Answering Listener Questions

We often get questions from listeners of The Crushing Debt Podcast. In this blog post, I’ll answer some listener questions I’ve received.

The first question I wanted to answer is whether a person already under a Chapter 13 repayment plan can legally have an automobile financed while still in bankruptcy?

This question comes from a listener in the Georgia area. Typically, people in a Chapter 13 need to finance a new car if: (a) they have a lease expiring during the term of the plan and need a new car, (b) they have a teenage child who wants to finance a car but needs a co-signor, or (c) they’ve had to get rid of their current car (accident, or some other reason) and need a new car. Unfortunately, I don’t know Georgia law but I can speak to Florida law, so if this were a case pending in Tampa they can finance a new car, however they need to get permission from the bankruptcy court and the bankruptcy trustee. The reason is because the chapter 13 is a payment plan and the court wants to make sure that by taking on this car the debtor is not diminishing their monthly income to the point that they cannot continue with the plan. In other words, if the debtor’s monthly chapter 13 payment is $400 and they buy a car that they have to finance at $500 monthly, obviously that is not going to work because their chapter 13 bankruptcy payment would have to decrease $100 to make up the difference, reducing the payment to unsecured creditors.

In most cases if somebody needs a car to get to and from work, the bankruptcy court will approve the purchase as long as we can show the bankruptcy court the need for the car, how we’re going to finance the car, and how we’re going to make monthly payments on the car. In many cases, we are going to steer the debtor towards a “buy here, pay here” car lot or some other type of self-financing car lot.

Our next question this question comes from a listener in the southern part of Florida: can a previous landlord garnish my wages if I make less than twenty thousand dollars a year?

Unfortunately, I don’t have enough facts to answer that question. Wage garnishment is not dependent on the amount of money that someone makes per paycheck. Instead, wage garnishment is dependent on whether the garnishee has available exemptions. If the person asking the question makes $20,000 a year and is a single person living by themselves with no minor kids, then yes, unfortunately in Florida garnishment can happen by the creditor.

The exemption most often used is the Florida Head of Household exemptions. If our questioner making twenty thousand dollars a year is a single parent of a minor child, for example, who relies on alimony or child support from the other parent, then they would possibly be considered a head of household (“HOH”). The HOH must prove that they provide more than 50% of the support of their dependent and if they can prove that then their wages would be exempt from garnishment.

Another thing to consider is that in Florida the maximum wage garnishment is 25% of gross (before-tax) wages. So if somebody is garnished up to 25% of their wages, then that cuts off the ability of other creditors to garnish until the first creditor is repaid or the garnishment is someone resolved (other than bankruptcy, which would discharge all potential garnishments and collections).

Again, I don’t believe that the amount of income really determines whether someone can be garnished.

Another good question from out in Washington State: should I pay or fight a $1,200 lawsuit from an old credit card debt?

I’m a little bit mixed on the answer to this one because I want to make sure that I’m providing value to my clients. If someone wants to pay me to defend a $1,200 credit card collection, they can, but they’re likely to pay me near or more than the debt itself. So in a situation like this the only way that I might take on the case is if maybe we have some type of counterclaim, like under the Fair Debt Collection Practices Act (FDCPA) or the Florida Consumer Collection Practices Act (FCCPA). Maybe the credit card debt is beyond the statute of limitations and we can bring a creditor harassment lawsuit, maybe the credit card debt was discharged in a previous bankruptcy and we can bring a bankruptcy discharge violation lawsuit.

The problem that I face in a situation like this is that the lower the amount that’s owed, the more likely it’s going to be that my attorney fees will equal or exceed the amount that’s owed, so I would not be providing value in a situation like that.

At the same time, I would never advise somebody to just simply roll over and give in to the $1,200 demand in the lawsuit. We can review the lawsuit to see if there’s anything that the debtor can challenge: the amount of money requested, interest or late charges, notice, service or something else.

I think it might be worth it to pay $1,200 to resolve the lawsuit and it might also be worth it to fight a $1,200 lawsuit. I think it depends on the resources of the person who allegedly owes the money.

Now let me turn my attention to some real estate questions. My mother’s house was sold at a foreclosure sale. Is she entitled to any excess money? The price paid by the winning bidder at the foreclosure auction was almost twenty-five thousand dollars more than the judgment amount.

In a situation like this the general answer is yes, the person who lost the property at foreclosure sale is entitled to that excess twenty-five thousand dollars, less maybe some additional clerk fees or court costs, if there are no other defendants in the lawsuit. If there’s a second mortgage, homeowners or condominium association, a judgment creditor or other lien holders, or a construction lien holder, then those parties might be entitled to the surplus proceeds before the homeowner.

What if there are unpaid taxes or other superior liens? Superior lien holders are not part of the foreclosure lawsuit, so they would not be defendants in the underlying foreclosure and not entitled to any surplus proceeds. In that example, the new owner of the property would have to pay the property taxes or other superior liens and the former property owner would be entitled to the $25,000 surplus proceeds.

Our last question: can sellers of a townhouse change their mind after the buyer paid for the appraisal and the home inspection?

This question is general and there are not enough facts, so I’m going to assume a couple of facts. Assuming the appraisal and home inspection were completed within the time frame to complete those inspections and there are no other contingencies in the contract, then no, the seller cannot change their mind and the buyer is entitled to buy the property. To fully answer the question, I need to know where the contract is in terms of the contingencies, have they been met, satisfied or waived?

The question here in terms of whether a seller can change their mind or not may also be impacted by what type of contract was signed, an As-Is or Repair Limit contract? If the contract is “As-Is” then the buyer has the option to cancel the contract for any reason. However if this is a contract that provides that the seller is going to pay for some amount of repairs to the property (normally about one and a half percent of the purchase price) then the seller does have the option to cancel the contract if the buyer determines that there are more repairs than the repair limits. For example, assume a repair limit of $1,500 and the repairs are $2,000. The seller can choose to pay that extra $500, the buyer can choose to pay that extra $500, or the contract then gets cancelled.

If you have questions that we can answer on our blog or on the Crushing Debt Podcast on topics ranging from real estate law, bankruptcy law, debt settlement, creditor harassment, or any other topics, please contact us. If you’re facing any of these issues, you can also schedule a free initial consultation to discuss your options at 813-774-5737 or email me directly at shawn@yesnerlaw.com. You can also order Crushing Debt: 9 Strategies to Eliminate Financial Bullies on Amazon.com. Please also subscribe to the Crushing Debt Podcast, on Apple Podcasts, Spotify, and other podcast players, including Amazon Echo (“Alexa”) for more free information about these topics.

Shawn M. Yesner, Esq., is the host of the Crushing Debt Podcast and founder of Yesner Law, P.L., a Tampa-based boutique real estate and consumer law firm that helps clients eliminate the financial bullies in their lives. We assist clients with asset protection, the sale and purchase of real property, Chapter 7 liquidation, Chapter 13 reorganization, bankruptcy, foreclosure defense, debt settlement, landlord/tenant issues, short sales, and loan modifications in Tampa, Westchase, Odessa, Oldsmar, Palm Harbor, Clearwater, Pinellas Park, Largo, St. Petersburg, and throughout the greater Tampa Bay Area.