Rights & Options When You Owe Money

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1 Are you 60 or over? If yes, free legal assistance is available. If you have a debt collection or other consumer problem, please call Consumer Law Project for Elders Call SLS for help if you are under 60. Search our website for help. Statewide Legal Services CONSUMER LEGAL SERVICES SELF HELP SERIES Rights & Options When You Owe Money January We offer free legal help in many areas including: welfare SNAP (food stamps) divorce child support domestic violence bankruptcy special education nursing home care health insurance eviction foreclosure...and more See reverse side for more about Legal Services.

2 Introduction Are you having trouble paying your bills? You are not alone. Many people fall behind at some point in their lives. Don't worry that you will go to jail -- you will not. Owing money is not a criminal matter. You might think that bankruptcy is the answer to your problems. But, whether you need it and how much it can help you depend on your situation. For some people it is the best choice, but for many others, it is not. Bankruptcy is a legal process that can get rid of certain debts and give you a chance for a fresh start. It does not get rid of all debts. You will still have to pay child support, alimony, unpaid taxes, and other bills like student loans and your mortgage. This booklet talks about certain types of debt, such as credit card bills utility bills medical bills personal loans...these are called private unsecured debts. The rules are different for other debts, such as child support student loans taxes secured debts...you will probably have to pay these debts. You should talk to a lawyer. Is bankruptcy the best choice for me? Bankruptcy is a serious step that is not right for every person. You may not need to file bankruptcy because you're already protected. This booklet gives information on who is protected. If you are thinking about bankruptcy, talk to a lawyer soon to fi nd out your choices. 2 Call SLS for help or If you're under 60, call us for help. Search our website for help Connecticut Legal Services Bridgeport 211 State Street New Britain 16 Main Street New London 153 Williams Street Stamford 20 Summer Street Waterbury 85 Central Avenue Willimantic 872 Main Street Greater Hartford Legal Aid Asylum Avenue Hartford, CT New Haven Legal Assistance Association State Street New Haven, CT Consumer Law Project for Elders (CLPE) Free legal assistance to seniors 60 and over throughout CT who have consumer problems Legal Assistance Resource Center of CT (LARCC) Community education and public policy advocacy organization addressing issues of importance to low-income Connecticut residents. 363 Main Street, Flr. 3-1 Hartford, CT This booklet was produced by the Legal Assistance Resource Center of Connecticut in cooperation with Connecticut Legal Services, Greater Hartford Legal Aid, New Haven Legal Assistance Association, and Statewide Legal Services. The information in this booklet is based on laws in Connecticut as of 1/2014. We hope that the information is helpful. It is not intended as legal advice for an individual situation. Please call Statewide Legal Services or contact an attorney for additional help. January 2014 Statewide Legal Services or If over 60, call CLPE for help

3 Where can I get help? Statewide Legal Services Consumer Law Project for Elders Do I NEED to fi le bankruptcy? If your income is very low and you have few assets, you might not need to fi le bankruptcy. Why? Well, chances are your creditors cannot collect money from you because you are already protected. (You do not have money or property that the collector can legally take.) Free legal representation may be available. Contact the Clerk's Offi ce shown below and ask for an application for the pro bono panel. New Haven County: 157 Church Street, New Haven Fairfi eld County: 915 Lafayette Boulevard,Bridgeport Budget Counseling: Approved credit counseling agencies - get a list from U.S. Bankruptcy Court Cooperative Extension Service of the University of Connecticut. 305 Skiff St., North Haven See our other consumer booklets: Defi nitions Creditor Someone you owe money to Debt Money you owe (unpaid bills) Debtor Someone who owes money Discharge - The legal word for erasing or getting rid of your debt through bankruptcy Judgment proof Creditors cannot collect from you. As long as your situation remains the same, it will be impossible for creditors to collect on the debt. However, as soon as your situation improves, creditors can take action. So, the fi rst thing to fi nd out is, Are you already protected? You may hear the words judgment proof which is the legal term for being protected after a court has entered a decision (judgment) stating you owe money to someone. Find out if you are already protected Am I Already Protected? IF THEN q You do not own a house, or q You do not have a car worth more than $3,500, or q You take home less than $348 a week ($360/wk in 2015), or q Your income is from Social Security, public benefits, disability benefits, etc. You are already protected. You probably do not need to file bankruptcy right now. You are judgment proof. 10 Call SLS for help or Search our website for help 3

4 How does being judgment proof protect me? Judgment proof means your creditors cannot take your money from you. You can be sued, but you will not have to pay the debt as long as your situation stays the same. If it changes (for example, you go back to work and make enough money), you may have to pay the debt. This type of judgment can last years. Note: A judgment is a court order. If the creditor wins the case, the judgment will say you owe your creditor a certain amount of money. A judgment does not require that you pay anything. A court can still enter a judgment against you even if you are judgment proof, but creditors cannot collect money from you. How can a creditor collect money from me? Until a creditor sues you and wins, he has only one way to collect from you ask you to pay. He can call you and send you letters. Once the creditor sues you and wins, the creditor has three ways to try to collect from you: Take money from your pay, Take your property, Take money from your bank account. But, if you are protected (judgment proof), a creditor cannot do any of these three things. Even if a creditor sues you and wins, he can only collect from you if You take home more than $348 a week ($360/wk in 2015), or You have a house or other property or assets, or You have money in a bank account that is not protected. 4 Call SLS for help or What if someone signed the loan with me? The other person (the co-signer) is still responsible for paying the debt even if bankruptcy erased it for you. More about the Bankruptcy Process You may hear the words fi le for bankruptcy or declare bankruptcy they both mean start the legal bankruptcy process. It usually takes at least six months to fi nish the process. Chapter 7 is the most common type of bankruptcy. It will cost you around $300 to file the papers in court. If you can t afford the fee, you can apply to have the fee waived or to make payments. You can get the forms at the Connecticut Bankruptcy Court clerk s offi ce or online. Before you file for bankruptcy. Connecticut Bankruptcy Court You must complete credit counseling BEFORE filing for bankruptcy. To get a list of approved Credit Counseling Agencies, go online to CT Bankruptcy Court or ask the court clerk. The counseling is $50. If you can t afford the fee, ask the agency for a fee waiver before counseling begins. Do not sign up for any counseling until you have talked to a lawyer about whether bankruptcy is the best choice for you. Bankruptcy is a complicated legal process. Search our website for help 9

5 What debts CANNOT be erased? What can a creditor do if he sues me and wins? You will still need to pay debts, such as: Child support Alimony Most student loans Most taxes Secured debts (car loan, mortgage, etc.) Debts not listed on your bankruptcy papers (includes debts you get after fi ling bankruptcy) Debts where you were dishonest Drunk driving fines, criminal fi nes, traffi c tickets, etc. Can a creditor... Take $ from your pay? Take your property? Take $ from your bank account? NO, not if... You take home less than $348 a week ($360/wk in 2015). You rent so you don't have any property to take. Your money is protected (see below). YES, if... You take home more than $348 a week ($360/wk in 2015) now or when you go back to work. You have a house or other assets. Your money is not protected. Can I keep my car? It depends. If you owe money on your car, but you are not making payments, the lender can repossess (take back) your car. If you don t owe money on your car, you can usually keep it if it is worth less than $3,500. Note: You can keep your clothing, household items, and at least $10,775 in property and cash. If you own a home, you also can keep up to $75,000 ($150,000 for couples) in equity. What happens to my credit rating? Bankruptcy will stay on your credit history for 10 years. You can probably still get a credit card or loan after bankruptcy, but it is up to the lender. It might be harder to rent an apartment or get certain jobs. You probably do not NEED to go bankrupt now. Is money in my bank account "protected"? Some of the money in your bank account may be safe. But, you may have to fi le certain papers in court to protect it. Creditors cannot take money from your bank account if it is a direct deposit and comes from: Social Security benefi ts (retirement, disability, survivor) Unemployment benefi ts State welfare Child support Alimony Pension Disability benefits (SSI and SSD) Automatically Protected Money Whichever is higher... 2 months' worth of benefits - or - $1,000 8 Call SLS for help or Search our website for help 5

6 Is money in my bank account protected? (cont.) Limit on Amount of Money Protected Two months worth of your direct deposits of child support, alimony, pension or government benefi ts or $ whichever is higher is automatically protected. Do not keep more than this protected amount in your bank account. If you do, the creditor may try to take that money. However, you will be able to get that money back after a court hearing. Direct Deposit of Paychecks Be careful if you have your paychecks directly deposited. A creditor CAN take that money from your bank account even if you make less than $348 a week ($360/wk in 2015). However, if you take home less than $348 a week ($360/wk in 2015), you will be able to get the money back after a court hearing. TIP: Instead of getting your pay directly deposited, it might be a good idea to get a paper paycheck. Are there times when I should file bankruptcy? You might want to think about bankruptcy if: Your income or assets change (then the creditors have something to take). You are too worried and stressed about your debts. You are about to get a job and creditors will be able to take money from your paycheck. If you have not been sued, this is probably not the time you need to fi le bankruptcy. How can bankruptcy help me? You might be able to: Get rid of certain debts. They are legally erased ( discharged ) so you do not have to pay them. Stop collection calls. Stop most wage attachments (money taken from your pay to repay the debt). Keep any wages, money, or property you get in the future. Keep utility service -- either turn service back on or stop a shut off (if it was because you did not pay your bills). Stop foreclosure of your home (for some types of bankruptcy). What debts CAN be erased? Bankruptcy can get rid of unsecured debts, such as: Medical bills Credit card bills Utility bills Personal loans Types of Debt Secured & Unsecured Is there something the creditor can take back or repossess? q NO then it is an unsecured debt and can be erased by bankruptcy. q YES then it is a secured debt and cannot be erased by bankruptcy. Example: Your creditor can take back your car if you don't make your payments. 6 Call SLS for help or Search our website for help 7