Chapter 13 bankruptcy is one of the best options for many people who have found themselves struggling with debts. If the money you are paying to your bills is not actually bringing down balances because all of the money is going to interest, Chapter 13 may be the way to get out of the financial mess you are in. Filing for bankruptcy protection is also even more important if you find yourself in a situation where your wages are being garnished or where you are being subject to abusive debt collection practices.
There are laws in place which are supposed to protect debtors from abusive debt collection efforts and from wage garnishments which take so much of their income they cannot afford to pay their basic bills. Unfortunately, Human Rights Watch warns courts are not really doing their jobs to protect people who have gotten badly into debt.
How Courts are Failing to Protect Debtors- And Why Bankruptcy May be the Answer
According to a recent report released by Human Rights Watch, courts are failing to protect families who have been caught up in debt buyer lawsuits. HRW has reported some families are bringing home almost none of their paychecks after debt garnishment orders are issued, which leaves them unable to provide basic necessities for their kids and unable to pay the electricity and light bills.
The problem for many families stars when debt buyers pay pennies on the dollar to purchase old debts. The debt buyers then file "hundreds of thousands of lawsuits each year." The debt buyers sue and debtors may not be aware they are being sued or may not be able to get legal representation to help them.
Many debtors end up not showing up in court when they are sued because they don't have lawyers or aren't sure how to handle the cases. This results in default judgments being entered against them. As HRW warns, many courts aren't scrutinizing the lawsuits which debt collectors are bringing and are just handing down judgments without any documentation proving the debts are actually owed. The courts re "rubber-stamping" cases and not even demanding proof either that the debt exists or that the debtor has been properly notified of the case and given the chance to defend against allegations he owes money.
The debt buying industry has become big business, with just one debt buying company reportedly collecting $1 billion annually from debtors. These big debt buying companies know how to make the court system work for them to get judgments against debtors, while debtors have no representation and no idea how to go up against the companies accusing them of owing. Not only can this result in wage garnishment orders, but some debtors have actually had their bank accounts frozen.
If your wages are being garnished and it is causing you financial hardship, you do not have to just accept this as a fact of life. When you file for bankruptcy protection, an automatic stay goes into effect to prevent any further collection efforts from taking place. When you file Chapter 13, you create a payment plan with your payments based on both your debts and based on what you can actually afford to pay. Wage garnishments stop and you are able to keep more of your own money so you can pay the bills and take care of your family while still permanently resolving your debt issues.