People are calling Walker & Walker to ask if any of the new laws in Minnesota or the governor’s shelter in place order help stop some of the most harmful parts of debt collection. This article answers the most common questions we are hearing.
Does the virus mean that no one can garnish paychecks or freeze bank accounts?
- No. Wage garnishments and bank levies are still happening. This is true even for essential workers and first responders, which seems unfair.
- Bankruptcy filing stops these completely and sometimes even allows us to get back some of the garnished money, but only what was taken in the 90 days before filing the bankruptcy.
Does the virus mean that no one can get a judgment against me?
- NO. New judgments for debt collection are still happening. In-person court appearances are largely getting canceled in Minnesota, but the courts are allowing lawyers to present their case by phone sometimes. The courts are also allowing debt collection firms to get default judgments.
- Most judgments for debt are default judgments. It is a default judgment when the defendant (the person who owes the debt) doesn’t file legal paperwork to fight the judgment in court. This means that most judgments for debt collection are still happening like normal.
- Filing bankruptcy immediately stops any judgments from going forward. If there is already a judgment against you, then filing bankruptcy voids the judgment. The bankruptcy trumps the judgment and makes it go away.
Does the virus mean that home foreclosures or vehicle repossessions are stopped?
- NO. Home foreclosures and vehicle repossessions still happen as before. If you are behind on a car or house payment, the loan company can still attempt to take back the collateral.
- In Minnesota, most home foreclosures are done through “foreclosure by advertisement,” which happens out of court.
- Vehicle repossession also happens out of court in Minnesota.
- For some mortgages and for some mortgage servicers, you can call your mortgage company and get some payments delayed. This is often called forbearance.
- You have to have a mortgage servicer willing to work with you, or a certain type of federally-backed loan for this.
- If you don’t talk with your mortgage company and ask for the forbearance, they don’t have to give it to you.
- Filing bankruptcy stops foreclosure and repossession immediately. It often gives you 5 years to catch up on missed payments and buys some breathing room.
Does the virus mean that I can’t be evicted?
- Yes, at least in the Twin Cities metro area. Minneapolis and Saint Paul, and some other cities, have orders in place preventing evictions or unlawful detainers from going forward right now.
- Rent continues to accrue every month, so if people are unable to pay their rent for several months, then they will owe lots of back rent when this is over.
- Bankruptcy discharges back rent and stops eviction, but after the bankruptcy is over, most times the landlord will seek to have the tenant move because new rent is accruing every month.
Does the virus stop utility shutoffs?
- Mostly yes in Minnesota. Xcel and Centerpoint have stopped doing utility shutoffs voluntarily. Legally, utilities are still allowed to do shutoffs, but some have decided to stop them.
- Just like with rent, the balance owed to the utility company continues to increase every month.
- Filing bankruptcy discharges any money owed to the utility companies, and stops them from doing a shutoff.
- After bankruptcy, the utility can charge a deposit of approximately 2 months of normal utility usage. You get some time to build up the deposit, and you will get the deposit back when you move out.
Do I lose the Coronavirus stimulus payment if I file bankruptcy?
- NO. You get to keep the stimulus payment if you file bankruptcy. It is explicitly protected in Chapter 13 bankruptcies, and there are other laws which protect it in Chapter 7.
If you have lost some or all of your income, and need help to prevent these things, then call us today at 612-824-4357 for a free attorney consultation. We will talk about all of your financial and credit situation to see if bankruptcy is right for you.
