Question about Liens and credit card debt

[Russ Smith]

A friend is in deep doo doo and just got a notice in the mail of a lien being filed due to her credit card debt. The problem is she doesn't know what the lien really is and frankly either do I. She doesn't own any property, the book value of her car is less than what she owes on the cards(Car is probably less than 2k) so it's not on her car either I assume.

What exactly does a lien for CC debt do? They're not the IRS so they can't garnish wages. Is this just something they have to do before they take you to court or is there a better reason why someone would do that?

 

[Gaddabout]

An unsecured lien basically serves as a placeholder for position of claims in case someone files bankruptcy. It means they'll be notified of a hearing if she does. I suspect this means they will challenge a bankruptcy until they get paid, or at least a portion of whatever the judge deems is fair and she's actually capable of paying.

But I believe they could garnish wages if it was in their agreement she signed. They would simply need to obtain a court judgment of debt against her and present the claim through your employer.

 

[MigratingOsprey]

I'm not sure what it means - but as Matt pointed out, the IRS isn't the only entity that can garnish wages

I've seen it happen due to a debt that went through small claims court - when the employer failed to do so they had a judgement put against them and their business

 

[kps0001]

An unsecured lien basically serves as a placeholder for position of claims in case someone files bankruptcy. It means they'll be notified of a hearing if she does. I suspect this means they will challenge a bankruptcy until they get paid, or at least a portion of whatever the judge deems is fair and she's actually capable of paying.

But I believe they could garnish wages if it was in their agreement she signed. They would simply need to obtain a court judgment of debt against her and present the claim through your employer.

 

[conraddobler]

The can garnish wages or bank accounts, usually per state guidelines one or the other sometimes both, states vary.

That's what they're likely angling to do, if they know where they work then that's probably what's comming next.

If they know where they bank that's a possibility but a much lesser used route compared to wages.

If they have CD's or large deposits in the bank and the people know where they bank then it's a worry, it sounds like this is not the case.

So I'd guess it's the wages they're after, a BK filing should avoid this.

 

[BillsCarnage]

To add... I believe payments/garnishments/etc go in lien date order - when the lien was placed. Or it might be value based.

So if her debt/income ratio is really bad and something does happen this place wants to make sure they can get as much back as possible.

 

[Russ Smith]

The can garnish wages or bank accounts, usually per state guidelines one or the other sometimes both, states vary.

That's what they're likely angling to do, if they know where they work then that's probably what's comming next.

If they know where they bank that's a possibility but a much lesser used route compared to wages.

If they have CD's or large deposits in the bank and the people know where they bank then it's a worry, it sounds like this is not the case.

So I'd guess it's the wages they're after, a BK filing should avoid this.

That's what I think and I've been advising her for awhile now to just rip the bandaid off. She either has to file BK and be done with it, or she's going to get this suit from every card(I think she has 3 now but only 1 has a lien).

She did make an appointment to see a lawyer this week via employee assistance from work. She's already got garnished wages via the IRS for taxes owed from a misguided self loan from her 401k. This has been slow agony to watch every step of the way she asks my advice then ignores it and gets into deeper doo doo. At this point I think she either wins the lottery, marries rich, or files BK.

 

[conraddobler]

That's what I think and I've been advising her for awhile now to just rip the bandaid off. She either has to file BK and be done with it, or she's going to get this suit from every card(I think she has 3 now but only 1 has a lien).

She did make an appointment to see a lawyer this week via employee assistance from work. She's already got garnished wages via the IRS for taxes owed from a misguided self loan from her 401k. This has been slow agony to watch every step of the way she asks my advice then ignores it and gets into deeper doo doo. At this point I think she either wins the lottery, marries rich, or files BK.

Try doing what I used to do, tell her under no circumstances should you ever do A.

When it's A you think they should do in the first place.

That's if you really care, I have a sister in law just like this and it's probably wrong but now I tell her exactly what she should do, knowing she will do something else.

I shouldn't do this but I can't help it.

 

[Russ Smith]

Try doing what I used to do, tell her under no circumstances should you ever do A.

When it's A you think they should do in the first place.

That's if you really care, I have a sister in law just like this and it's probably wrong but now I tell her exactly what she should do, knowing she will do something else.

I shouldn't do this but I can't help it.

I tried that the problem is she is just afraid to file BK I think she thinks it's a stigma or something and she doesn't get she's just putting herself in more problems by not doing anything. I have been advising her for about a year to personally call the companies and ask if they will negotiate a payment plan like the IRS did. They're not stupid they'd rather get something than wait and have her file BK.

 

[Absolute Zero]

The only way the credit card company can get a "lien" would be by filing a lawsuit against your friend and obtaining a court judgment. Before that happened, they would have to be served with the lawsuit and given an opportunity to contest the case. That also would provide a window in which to file BK and avoid any lien, preemptively or after the fact.

So unless this already happened, my guess is that the credit card company is trying to pressure your friend into payments. The notice may be just a pressure tactic, unless it was issued from the court.

If you want to PM me with the notice, I'll take a look at it pro bono!

 

[Russ Smith]

The only way the credit card company can get a "lien" would be by filing a lawsuit against your friend and obtaining a court judgment. Before that happened, they would have to be served with the lawsuit and given an opportunity to contest the case. That also would provide a window in which to file BK and avoid any lien, preemptively or after the fact.

So unless this already happened, my guess is that the credit card company is trying to pressure your friend into payments. The notice may be just a pressure tactic, unless it was issued from the court.

If you want to PM me with the notice, I'll take a look at it pro bono!

Thanks I think it is an actual lien the first line is "pursuant to government code section 27297.5 you are hereby notified that a document which may be a lien has been recorded in the county clerk recorder of Santa Clara County."

Says may be a lien against your property so not 100% positive but she's apparently seeing a lawyer tomorrow for advice on what to do. She has had 2 suits filed by collections companies she did what was required to respond to the suits, this is a different company so presumably this could happen 3 times.

I hope the lawyer can help her but I really help the lawyer explains to her the folly of how she got to this point and convinces her to do something now before it gets even worse. I've been trying to do that for a LONG time now.

 

[Absolute Zero]

Thanks I think it is an actual lien the first line is "pursuant to government code section 27297.5 you are hereby notified that a document which may be a lien has been recorded in the county clerk recorder of Santa Clara County."

Says may be a lien against your property so not 100% positive but she's apparently seeing a lawyer tomorrow for advice on what to do. She has had 2 suits filed by collections companies she did what was required to respond to the suits, this is a different company so presumably this could happen 3 times.

I hope the lawyer can help her but I really help the lawyer explains to her the folly of how she got to this point and convinces her to do something now before it gets even worse. I've been trying to do that for a LONG time now.

Crap, well OK. At least she is going to see an attorney, very good move. I still wonder what they think they have a lien against if she has nothing.

The problem with the credit card debt is that is that it is bundled up and sold on the market to "debt buyers" as a commodity, for years and years. So if the original company can't collect, they bundle it up and sell the lot to a debt buyer for 50 cents on the dollar. Then they try to collect it for a few years. If they can't collect it, they resell it for 20 cents on the dollar to another debt buyer. And so on and so on. With the outrageous interest rates, this can really add up.

The only good thing, which I have learned from representing some debt buyers years ago, and serving as an arbitrator on some of the cases, is that they all do a shoddy job at keeping track of paperwork. So if you fight the case, you may learn that they don't have any paperwork with your signature on it. So often, the high interest rates and other charges outlined in their "agreements" are unenforceable. They can't prove you agreed to the terms, especially when they change over time. And the older the debt gets and more it is sold on the market, the less paperwork they have access to. Because of this, I had one debt buyer client years ago that would tell me to dismiss the case anytime it was contested.

That can save you a lot of money, but you are usually still on the hook for the purchases you made, plus statutory interest. If that is still overwhelming beyond control in light of other debt load, bankruptcy is something to consider.

 

[Russ Smith]

Crap, well OK. At least she is going to see an attorney, very good move. I still wonder what they think they have a lien against if she has nothing.

The problem with the credit card debt is that is that it is bundled up and sold on the market to "debt buyers" as a commodity, for years and years. So if the original company can't collect, they bundle it up and sell the lot to a debt buyer for 50 cents on the dollar. Then they try to collect it for a few years. If they can't collect it, they resell it for 20 cents on the dollar to another debt buyer. And so on and so on. With the outrageous interest rates, this can really add up.

The only good thing, which I have learned from representing some debt buyers years ago, and serving as an arbitrator on some of the cases, is that they all do a shoddy job at keeping track of paperwork. So if you fight the case, you may learn that they don't have any paperwork with your signature on it. So often, the high interest rates and other charges outlined in their "agreements" are unenforceable. They can't prove you agreed to the terms, especially when they change over time. And the older the debt gets and more it is sold on the market, the less paperwork they have access to. Because of this, I had one debt buyer client years ago that would tell me to dismiss the case anytime it was contested.

That can save you a lot of money, but you are usually still on the hook for the purchases you made, plus statutory interest. If that is still overwhelming beyond control in light of other debt load, bankruptcy is something to consider.

Thanks my advice to her for about a year now has been file for BK , rip the bandaid off but she's been delaying afraid to do that, which is just making it worse.