Judgments and Tax Sales

good afternoon everybody it's jeff jenkins and eric clayman again for another of our weekly facebook live episodes uh eric likes to say it's the best 20 minutes on i don't know what on the internet on the internet okay um today we're going to talk about two things assuming we have time the first one is uh judgments in new jersey how a creditor gets a judgment and what they can do to you once they have one and the other thing we want to talk about are tax sales that would be property tax sales or sales by a municipality for money that's owed to them for water or sewer or if you owe it to the county that you're in has to be owed to a governmental entity um for example if you're in south jersey and you owe money to the new jersey american water company that's not going to be a lien on your property but if you own money to the city of camden or water or sewer that's going to be leaning into property and that's the kind of stuff we want to talk about and and really one of the reasons that we're talking about these two things is that um we've talked so much about the pandemic and the moratoriums and moratoria as long as we're not in a moratorium yet yeah um and there are some things that uh aren't covered by these uh restrictions and the two that we're going to talk about today are two of the big things that you need to understand there is nothing in any of the coveted executive orders legislation or anything else it's going to stop someone from getting a judgment against you and executing on it or getting a tax certificate and doing things with it that we'll talk to you about so eric do you want to start talking about judgments a little bit sure let's do that jeff and jeff and i have both uh we've been doing this for a year now for a year and that's the facebook live stuff not right not bankruptcy work bankruptcy worked for more than 35 years yes the facebook live show if you can you can go to our website you can see the previous episodes but we've often emphasized if you are sued if you receive a summons and complaint you must respond to it by seeing a lawyer otherwise default and default judgment will be hindered against you so basically when jeff is talking about a judgment most common judgments are unfortunately default judgments where someone sues you and you don't respond you receive a judgment if someone sues you and you go to trial and lose there will be a judgment against you and those are pretty much um the beginning of collection actions that we see now sure there's many judgments where there's a car accident case involved that's the case contact your insurance company and there's other lawsuits that's what memphis lawsuits like that where you have insurance to cover you but we're mainly talking today about a summons and complaint which deals with a bank or collection agency that thinks you owe them money and they've hired an attorney to sue you if they've hired an attorney to sue you you must hire a lawyer to defend yourself otherwise if you don't within the time frames listed on the summons the complaint will be moved to judgment status and jeff once there is a judgment it's um there's about three four or five things that happen in new jersey one of which is it becomes a lien against it can become a lien against your real estate it's serious instantly the moment the judgment's entered signed by the judge it becomes a lien against any real estate you have in new jersey not just your residence you have 10 properties it's a lien against every one of those 10 properties and that's serious because if you want to then buy sell or refinance real estate in new jersey and you have a judgment you're going to have to pay it so that's one of the um bad things that happen if a creditor sues you new jersey although it's considered a progressive or liberal or blue state when it comes to giving banks and creditors opportunities to collect it's one of the harshest our neighboring states don't have remedies for banks that they have here in new jersey so it's a popular place for collection agencies to work number one by our end collection lawyers to work number one once there is a judgment against you in addition to the lien we just talked about real estate so i guess this is number two there can be a wage garnishment against you before we get into that maybe we should talk about once a creditor gets a judgment what are they going to do then what what's the next step they take do they talk to the person they got the judgment against how do they find out i don't think so i look they're going to send a demand letter at first then they're going to going to sue you and if you haven't responded and they get a judgment they're going to talk to their client about what's in the file and when you filled out your credit application where were you working and where and did you ever pay on the account where are your bank accounts and those were the two things i was going to talk about was they can garnish your wages and they can levy your bank account and that is a miserable experience to go to the bank and try to pay rent there's no money there i guess i was getting that post-judgment discovery that they might engage in if they didn't have all the information they need about you they could issue a subpoena requiring you to appear in their offices and answer certain questions for example what bank do you use who's your employer what's the address the phone number all those kinds of things they don't have that already they want to get it so they can do what eric just talked about and that is they want to collect their money somehow and the two big ways that we can think of besides just if you want real estate sitting there uh the creditors sitting there and waiting for you to have to sell it and then they would get the money on their judgment um the other things to do would be for them to garnish your wages or to levy a bank account like eric was saying and that is a miserable experience jeff most people in new jersey and certainly most of our clients but really most people live paycheck to paycheck and even if you're doing fine and not facing the possibility of a bankruptcy you have enough money in the bank to pay your rent to pay your car to pay your car insurance and if a bank comes and gets a judgment a creditor gets a judgment against you pardon me the creditor can then ask the sheriff's office to levy against your bank account and yet there are certain protections in new jersey and federal law about that but for the most part if there's wages in your bank account you're gonna lose that money right that's right you absolutely will if unless you can show for example that your only income is social from social security and if that's the case then the creditor can't take that money out of your checking account and your bank knows that too so if your bank was presented with a levy they know all you get is social security they'll they'll contact the creditor and say you can't do this the person just has social security income and that's it but other than that they can take the money and the process works as follows they hire the sheriff's deputy to go out to the bank and to levy the funds the funds are then frozen and the creditors attorney has to do a motion for turnover which is all noticed to you the banks all charge approximately a hundred dollars to execute on your own bank account isn't that like really giving it to you you lose your money and you get charged another hundred dollars and then all your checks and then all your checks bounce too it's so miserable um then the money is just frozen for a while they have to go to state court again to get a court order to turn the money that's been frozen over to the benefit of them for their judgment now during this time jeff even at this late stage that i've just described the money's frozen we can file bankruptcy and release those funds can't we absolutely yeah and we've talked about things like this before and it's important to interject it here as we talk about judgments understand that if we file a bankruptcy anywhere during the process before the creditor gets their hands on the money maybe even then we can do something but certainly before then we can and it just like eric said many times it stops them in their tracks from what they're doing they just have to stop they can't continue with trying to get your money they can't continue with a lawsuit if it hasn't gone to judgment yet everything is frozen as far as they're concerned with you um once the bankruptcy's filed and that's right and jeff we talked about the second collection action against consumers in new jersey which would be the most common one which would be a um wage garnishment in that situation again the sheriff's office is hired by the creditor and the creditor and the sheriff's officer then goes in person on writing to the employer and says you have to give me up to a certain percentage of your wages to a certain amount and the employer then your next paycheck shows hey i made a thousand dollars this week 200 in taxes a hundred and health insurance and and two hundred dollars to this creditor what a terrible feeling really and your employer has to do it because what he's been served with is an order from a state court judge to him that he must do this he must take a certain amount of your pay and give it to the creditor each payday and generally when we think about what that amount is going to be it's going it can't be more than 10 of your gross or i think 25 of your net but most the time not understanding exactly what the net's gonna be they're going to go after 10 percent of the gross and the good news is there is any you can only have one of these at one time doing something to your pay you can't have five creditors taking money out of your pay you can have one taking money out and four others lined up to though if the other levying creditor is for child support or alimony this can be done along with that more taxes and that's the next one if the irs has a wage garnishment against you that doesn't count on what jeff said no and those are significant i mean that's like 25 right those are 10 percent they're taking a lot of money the irs or the state and so do we have hello usually it's just the irs we don't see the state do a lot of wage commissions do it but the irs does it can we stop the irs by garnishment by filing bankruptcy absolutely you know the irs is kind of scary to a lot of people uh the new jersey division of taxation perhaps as scary as the irs but in a bankruptcy context these are just they're just two more creditors you know and they have to abide by the bankruptcy laws the protection provisions of the bankruptcy laws um and we deal with them all the time and and buying they're treated like another creditor they don't get you know special treatment they you know you don't sound a trumpet when you're in court and they're talking about the irs or something and the attorney marches in and they throw rose petals as he walks in well we haven't been to court in over a year but my best recollection is they don't do that right and um many people come in to see jeff and i and they'll say well i owe 40 000 in credit card debt 10 000 medical bills some payday loans some surcharges which we can kind of talk about today if we have time and i owe the irs but i have a payment plan with the irs they were garnishing my wages but i have a payment plan i want to keep that well the irs just as uh jeff just said is treated like every other creditor the payment plan you get in bankruptcy will be a better payment plan anyway because most of the time interest stops and penalties go away there's exceptions but in the general sense we're saving you a lot of money by filing bankruptcy as to the irs as well as credit cards medical bills payday loans personal loans surcharges and whether they we are turned into judgments or not right right and we've talked about taxes a little bit before and how that works you know we've mentioned these things before but uh they can go on a people can go on our website and there's typically a title if you go if you click on the video portion there's a title to each one of our thursday uh facebook lives and if you can just click on the one that says taxes it's it's 20 minutes and you'll really learn a lot about um can bankruptcy help you if you owe income taxes yeah just a quick aside if the irs files a lien against you that's how they become a secured creditor and that puts them in a position to do all these things that we're talking about um or the state files uh judgment yeah it's not it's not a judicial lien because they don't have to file a complaint and stuff like that in court they can just get it automatically by certifying that you owe so much money now they've got a lane against you um and we talked about judgments being a lien against real estate that you would have the state and the irs liens would also become a lien against any real estate you own for the state it would be anything in new jersey for the irs they have a lien against any real estate you own anywhere you know like your your second home in florida your third home in uh maui covers everything everything yes i think we did a nice job with judgments here i think so we've explained how the judgment occurs what the creditor can do once they obtain a judgment and the fact that we're here to help people with judgments but there's also as you pointed out in the introduction despite the coveted restrictions on some litigation one type of litigation that we're seeing all the time are municipalities and counties but mostly as municipalities multi-municipalities of accounting so it's municipalities who have continued harsh collection actions against people who own real estate in their municipality that's right and what we're talking about here um we call them tax sales or a tax sale certificate if if you owe money uh to your municipality for property taxes water sewer or you owe it to the county you live in that an entity that's affiliated with the county not the new jersey american water company but camden county municipal utility authority okay so if if they're affiliated with uh the township you live in or the county you live in and you don't make the payments for water sewer property taxes it's going to be an automatic lane against your property and once a year all the municipalities in new jersey have a tax sale and but not on the same day no not on the same day the dates are everywhere you know it just depends on the municipality it could be january february march april december whatever but one day here they have them and um fundamentally what they're trying to do is get somebody to pay that money that you owe so that so that the municipalities at least getting what it should get and that because they need that money to operate the schools and other things in the municipality um so uh they the one day a year when they have these tax sales they there might be a group of people used to be in a room now maybe they're on the computer i don't know but um they'll read out somebody's name and address and this is how much they owe and the people that are paying attention to this tax sale can actually bid on uh getting a tax sale certificate and the bidder with the lowest interest rate wins and gets to to pay the municipality what's owed to them and in return that person gets that entity gets a tax sale certificate from the municipality entitled in them to um whatever interest they did on that amount of money but once they have a tax certificate in them i don't want to lose you i'm not going don't worry so far okay skip all over the place but um while you might bid and get a tax sale certificate for five percent and you can charge five percent on whatever amount of money you pay that day the next time that person uh doesn't pay their property taxes or water or sewer and they've got 10 days to do it they don't then as a tax sale certificate holder you can pay it and now you're not bound by the original interest amount you get 18 so you can see why this it might be conceivably attractive for investors and it's it's a lien in the property you're not going to get rid of it you just you just won't so everything after that initial certificate they're getting 18 on any other money that they they pay to the municipality um and then maybe they just don't want to sit tight earning 18 percent jeff that's right and that's you want to talk about that sure at some point two years or more after the tax sale occurs they the creditor who purchased the tax sales certificate is able to foreclose on the property and it's a different kind of lawsuit than other lawsuits if the person hasn't redeemed the money they haven't paid money yeah you're right if the debt is still outstanding right and typically you find out the payoff from the municipality even though it's through the investor but regardless if it's still outstanding and it's been more than two years you can lose your home for a pittance and we see this a lot with inherited properties and with reverse mortgages properties that don't really even have regular mortgages because most regular mortgage companies not all pay your real estate taxes for you but if you inherit a property or own a property without a mortgage or a mortgage company that doesn't pay your real estate taxes for you and it's been two years it's been a year it's been whatever you are at risk to losing your home through a tax sale and once they apply to the superior court and get a judgment the final judgment acts as a deed re-vesting or vesting the property interest in the creditor it's horrible and it's fast it's really fast and maybe might take them two months from the time they file their initial pleading in state court to the time they go to state court and in effect get a deed from the judge giving them the property now it's their property it doesn't belong to the person that owned it before it belongs the creditor the taxed uh sale certificate holder and again it could be just for a pin it could be for a small amount of money that's right i mean they could get a million dollar property for ten thousand dollars um but the good news is we can file bankruptcy if we need to you know if the person can't come up with the money to pay this thing off we can do a bankruptcy just like it stops creditors in so many other ways it would stop that tax sale certificate holder from doing anything the moment the bankruptcy's filed everything stops so if they didn't get an order from the state court judge giving them the property we can stop that process and we can pay what's owed to the municipality for taxes water sewer through the chapter 13 trustee and we should talk about um fraudulent transfers too we can do more is what is talking about fraudulent transfer under the bankruptcy code it's a it's it's a thermal part fraud it doesn't mean that fraud was involved but under the bankruptcy code debtors or their trustee and you can call us if you have questions about this it does get complicated can even after the property is lost to a tax sale can sue the tax sale purchaser and say the amount of consideration for the property was so unconscionably unconscionably low that it was amounts to a fraudulent transaction jeff's example where you could lose a million dollar property for ten thousand dollars in taxes even after the deed was transferred you could file bankruptcy and could bring a lawsuit claiming fraudulent transfer and you could be successful although um we can never guarantee the success of that type litigation because it's complicated but what we're saying is talk to an attorney if you've received paperwork that indicates that you might have lost your property due to a tax out yeah it is complicated we we understand all the ins and outs of the thing and if you come in and see us and you've got a situation like that we're going to go all through it with you to see if uh it's the kind of thing that we need to go back into that we need to go into bankruptcy court for and asked to have this transfer for the state court judge sign an order undone as a result of what's bankruptcy fraudulent transaction that's not meaning that it's fraud but meaning the sale price was just so low that it amounts to a fraud exactly i think we're in pretty good shape for a day we did well we got our two topics covered you know we really did it was a good complete show and i hope that you all were listening and enjoyed it jeff and i enjoy presenting it to you and if you ever have any questions just give us a call we have plenty of paralegals and attorneys standing by we'd love to help you that's what we do that's right that's our job that's what we do so hopefully you'll tune in and see us next week same time same place two o'clock on thursday afternoon and until then stay safe and god bless.