Exemptions, Exemptions, Exemptions!
OK – so you have been sued by a creditor. Maybe even a judgment has been entered. Many people think that is the end of the matter. The lawsuit, while anxiety-inducing, was nothing. Entry of the judgment itself, with some exceptions, is no big deal. Rather, it is the effect of the judgment and what it allows the creditor to do that is important. Lawsuits thus should never be ignored.
In all states, judgments can last for a period of years unless renewed. That does not mean that they go away. They don’t. They just earn interest at whatever the statutory rate is and get bigger. The renewal period concerns the enforceability of the judgment. For example, judgments in North Carolina last 10 years and can be renewed for another 10 years. That means they are potentially enforceable for 20 years. In Georgia, the renewal period is 7 years, and in Pennsylvania, its 5 years for real property and 20 years for personal property. So judgments last forever and can be enforceable for a long time.
Judgments can be enforced 30 days after their entry. Sometimes a creditor or court will send notice of the entry of judgment. More often they don’t, so the debtor must be aware of when a judgment is likely to be entered.
To collect on a judgment, creditors have a variety of tool at their disposal – the most common is to “freeze” (levy on) bank accounts and garnish wages. Only a handful of states do not permit wage garnishment, North Carolina and Pennsylvania being among them. Other remedies are the seizure and sale of assets that are owned free and clear. However, bank accounts and wage garnishment are preferred because creditors do not want your pots and pans and old furniture as these are not worth much and will not bring in very much if sold. And even if assets are seized, there are going to be storage and/or costs of sale, which have to be taken into account.
However, all states have certain exemptions from levy and seizure of assets by judgment creditors. A debtor’s assertion of exemptions is in effect telling the creditor “you can’t touch this.” So that is why they are extremely important as it allows you to shield exempt assets.
The exemptions are different in the states and the procedure for asserting the exemptions is different too. Since I am admitted in Georgia, North Carolina and Pennsylvania, I am going to focus on each of these states. If you have a judgment against you in another state, then you should consult an attorney in your state. However, I am part of a network of attorneys throughout the US and if you are in another state, I may be able to refer you to an attorney in your state with whom you could consult about the effects of a judgment in your state and your state’s exemptions. So please feel free to ask me if I can be of help.
Bottom line – if you are sued, don’t despair. It is wise to consult an attorney as soon as you are sued so you can assess the risks, weigh your options and decide upon a strategy. Know that debts almost always can be resolved, either before a lawsuit is filed, after a lawsuit is filed or even after the entry of judgment. If wage garnishment or levy of assets is a concern, payment arrangements can be worked out. Depending on the assets and debts, bankruptcy can be the option of last resort if all other efforts fail. However, it is important to get an attorney involved in the process as early as possible so that assets can be protected in the event judgment is entered. And that is where exemptions come in.
Copyright (c) 2012 by Rachel Lea Hunter
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