As a Streamwood bankruptcy attorney, I have seen judgments lead a person to bankruptcy. Just remember that a creditor with a judgment gets interest at 9% per year. 9% per year per interest and we are getting less than 1% on our savings accounts. So you can see a judgment amount at 9% can increase very rapidly and become overwhelming very quickly.
A creditor with a judgment also has the ability to attach a bank account and ask for a turnover of those funds up to the judgment amount. So if you have a checking account and you think everything is going fine, you are paying your bills. You may or may not even know that there is a judgment against you and all of a sudden you can get a notice saying your account is frozen. All of the checks that you currently have floating will bounce and if you don’t file Chapter 7 bankruptcy, there’s a good chance that that creditor is going to come into court a couple weeks later and ask for a turnover order. A turnover order is an order from the court that would be sent to the bank requiring the bank to cut a certain amount of the funds over to the creditor.
These are things that I can prevent as a bankruptcy attorney. Filing a Chapter 7 bankruptcy case automatically creates a protection immediately once the case is filed. This protection that I speak of is called the automatic stay. An automatic stay is created immediately when the cases filed. An automatic stay can be sent to your employer. It can be sent to the bank. They could be sent to all creditors advising them that your case has been filed and they can no longer take certain actions. This is part of the bankruptcy basics and law provides assistance.
If a creditor does something in violation of the automatic stay, then that creditor can be brought back into bankruptcy court and sanctioned. I have had many cases where a creditor has continued to collect or attempt to collect the debt after someone has already filed a Chapter 7 bankruptcy case. This is either an innocent or a knowing violation of the automatic stay but it is a violation just the same. In some cases, we have had to go to extreme measures to stop a creditor from violating an automatic stay. In one of my recent cases, there was a creditor who repossessed a vehicle after the bankruptcy case was filed and that creditor did not receive court permission to repossess the vehicle. Not only did the creditor repossess the vehicle but the creditor refused to return the vehicle once they became aware of the bankruptcy claim. The creditor was an unsophisticated auto lot that was not versed in bankruptcy law and didn’t understand how filing a bankruptcy would require that auto lender to give the car back. Well, it wasn’t until we actually brought that creditor before the federal bankruptcy judge that the creditor finally realized and was ordered to return that vehicle to my client.