The news is usually a source of ideas for the Soapbox, second only to clients.  The news this month echos all too familiar themes.

• Notices of foreclosure sales must be single handedly supporting my local newspaper, the Mercury News.
• AP and the NYTimes write with amazement that mortgage loan modifications aren’t happening.
• The Mortgage Bankers write letters to the editors opposing a bankruptcy solution to the housing debacle.

Meanwhile, the average income of people through my door  has to have increased $75K a year in the past four months.  Bankruptcy now looks good to people making well over $200,000 a year.

The formerly well to do are following more and more long established small businesses that have hit a wall.

The news tells us the recession is ending;  if that’s so, the casualties will persist long after  the economy is supposedly recovered.

We were exploring the timing of a bankruptcy case, trying to live free in the house to be foreclosed while avoiding a garnishment on the working spouse’s wages.  I was thinking about comparing the cost of a garnishment to the cost of renting a house:  the client was thinking that a wage garnishment was forever!

Not so.  Bankruptcy eliminates the right of any creditor to continue to collect on its debt.  The prohibition requires that the creditor with a wage garnishment instruct the sheriff to cease withholding money from the debtor’s wages.

Further, the debtor may be able to recover from the creditor funds garnished in the 90 days before the bankruptcy case was filed, as a preference.  (My experience is that preference actions over sums this small are seldom economic, however.)

The client was also worried that multiple judgments could result in multiple garnishments at the same time.  Again, not so.  California law permits only one garnishment in place at a time and caps what the garnishing creditor can take from each paycheck at 25% of after tax wages.

The world was a lot less scary place for the client after we found and destroyed another bankruptcy myth.