Debt and Liens

[blady]

My question involves collection proceedings in the State of: Indiana

I am over 65 and on Social Security. I was previously on disability at age 62. My husband is 73 and on Social Security (which he took at age 62). We receive no other income. We do own our own home. In 2014 we contracted with a debt consolidation company (never again) to pay off some of our credit card debt. We ran out of money before we could pay them all off. As a result, we still owed on 3 of them. They took us to Court and won judgments against my husband (I was never on the cards and they never attempted to collect from me). We have not paid on them since 2014.

We just attempted to refinance our home due to it needing some repairs and we have no other way to pay for them (need new roof, and basement leaks). Unknown to us until the title search came back is that these 3 judgments have liens on our home totaling $41,782.

We also owe the IRS approximately $18,000 due to these settlements showing us as income. (We never realized these write-offs would be considered as income and did not realize that this debt consolidation company would take approx. 40% of the payoff as their "fee". Believe me, if we did we would never have went this route. ) Hind site is always better.

But, we are paying on the IRS bill but in no way can afford to pay it, and these credit card bills of $41,000. Any thoughts or suggestions? Would a local attorney be able to help? I am trying to find out if we would have recourse on this and hire a local attorney before I waste any more money trying to fix this.

BTW.. I am told that we can not file bankruptcy as I own 1/3 of my parents home with my sisters and we would have to sell this and I own 1/2 of a home with my granddaughter and would need to sell this. My one sister lives in the house and my granddaughter lives in the other. Could my husband file bankruptcy singularly and if so, what would this do to our home or the liens on it?

Thanks.

[pg1067]

Sounds like all of your income sources are exempt, which means you may be, effectively, judgment proof. As far as bankruptcy, why not sell your interests in the other persons' homes to give you some money to pay your debts? Also, who told you that you "can not file bankruptcy"?

[blady]

I can't sell my interests in the other homes as family is living in them and they are not in financial positions where they could buy me out. A friend who filed bankruptcy told me that I would have to sell my interests in these properties because the bankruptcy courts would consider them assets. My husband is not listed as owners on either of them, only our marital residence, as I had them before we were married.

What do you mean "you may be, effectively, judgment proof"? They already have judgments against my husband and these have liens on our marital residences.

[pg1067]

A friend who filed bankruptcy told me that I would have to sell my interests in these properties because the bankruptcy courts would consider them assets.

Your friend may have some practical experience with bankruptcy, but that hardly qualifies him to opinion about the law on this issue. Your interests in your family members' homes are, of course, assets, but that doesn't mean you'd have to sell them. For starters, the only way you can sell something is by finding a willing buyer. If your family members can't afford to buy you out, that would mean selling to an unrelated party, and virtually no one is going to want to own a 1/3 interest in your parents' home (or is it one of your sister's home?) with your sisters or a 1/2 interest in your granddaughter's home. At a minimum, I can virtually guarantee that no one will pay 1/3 or 1/2 the fair market value. By the way, why do you own these interests in the first place?

What do you mean "you may be, effectively, judgment proof"?

"Judgment proof" is a colloquialism that refers to a person whose situation is such that a person holding a judgment against the judgment proof person cannot effectively enforce it. The two most common ways of enforcing civil money judgments against individuals are wage garnishments and bank levies. Since you receive no income other than social security, that means you have no wages to be garnished. Social security income is exempt. While a creditor could levy on your bank account, the bank may have an obligation to reject the levy because the only money in the account is from an exempt source. While there are other things a creditor could do, those things are very uncommon and may not be possible. Yes, the creditor created a judgment lien, and yes, that lien is preventing you from refinancing, but creating a lien and active enforcement of a judgment are very different things.

With all that said, your choices are to file bankruptcy or live with the current situation. Yes, your husband could file BK without you, but then you'd still owe the credit card debt and the lien would stay on your home. I strongly suggest you consult with a bankruptcy attorney.

[llworking]

Your friend may have some practical experience with bankruptcy, but that hardly qualifies him to opinion about the law on this issue. Your interests in your family members' homes are, of course, assets, but that doesn't mean you'd have to sell them. For starters, the only way you can sell something is by finding a willing buyer. If your family members can't afford to buy you out, that would mean selling to an unrelated party, and virtually no one is going to want to own a 1/3 interest in your parents' home (or is it one of your sister's home?) with your sisters or a 1/2 interest in your granddaughter's home. At a minimum, I can virtually guarantee that no one will pay 1/3 or 1/2 the fair market value. By the way, why do you own these interests in the first place?




"Judgment proof" is a colloquialism that refers to a person whose situation is such that a person holding a judgment against the judgment proof person cannot effectively enforce it. The two most common ways of enforcing civil money judgments against individuals are wage garnishments and bank levies. Since you receive no income other than social security, that means you have no wages to be garnished. Social security income is exempt. While a creditor could levy on your bank account, the bank may have an obligation to reject the levy because the only money in the account is from an exempt source. While there are other things a creditor could do, those things are very uncommon and may not be possible. Yes, the creditor created a judgment lien, and yes, that lien is preventing you from refinancing, but creating a lien and active enforcement of a judgment are very different things.

With all that said, your choices are to file bankruptcy or live with the current situation. Yes, your husband could file BK without you, but then you'd still owe the credit card debt and the lien would stay on your home. I strongly suggest you consult with a bankruptcy attorney.

It is not joint credit card debt therefore why would she owe it? I agree that the lien would still stay on his half of the home, but she never has and never will owe the debt. Indiana is not a community property state.

As far as "her" joint ownership of various family member's homes are concerned, that should have zero to do with her husband filing bankruptcy...because again, Indiana is not a community property state.

[blady]

By the way, why do you own these interests in the first place?

Mother left her home to the 3 daughters as tenants in common with rights of survivorship. I put my granddaughter on the Deed to my house as her inheritance.

So, my husband's filing bankruptcy would not take the liens off of the house? The only way we could remove the liens would be for both of us to file bankruptcy?

If we do nothing, we can not sell the home with the liens, correct? Or get any type of refinancing? Or the liens would have to be settled at the time of closing?

[PayrolGuy]

No, your husband alone filing bankruptcy would not remove the liens. It would have to be both of you.

You can sell the home with liens but they would have to be settled at or before closing.

I can't think why anyone would loan mone with the house as collateral if there is a lien with higher standing. Not to mention the fact that there are liens shows you are a credit risk.

[Taxing Matters]

My question involves collection proceedings in the State of: Indiana
We also owe the IRS approximately $18,000 due to these settlements showing us as income. (We never realized these write-offs would be considered as income...

You ought to see a tax professional to ensure that you truly do owe tax for the discharged debt. While discharged debt is taxable income, it may be excluded from income to the extent that you and your husband were insolvent at the time of the debt discharge. But you have to file the proper form with your return to claim the insolvency exception. If what happened was the IRS made the adjustment based on the 1099 forms the creditors issued and you never claimed the insolvency exception then you can submit an amended return to do that, assuming you do meet the requirements for that exception. See IRS publication 4681 for information on that. That may help you reduce or eliminate the tax liability.

Sounds like all of your income sources are exempt, which means you may be, effectively, judgment proof. As far as bankruptcy, why not sell your interests in the other persons' homes to give you some money to pay your debts? Also, who told you that you "can not file bankruptcy"?

Unfortunately for the OP, that is not true as to the liability owed to the IRS for the federal income tax liability. While no private creditor may attach Social Security old age and disability benefits, the IRS may levy upon those benefits to collect federal taxes owed.

[doucar]

If your husband were to file bankruptcy, it would remove his personal liability for the debts, but not remove the judgment liens. I don't know if it is possible in your state, but there may be additional action you could take after the bankruptcy to remove the lien. So check out this possibility with a bankruptcy attorney.

[blady]

Ok. Thank you all. We will contact both a tax professional and a bankruptcy attorney. Does anyone have any thoughts on those companies that advertise they can help you relieve your tax debt if over $10,000?

Thanks.