Bankruptcy - Checking acct - Judgment

[ihatearizona]

What is the name of your state? Arizona

My husband and I are going to be filing chapter 7 next week. We live in Arizona. We are going pro se since we are broke and cannot afford an attorney. I have a few general questions:

1. On 05/04/04 Wells Fargo Auto took almost $900.00 out of our checking account (without our permission) towards what we owed them on a car we turned back in to them. Along with taking the funds, they also placed a "hold" on our account for the same dollar amount. My question is this: Once we file with the court can I contact Wells Fargo Auto and give them notice that we have filed bankruptcy (since it's going to take the court 20-40 days per their web site) AND once that is done, how long will they have to remove the hold on my account or do they have to remove it at all? What do I do if they don't remove the hold and they are required to by the stay?

2. I believe I read somewhere that if any of your creditors received funds (voluntarily or involuntarily) 90 days prior to filing for bankruptcy that they would have to give the funds received back to the trustee? Is this true and if so, would a creditor such as the IRS be given the funds first or would it be evenly distributed amongst our creditors listed?

3. We have a judgment against us by a local attorney for one of our credit card accounts that is being included in the bankruptcy. While I know that the judgment will be void once the bankruptcy is discharged, how do I go about having the judgment removed?

If anyone has any answers to the above questions I would be very grateful!

 

[AttorneyOney]

The common law allows someone like a bank to "set off" a debt they owe you by the amount of a debt you owe them. It sounds like Wells Fargo has exercised that right.

Section 553 of the Bankruptcy Code allows the trustee to recover the amount of a setoff that occurred within 90 days in some limited circumstances. For example, suppose that you owe a bank $1,000 and have $100 on deposit 90 days before filing. Then suppose that you deposit $500 10 days before filing and the bank immediately takes the $600 you have on deposit. Because the bank has improved its position to the extent of $500 over what it was 90 days before filing, the trustee could recover $500.

Section 522(h) gives a debtor the right to exercise the trustee's 553 powers to the extent that the amount recovered is exempt.

I've simplified this a good deal, and I'm sure it still sounds pretty complex. The key number is the "insufficiency" in your account (amount you owe minus amount in account) 90 days before you file. The lower that number, the more you could potentially recover.

Concerning an account freeze: there is a Supreme Court case that says this doesn't violate the automatic stay. Practically speaking, there's not much you can do about a frozen account once you file. Conventional advice is to withdraw as much as possible from any account at at bank to whom you owe money before filing.

Concerning where funds collected by the trustee go: there's an elaborate priority scheme in section 507, and most taxes are of relatively high priority. Ahead of general unsecured debts, anyway. Why exactly do you care?

A judgment does not technically become void because of the bankruptcy. Your obligation to pay may be discharged, and it may be possible to avoid any lien that the judgment creditor has obtained to the extent it impairs one of your exemptions. Thus, the judgment may become worthless. When you ask about having "the judgment removed", what exactly are you thinking about, therefore?

 

[ihatearizona]

Reply

Thank you for your reply.

If the checking account was frozen by Wells Fargo Auto and NOT Wells Fargo Bank (checking account) as an attempt to collect on the funds we owe Wells Fargo Auto, wouldn't Wells Fargo Auto have to remove the hold?

I asked about the tax issue because the funds that were taken from our account were for the IRS for 2002 taxes we owe. Now we have a bounced check to the IRS and that never looks good.

I read on a website somewhere that while a judgment pretty much becomes null and void once the bankruptcy has been discharge that it does NOT remove it from the court system. I read that there is a document that needs to be filed - something like a relief from court judgment???

 

[Ladynred]

You are referring to a 'motion to vacate' . That will get rid of the judgment once the debt that caused it is discharged. Just make sure that you double-check to find out whether or not the judgment creditor also got a lien on any property you have. As AttorneyOney said, it is possible to "avoid" a lien but its something that you must pursue, it won't go away automatically.

 

[ihatearizona]

Judgment/Lien

I don't believe they were able to place a lien against our home since Arizona has a strict Homestead law granting property owners $100,000 in equity protection. I will double check though. Wouldn't I have to receive a copy of any liens filed against my home?

 

[Ladynred]

Not necessarily, no. In most cases, people find out about liens the hard way when they go to sell property.