEN YOU DON'T PAY

HOW CREDITORS COLLECT DEBTS
Most of the time a creditor will call you or write you asking for the money you owe.  The first calls and letters are usually friendly reminders that you forgot to pay.  If you still do not pay, the calls and letters become demands for payment.  A creditor can say just about anything he wants.  But, he cannot threaten you or abuse you.  If this happens to you and you feel you have been damaged in some way, you may want to talk with a lawyer.  You may be able to sue the creditor for debtor harassment.

Previously we said that the collection agency has the same rights as the original creditor.  That is true, but there are stricter rules about how collection agencies can collect the debt.  There is a law called the Fair Debt Collections Practices Act.  This law says that the collection agency cannot call you at an inconvenient time.  They cannot call you at work if you have told them your boss doesn't want you to take personal calls.  If you have an attorney helping you, they cannot call or write to you at all. If you want to know more about this law and its protections for you, check with your local library.  If you feel you have been harmed in some way by the collection agency's attempts to get their money, talk with a lawyer.

If a collection agency is calling you, you have the right to tell them to stop.  Find out the name and address of the company when they call or write.  Send them a letter telling them to stop contacting you (keep a copy).  Under the Fair Debt Collections Practices Act, the collection agency must then stop.  This may force them to sue you to collect the money.  The original creditor can continue to contact you.
 

MAKING ARRANGEMENTS
The best time to deal with your creditors is before the calls and letters become demands for payment.  Explain why you have not paid.  Take a careful look at your budget and figure out how much you can afford to pay.  If you have many creditors and are having problems with all of them, you might want to get help in figuring out your budget.  In Omaha,  you can call the Consumer Credit Counseling Service at 333-2227. This is a free service to those who qualify.  In other cities, check the yellow pages to see if there is such a service.  If not, you might check with some other type of social service agency to see if they can help you.
 

FROM CREDITOR TO COLLECTION AGENCY
Let's assume that you have not been able to follow this advice.  You have been getting calls and letters from the hospital about the $2,500 you still owe them from when your wife had her appendix removed.  This is an unsecured debt.  You have promised to send them some money, but you haven't been able to.  You have been telling your children to tell them you are not at home when they call.  Today you received a notice from a collection agency demanding that the whole $2,500 be paid right away.

The hospital has hired a collection agency.  The collection agency is now the hospital's assignee.  Even though the collection agency has demanded the whole amount, they will probably agree to take installment payments.  If you cannot agree on payments, the collector will have to sue you to collect.  Since a lawsuit costs time and money, the collection agency should be willing to agree to a payment plan you really can afford.

Once you have reached an agreement, keep up your end of the bargain.  If you do not, they can sue you.  Sending them only part of a payment will not save you from being sued.  If you have agreed to pay $40 per month but sent them $10, they can go ahead and sue you even if they keep the $10.

NOTE: Not all creditors hire collection agencies. Once they give up trying to collect from you, they may go straight to a lawyer and ask him or her to sue you. Sometimes you can reach an agreement with the lawyer just as you can with a collection agency.  If not, you may need a lawyer of your own at this point.

 SO YOU'VE BEEN SUED

IT'S LAWSUIT TIME
Let's assume you reached an agreement with the collection agency to pay $40 per month on the old hospital bill.  You paid that amount faithfully for six months, but last month you had to buy the kids school clothes and this month the car needed new brakes.  You've missed two payments and the collection agency's calls and letters are not friendly at all.  You sent them $10 last week, but they sent it back and demanded the whole payment.  Today, a constable or sheriff brought you a paper which is called a Summons. (In some cases a summons can be delivered by mail or left with someone in your household or left in your door.)
 
You have been sued.  The collection agency has turned your files over to their lawyer.  The lawyer will now try to use the power of the court to collect the money from you.  The creditor's lawyer will ask the court to make a written finding that you owe a specific amount of money plus interest and court costs to the creditor.  This written finding is called a judgment.  If the court enters a judgment against you, the creditor can then garnish your wages and take some kinds of property away from you until the judgment is paid.

Even though you've been sued, you still may be able to work out an agreement with the creditor's lawyer.  There are some advantages to you in doing this.  An agreement for payment may prevent a judgment from being entered against you.  That will prevent garnishments and other types of collection.  A judgment looks bad on your credit record.

At this point, you may also want to get a lawyer to represent you.  In our example,  you know you owe the money and have no defense (legal reason) for not paying.

This is  not always true.  Sometimes you might have a defense for not paying.  For example, you bought a refrigerator and it broke down the first month you had it.  The company refuses to fix it and you refuse to pay for it.  If they sue you, you may be able to show the court that you should not have to pay for it.  If you are ever involved in this kind of case, make sure you see a lawyer.

In the hospital bill example, a lawyer can help to slow things down.  He or she can help you work out a payment agreement with the other lawyer.  However, you may be able to do this by  yourself.

DO NOT IGNORE PAPERS FROM THE COURT
Regardless of whether you want to work out an agreement, or get a lawyer, or think you owe the money, you should respond to the papers from the court.
 
You should receive a copy of the creditor's Petition.  This is a document which explains why the creditor believes you owe it money.  You should also receive a summons.  This is a document which explains that you have been sued and tells you that you have a given number of days from the date you recive the summons, usually 30 days, to file a written response.

The written response to a Petition is called an Answer.  The deadline for filing an Answer is called the Answer date.  Don't let the Answer date pass without filing an Answer.

If you don't file an Answer by the Answer Date, the creditor can get a judgment against you without going through a formal trial.  The creditor wins automatically, basically just by tellling the court that you didn't file an Answer.  This is called a default judgment.

A default judgment is just as good as a judgment entered after a full scale trial.  A creditor can use it to garnish your wages and take your property.  Any defense you had to the creditor's claim is gone.  (In County Court a default judgment can be set aside under some circumstances if a request is filed within 30 days of the default judgment.  But it's always better to file an Answer on time rather than fight to get a default judgment set aside.)

In the Answer, you say whether or not you agree that you owe the money.  A lawyer may file an answer to prevent a default judgment, if you have a legal reason for not paying. You can do the same thing if you file the Answer on your own.  Lawyers often use an Answer called a General Denial.  In Douglas County, the Clerk of the County Court has General Denial forms that you can use.

Even if you think you owe the money, you can still file a General Denial to prevent a default judgment and to give you time to work out an agreement with the creditor.  If you think you have a defense to the lawsuit, filing a General Denial may give you time to get a lawyer.

NOTE: A General Denial will not help you if your creditor had you sign a Promissory Note.  If you are being sued for a debt to a loan company or bank, you probably did sign a Promissory Note.  If you did or you are not sure, you should talk with a lawyer.

Let's assume that you filed your own Answer.  This will give you some time to work out an agreement with the lawyer.  You can find his or her name on the Summons you received or on the Petition.  Figure out what you can afford to pay and make an offer.  The creditor is not likely to accept an offer that is less than what can be obtained through a garnishment.

If you can reach an agreement with the lawyer, he or she probably will want you to sign a paper called a Stipulation.  The Stipulation spells out when and how you are to pay off the debt.  It probably will say that if you miss a payment, the lawyer can ask the judge to enter a judgment against you without filing any more papers or giving you any more notices.  The Stipulation is filed with the court.

As long as you make the payments you will have no problems.  But, let's assume that it is six months later and you have been laid off again.  Today you received a notice from the court that says a judgment has been entered against you.  The lawyer went back to court and showed the judge the Stipulation you signed.  He told the judge that you missed a payment and asked that the judgment be entered against you.  The judge did so.  Now the lawyer can use the power of the court to collect the money you owe.

NOTE: Sometimes you will not know that you have been sued until you receive the notice from the court that a judgment has been entered against you.  If you ever receive a judgment notice and you don't think you owe the money, see a lawyer right away as there are time limits to appeal the judgment.  He may be able to help you, but the papers must be filed right away.

   AFTER THE CREDITOR GETS  A JUDGMENT

TAKING YOUR PROPERTY
A creditor who has a judgment against you is called a judgment creditor.  A secured creditor can become a judgment creditor.  The secured creditor will first repossess the collateral and sell it.  If the sale doesn't pay off the debt completely, the secured creditor can sue you for whatever's still due.  Once it gets a judgment, it is a judgment creditor.  There are several ways a judgment creditor can try to collect its money.  It can:

 1. put a judgment lien on your home or property you own;
 2. force a sheriff’s sale of some of your property;
 3. take property like a car and sell it;
 4.  garnish your paycheck; or
 5. garnish bank accounts.

If a judgment creditor puts a judgment lien on your property the lien has to be paid when you sell the property later.  A judgment creditor can also hold a sheriff's sale in which the property is sold and any liens paid off.

EXEMPTIONS
You have some protections that will prevent you from losing  everything to a judgment creditor.  These protections are called exemptions.

The following are the most common exemptions, things that cannot be taken from you by the sheriff or constable to give to a judgment creditor:
 

1. you and your family's immediate personal possessions;
2. you and your family's necessary clothing;
3. up to $1,500 in household furnishings, goods, computers, applicances, books or musical instruments;
4. up to $2,400 worth of tools and equipment you and your family  use for your own support including an auto to get to and from  work;
5. up to $2,500 in other personal property except wages  (Personal property  is all property except land and  buildings.);
6. up to $60,000 equity in the home you live in with your family  (Equity is the difference between what property is  worth and what you owe on it.  If your home is worth  $100,000 and you owe $60,000 on the mortgage, your  equity  would be $40,000.)
 
All of these exemptions have to be claimed in court.  You cannot ignore a judgment creditor's attempt to take property.  You will have to file papers in court claiming that the property is exempt.  You may need a lawyer to do this.

Sometimes an exemption will stop a judgment creditor from taking or selling property altogether.  For example, if you have less than $60,000 equity in your home, a judgment creditor can not force a sheriff's sale of your home.  If your car is worth less than $2,400, a judgment creditor can't take it and sell it.

In other cases, a judgment creditor would have to pay you the amount of the exemption in order to take your property.  For example, if you have $70,000 equity in your home, a judgment creditor could take the home.  But it would have to pay you $60,000 for your exemption.  Many creditors are reluctant to do this and therefore don't force sales.

Nebraska and federal law provide other exemptions.  Exemptions for wages and other forms of income are discussed below.  There are also exemptions for specific kinds of property like portions of pensions and retirement accounts.  You should consult a lawyer if a judgment creditor tries to take property from you.

Remember that these exemptions only apply against judgment creditors.  They do not prevent a secured creditor from taking back or repossessing its collateral.  For example, a secured creditor with a lien on your car can take the car if you miss payments.  You could not use an exemption to keep the car.
 
GARNISHMENT
Judgment creditors can also garnish your wages.  Say a judgment creditor finds out where you work.  The creditor's lawyer asks the sheriff or constable to take papers (called Garnishment Interrogatories) to your employer.  The word "Interrogatories" is a fancy word for questions.  Your employer must answer them.  They ask things like do you work there, how much do you make, when are you paid, etc.  The paper also tells the employer that he must hold back some of your pay for your creditor.

Let's say that you are paid every Friday.  The garnishment papers were given to your employer on Wednesday.  Garnishment papers apply to the money your employer owes you at the time he receives them.  In your case, he owes you for Monday, Tuesday, and Wednesday.  The money you make for those days is what is covered by this garnishment paper.

Once a judgment creditor locates your employer, it can get a continuing garnishment on your wages.  This can last for 90 days.  The judgment creditor does not have to file any new papers during that 90 days.  A judgment creditor can file new papers at the end of the 90 days and get another continuing garnishment.

Just as there are  protections for property, there are protections or exemptions for wages.  These exemptions always apply to disposable earnings.  Disposable earnings are what you take home after taxes.  Other deductions like health insurance are not counted in determining what your disposable earnings are.

You always get 30 times the minimum wage per week. Right now that is $175.50.  This means that the first $175.50 per week of your wages after taxes is exempt.  If your employer owes you less than $175.50 a week after taxes, nothing is held back.  If you are due more, than a judgment creditor can take some portion of your wages.  But you will always get the first $175.50.

A judgment creditor can take 25% of your disposable wages if you are not the head of a household and 15% of your disposable wages if you are the head of a household.

Let's say that after taxes were taken out, your employer owed you $192.00 for three days.  Since this is more than your exemption ($175.50), your employer will hold back: 15% of your take-home pay (we know you have a family)   or your take-home pay minus $175.50  Whichever is less.  15% of your take home pay is $28.80. Your take-home pay  ($192.00) minus $175.50 is $16.50.  So your employer will hold  back $16.50.

Garnishment is an expensive way to pay your bills.  Judgment creditors are allowed to add the costs of garnishment to the original judgment.

Many employers don't like to receive garnishment papers.  There are laws which are supposed to protect you from being fired if you have one creditor placing garnishments on your paychecks.  The law doesn't protect you if you have more than one creditor using garnishment to collect what you owe.  However, your employer may find another excuse to fire you if he gets tired of filling out the garnishment interrogatories.  Your best bet is to try to work out payments with the lawyer.  He may ask for bigger payments than you think you can afford.  Figure out what he could get per month if a garnishment was put on all of your paychecks.  You probably will need to pay at least half of that amount to reach an agreement with the lawyer.

CHILD SUPPORT AND ALIMONY ARE TREATED DIFFERENTLY.
These rules don't apply to judgments for child support and alimony.  Up to 65% of your disposable earnings can be withheld for child support and alimony.

EXEMPT INCOME
Some kinds of government benefits are exempt alltogether.  Examples are Social Security benefits, Veterans benefits, Unemployment benefits, Welfare benefits and Workmens Compensation.  These benefits are exempt even after they have been deposited in a bank account as long as no non-exempt funds are placed in the account.
 Again, the exemption does not apply to child support or alimony.

REPOSSESSION
Everything you have read so far in this Handbook applies only to debts which are unsecured.  This means that you have not put up anything of value (called collateral) to guarantee payment of the debt.  In our example, the hospital bill you owed for your wife's  operation was an unsecured debt.  You promised to pay them, but you didn't say that they could come take your car if you missed a payment.  The most common kinds of unsecured debts are doctor and hospital bills, utility bills and other bills for services.

Secured debts make it easier for the creditor to get his money back if you don't pay.  He can take whatever you put up as security (collateral) and sell it.  This is called repossession.  The secured creditor does not need permission from a court to repossess the collateral.  As long as the secured creditor can take the collateral without disturbing the peace, it is free to do so.

There are rules the secured creditor must follow.  More importantly, he cannot breach the peace.  For example, he cannot break the lock on the garage door to repossess a car.  Before he can sell the collateral, he must write you a letter saying he is going to sell it.

Let's say that you have been laid off from work again.  You've missed your last three car payments.  Three days ago the bank sent out a tow truck and your car was hauled away.  You talked with the loan officer at the bank, but he said he could not help you unless you made all three of the past-due payments. Today, you received a letter from the bank saying that they were going to sell the car.  Since the bank sent you the letter, they can go ahead and sell it.  This is just part of the bad news.  The car probably will sell for less than what you owe.  If it does sell for less than you owe, you will still owe the bank the difference.

This is called a deficiency.  The bank now can sue you for the deficiency.  If they get a judgment against you, they can garnish your paycheck or take other property just like any other judgment creditor.

There's more bad news.  Your wife told you that a man from Friendly Furniture Company came to the house last week to repossess your furniture and appliances.  You were buying the furniture and appliances and the seller got a security agreement covering them.

Your wife refused to let the man in, which she had the right to do.  But he told her that he was going to send the sheriff out to get his collateral.  This means that the Friendly Furniture Company's lawyer will go to court and ask the judge for a special order called a Replevin.  All the loan company has to prove to the court is that your furniture and appliances were security on the loan and that you have missed a payment.  The court sends the sheriff or constable with the Replevin Order to your house to pick up the collateral.  You have to let the sheriff in and can't keep him from taking your things.

More bad news.  As with the car, Friendly Furniture Company can sell your furniture and appliances after sending you a letter telling you that they are going to sell it.  If the money they get from the sale is less than what you owe, they can sue you for the difference (deficiency).  Another judgment means another possible garnishment.

Creditors do make mistakes.  There are rules which help to protect you.  Talking to a lawyer probably would be a good idea.  Perhaps he could work something out with the bank and Friendly Furniture Company.  If that is not possible, he can advise you about other options for solving your money problems.

 HOW TO GET A FRESH START

BEWARE OF DEBT CONSOLIDATION
Some loan companies try to get people to borrow money to "consolidate their bills."  This means that the loan company pays off all the individual bills you owe.  You make one payment a month to the loan company.  Think this over carefully before you do it.
 Bill consolidation could turn out to be a mistake.  You may be borrowing money at a higher interest rate.  Many of the smaller bills you had probably carried no interest (like doctor bills).  The consolidation loan may also be secured even if the debts you are consolidating are not.  You may be required to put up collateral like your car or even your house.

Consider talking with the Consumer Credit Counseling Service first.  They may be able to help you work out a payment plan that both you and your creditors can live with.

Let's say that you didn't think that counseling would help you.  You tried to get a bill consolidation loan from another loan company.  You were hoping to get enough money to pay Friendly Furniture so they would not go ahead with the replevin.  You were turned down.

You now must face the fact that your problems have really gotten out of hand.  If you haven't seen a lawyer yet, now is definitely the time.  You may want to consider bankruptcy.
 
SHOULD YOU FILE BANKRUPTCY?
The filing of a bankruptcy should always be your last choice.  It can stay on your credit history for up to 14 years.  However, if you have tried to work out payments and you know there is no way you will be able to pay off your debts, bankruptcy may be right for you.

The filing of a bankruptcy is intended to give you a fresh start.  The timing of the filing is very important.  You want to make sure that you do not wind up in the same position again.  For example, many people file because of medical debts.  If possible, before you file a bankruptcy, you should be sure that you have medical insurance or that you are covered by some type of medical assistance program, otherwise, the new expenses you incur will not be discharged in the bankruptcy.

If you are not working full-time, you should probably wait.  Even if creditors sue you, they will not be able to garnish your wages if you are making less than $175.50 per week net after taxes are deducted.  Thus, there is nothing they can do to hurt you right now.  During periods of unemployment, things tend to get worse before they get better.  So, wait until you are working full-time and the creditors can garnish your paycheck.  The exception to this would be if a creditor obtained a judgment against you and tried to sell your real estate to collect the debt.

The question you should ask yourself is .... If I don't file a bankruptcy what can a judgement creditor take from me? If the answer to this question is that creditors can not take anything from you then filing a bankruptcy at this time may not be in your best interest. Maybe you should wait !

Another consideration is that you can only file bankruptcy every 8 years.  If you file now and incur large medical bills soon after, you may not be to discharge them for another 8 years.

There are two different types of bankruptcies.  The first is called a Chapter 7, and is also known as a "straight bankruptcy."  The second is a Chapter 13 plan.  The type of bankruptcy you should file depends on the type of debts that you have and your assets.
 
THE CHAPTER 7 BANKRUPTCY
This is also called a "straight bankruptcy."  Instead of repaying your debts, you are discharged from doing so.  It means that legally these debts do not exist for you anymore.  Not all debts can be discharged.  Child support, alimony, taxes, and most student loans are examples of debts which can't be discharged without a special order from the Bankruptcy Court.  Debts you acquired through fraud are not wiped out by a bankruptcy.  Debts you were ordered to pay in a divorce may not be wiped out by a bankruptcy.

Some "secured debts" are treated differently.  If you put up some of your property as collateral for a debt or give a creditor lien against your property, that debt is a "secured debt."  The creditor may be able to take the property back even though you file bankruptcy.  If you want to keep the property, you may have to sign an agreement that says you will pay the debt even after you file the bankruptcy.  This is called reaffirmation.

The cost for filing a Chapter 7 bankruptcy is $299.00.  Be sure that you have included all pertinent information in your bankruptcy because the cost for adding creditors is $20.00.

The filing fee can be waived by the Bankruptcy Judge.  If your case is accepted by Legal Aid, you can discuss this possibility with your attorney.
 
THE CHAPTER 13 WAGE EARNER PLAN
A Chapter 13 Plan is a form of bankruptcy in which you pay all or some of your debt.  Usually debtors will pay all of their secured debt (the value of the collateral) in their plan.  A Chapter 13 may be the only way to deal with large secured debts such as a mortgage on your home.  Once the secured debt is paid off, then a percentage of the unsecured debt is paid.  The percentage can range from 0 to l00%.  Most Chapter 13 plans include a small percentage payoff to the unsecured creditors.  The filing fee for a Chapter 13 plan is $274.00.

In most cases, a Chapter 13 Plan must last 3 years.  It can last up to five years.  In addition to paying the debts you included in your plan, you will pay a fee of approximately 10% to the Trustee who manages your payments.

Before you can file either form of bankruptcy, you must have lived in the state for at least six months and one day.   The fee your lawyer will charge depends on the amount of time he must spend on your case.  If you are eligible for free legal services, all you pay is the filing fee.  A Chapter 7 Bankruptcy takes approximately four months from start to finish.  The length of time involved in a Chapter 13 Bankruptcy depends on the plan which you submit and which is approved by the court.  For both types of bankruptcies you will go to court at least one time.

Don't try to decide what type of bankruptcy is right for you by yourself.  Don't rely on what happened when your neighbor or your uncle filed.  The laws change.  You need to talk with a lawyer about your specific situation.

THE NEW BANKRUPTCY CODE

You may have heard that it is not possible to file bankruptcy anymore because of the changes made in the bankruptcy laws.  This is not true.  There are new laws that make it more difficult to file bankruptcy.  The laws require you to go to credit counseling both before you file bankruptcy and again after you have filed.  The laws require your attorney to review your financial documents such as your bank statements, payroll stubs and tax returns.
 
DEBTS FROM YOUR MARRIAGE  BEFORE AND AFTER
As long as you and your spouse are married, you both owe for necessary things bought or services for the family.  Even if a bill is in only one name, you both may be responsible for paying it.

If you are divorced, the court usually will say who is to pay what.  However, as far as your creditors are concerned, they still can look to both of you for payment.  A divorce decree which says that your spouse must pay the bills does not take your name off the bills.  If your spouse does not pay for them, the creditor can come to you.  If the debt is secured, the creditor can take the furniture, car, household goods, whatever you put up as security for the loan.

Whenever you have problems with creditors whom your spouse is supposed to be paying, see a lawyer.  There are things he or she can do to enforce the divorce decree which may help.  If you ever hear that your spouse is filing a bankruptcy, see a Lawyer.

 

CREDIT REPORTS

You can obtain a free credit report once a year from Annual Credit Report Services. You can request your credit report in writing, over the telephone, or by internet. The name, address, telephone number and web address are as follows:

Annual Credit Report Request Service
P.O. Box 105281
Atlanta, GA 30348-5281
1-877-322-8228

https://www.annualcreditreport.com/cra/index     

If you believe that the information contained on your credit report is inaccurate, you may dispute the information.

GLOSSARY OF TERMS

ANSWER - Written response filed by a Defendant in a lawsuit.  Admits or denies the statements in the Plaintiff's Petition and sets up any defenses the defendant may have.

ANSWER DATE - The date on which the debtor or his attorney must file the Answer.  If the debtor or attorney does not file an Answer, the judge will give a default judgment to the creditor, the Plaintiff in the lawsuit.

ASSIGNEE - The person or company who is hired to collect a debt and gets a portion of the money collected as payment.  The debt is "assigned" to the assignee for collection.

ATTACHMENT - The process used by a creditor to collect a judgment by the seizure and sale of a debtor's personal property.

BANKRUPTCY - A legal process started by a debtor which results in a court order which says the debtor no longer legally owes certain debts.

BANKRUPTCY TRUSTEE - An officer of the Bankruptcy Court who handles many jobs for Chapter Thirteen Bankruptcy (also called Wage Earner's Plan).

COLLATERAL - Property which is offered to the creditor to guarantee payment of the debt.  A secured creditor has a security agreement which describes the collateral.

COLLECTION AGENCY - Company hired by a creditor to get money from a debtor to pay the debt (an assignee).

CO-SIGNOR - A person who signs a loan for another; who promises to pay the debt if the borrower fails to pay.

COUNTY COURT - The court located on the first floor of the Omaha-Douglas Civic Center.  Most lawsuits concerning debts under $5,000 are handled there.

CREDITOR - Someone to whom money is owed.

DEBTOR - Someone who owes money.

DEBTOR HARASSMENT - Unreasonable actions by a creditor to collect a debt.  Examples: late night phone calls; threats of physical abuse; multiple calls to an employer, etc.

DEFAULT - Missed payment to an installment creditor, failure to pay the money owed on the date it is due.
 
DEFAULT JUDGMENT - Occurs when Defendant debtor does not file an answer by the answer date.  A decision by the court that the debtor owes the creditor a specific amount plus interest and court costs.

DEFICIENCY - The amount of money still owed after the secured property is sold by the creditor.

DISCHARGE - Judgment by the Bankruptcy Court which says that the debtor does not legally owe his or her debts; that they are canceled out.

DUE DATE - Day on which installment payment is owed.

EQUITY - The value of your property after you subtract what you owe.

EXEMPT PROPERTY OR INCOME - Property or income which is protected from a judgment creditor by state or federal law.  Property may be exempt up to a certain amount, for example the first $12,500 in equity in a family home, or it may be exempt altogether such as Social Security benefits.

FAIR DEBT COLLECTION ACT - Federal law which protects debtors from certain kinds of acts by a collection agency.

FILE - Process of giving legal papers to a court to begin a lawsuit or to respond to a lawsuit.

GARNISHMENT - The court process used by a creditor to collect a judgment from a debtor's wages.

GENERAL DENIAL - Answer filed by debtor which requires the court to schedule a date for a trial.

INSTALLMENT DEBT - A debt which is paid over a period of time, in several separate payments each week or month, etc.

JUDGMENT - Decision by a court; in collection cases, a decision whether the Defendant (debtor) owes the money to the Plaintiff (creditor or assignee).

NOTICE OF RESALE - Letter creditor must send to debtor telling time, date, and place that debtor's repossessed property will be sold to pay off the debt.

PETITION - Paper filed in court by a Plaintiff (usually a creditor) which says the debtor owes money, and asks the court for a judgment allowing the creditor to collect the money.

REAFFIRMATION - Occurs when the debtor promises to pay a debt after Bankruptcy so he or she can keep personal property which was security for the debt.

REPLEVIN - Special lawsuit filed by a creditor to get secured property out of a debtor's home so property can be sold to pay the debt.
 
REPOSSESSION - The taking of secured property by a creditor after the debtor defaults.
 
SECURITY - The property used as collateral; the goods used to guarantee payment.

SECURED DEBT - When the debtor offers property as collateral to get the loan.  It means that the creditor can take the property and sell it if the debtor does not pay off the loan.

SERVICE OF PROCESS - Occurs when the sheriff or constable delivers court papers to a debtor or, in some circumstances, leaves it at the debtor's home or mails it telling him or her that the creditor has sued.

SUE - The act of filing a lawsuit asking the court for some kind of legal relief or redress.

SUMMONS - The paper served by a constable or sheriff informing a debtor that he or she has been sued and setting out the answer date.

TRIAL DATE - Date on which both sides get to tell their stories to the judge.

WAGE EARNER PLAN - The arrangement set up by the Bankruptcy Trustee to pay a person's creditors by monthly deductions from the person's wages.

Prepared and provided by:
Legal Aid of Nebraska.
Rev. 4 / 2006