Do You Need a Mental Health Bankruptcy? When Financial Protection Isn’t the Only Concern

Concern Posed Asked By Real Client: I will get a judgment if I don’t file for bankruptcy. 

Don’s Answer: 

If you do not respond to a Summons, the Creditor will get a judgement against you. While it will take some time after that, the Creditor could then get a lien on your house. Except, you don’t own a house… The Creditor could garnish your wages. Except, you don’t have any wages. Your only income is Social Security, and the Creditor cannot garnish Social Security. The Creditor could also levy (get money from) you bank account. That one may be a bit more trouble.

When there is a levy on a bank account, the bank has to send you the paperwork they received from the Creditor, and that paperwork must include the form for you to tell your bank the account is exempt for levy, because it only contains Social Security. Many banks simply refuse to send the money to the Creditor, because they know it is Social Security. If you bank does not have that policy, then you have to complete the paperwork saying the Creditor can’t have your money because it is Social Security.

So– do you need to file bankruptcy to prevent a judgement? The Creditor cannot get anything from you, so from a financial analysis standpoint you do not need a Bankruptcy. However, you may need a Mental Health Bankruptcy. The Creditor that gets a judgement against you has the right to try to collect that judgement. They can send you bills, they will report to the Credit Reporting Agencies that they have a judgement, etc.  And some people just cannot tolerate that.

I can tell you–Financial Analysis says you do not need a Bankruptcy. But you have to tell me whether you need a Mental Health Bankruptcy. Those are usually pretty simple, but still going to cost at least one to two thousand dollars. Is your mental health worth a couple of thousand dollars? That is a question I cannot answer. You have to make that decision. Financially, you do not need a Bankruptcy. Mental Health? That is up to you. You and your family have to make that decision. Thanks for the question. Don