A recent client came to see me many months back to talk about potentially filing for bankruptcy. He was not even thinking about a bankruptcy release at that time. This person knew that he had debt, but he was reluctant to file for some reason. Many people think that if they just keep avoiding lawsuits or garnishments, that they can somehow ride out the debt without having to file. This strategy doesn’t work in some situations. Some creditors are not very aggressive in pursuing the debt. Some creditors will simply not file a lawsuit in an effort to collect a debt. They will turn over the debt to a collection agency who will call like crazy to try and get some money out of the debtor. However, not every creditor is going to take the full step and file a lawsuit and obtain a judgment.
Another client came to see me who did not take immediate action at all. He was one of those people that were simply going to ride it out and see what happens. Well, this is what happened. The creditor wound up getting a default judgment against him because he never showed up in court. He claims he was never officially served, but he never brought a motion to vacate the judgment or to quash service of process. He further waited afterwards to see what would happen next. Sometimes creditors get judgments and they just don’t enforce them. It sits on your credit report and it sits in the public courthouse records, but it doesn’t always get enforced. In his particular case, the judgment was enforced
The creditor that he owed the money to utilized a collection law firm that was fairly sophisticated in their collection efforts. They ran what we call a bank account search or asset search to see if there was anything that the debtor had that could be used for paying off the judgment. What they discovered was a checking account. What happened next we refer to as the “big freeze.” The creditor law firm filed a proper bank citation which was served upon the bank to freeze the account. The bank will hold two times the judgment amount until they received a court order either turning over a certain dollar amount or in order to release the hold on the account. In this case, the hold on the account was approximately $5700. As you can imagine, this is when that potential client who I saw several months back rings my phone once again. Although his situation was more imminent now than ever, my advice was still the same as it was several months prior. I suggested that he file chapter 7 bankruptcy.
By filing chapter 7 bankruptcy, I was able to protect a good portion of that money that was frozen in the bank account. In the state of Illinois you can protect up to $4000 worth of miscellaneous personal property. This is money that you can protect from creditors attachment while going through a bankruptcy process. Now since the amount owed was $5700.00, I technically could not protect all of what was frozen in the account. But here’s what happened next which is very interesting. The creditor who put the freeze on the account was made aware of the bankruptcy shortly after the freeze. We then filed documents to protect as much as possible of the bank account. Time passed by and the creditor’s lawyer did not file the appropriate motion to turn over the amount that was unprotected. For this reason, we just sat silently until the bankruptcy court ordered a discharge. We then sent the discharge order to the bank who released the freeze on the account. So here we had a case where the creditor did everything right in terms of getting a judgment, attaching a bank account, serving the right documents, and then never proceeded to the final step due to the bankruptcy filing. You could say in essence that the debtor got somewhat lucky. He got lucky because $1700 of what was in that bank account could’ve been ordered turned over to the creditor despite the fact that my client filed for bankruptcy.
The take away here is to file early if you can. Don’t wait for the creditor to get his hands on your assets. Do not allow a creditor to obtain a judgment to the point where they can freeze your bank account. This man had other payments that he needed to make but he could not use that bank account once it was frozen. In fact, it took approximately 120 days to get the release off of the account. He could’ve avoided all that trouble if he would’ve taken immediate action after the first meeting. Instead, he waited and hoped that his debt problems would go away on their own.
If you’re someone who is struggling financially and a creditor is attempting to obtain a judgment against you, keep in mind that bank accounts can be frozen if the creditor obtains the judgment and files the proper third-party citation with the clerk of the court. In some cases, a bankruptcy attorney can stop the citation once it is placed. In other cases depending upon what you have on account at that bank, a bankruptcy attorney’s help may be limited to some extent. To learn more about how you can be helped because every situation is particular, you can contact my office at 847-520-8100. I would like to help you well in advance of any creditor freezing your bank account.
