I Suffer From Depression, Cashed Out My 401k to Pay Bills and I’m Now Being Sued. – Johnny

“Dear Lewis,

I have suffered from depression all of my adult life. I lost my good job several years ago, then got much sicker during the next year. I didn’t work at all for 3 years, now part time for the past 4. I was hoping to have remissions as I did in the past, but it has not happened.

I liquidated all my savings, IRA, 401K, and managed to pay all bills until end of 2009. Then I simply could not pay everything, gave up my apartment, went back to live with my folks, and stayed current with all creditors I could. I had no money to pay the others, so the calls came. At first I tried to speak with them, but they were so mean I gave up.

I’m very ashamed of this whole situation, but now have to declare bankruptcy. I see no other option, as I have no idea if or when I will be able to resume fulltime work (if available in the current economy).

I live in Massachusetts. My income is about $140 a week, $7200 a year. I can’t take the calls and letters anymore, and can’t cover even the bills I have managed to pay much longer. Depending on the time of the month, I have between $100 and $500. No property or assets more than books and furniture and household items (i.e., no flat screens, jewelry, anything like that) in storage and a $1500 value 1997 Ford car.

One of my creditors sued me and obtained a judgment. I got a copy of the judgment and summons for some kind of execution meeting. I must have gotten the original summons, but I must have missed it in the mail, with all the collection letters I got discouraged and stop opening them all.

I’m going to file bankruptcy, but am having to save/borrow money from family to pay the attorney. I’m afraid about this upcoming lawsuit and this court date. What does it mean? Will chapter 7 bankruptcy include it? What will the creditor try to do? Try to make me sell car and furniture and books and vacuum cleaner, television, etc.? What will the judge/trustee view this?

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I guess I just don’t understand how a judgment and collection works. Am I judgment-proof, or collection-proof? I have heard these terms, but what I read seems different and unclear.

I hope I’ve been clear enough. Thanks very much in advance for any help.


Dear Johnny,

It appears you are on the right track – moving towards filing bankruptcy. It would simply be better if you could get your case filed right away and not have to worry about the lawsuit at all.

But be assured that at the moment you file the bankruptcy, the lawsuit must immediately stop, no matter what point of the process it is in. Even if they already have a judgment at that point, and possibly garnishing, the lawsuit must stop the moment you file the bankruptcy.

There is a common misconception between being judgment proof and collection proof. No one is really judgment proof. If someone has a right to sue you, and they win, they get a judgment. But if you have nothing to collect against (unexempt assets, income, etc), then you are collection proof.

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Unfortunately, I do not know Massachusetts exemptions. But it sounds like you are collection proof, if not very close.

I would beg or borrow the remainder of your attorney fee so that you can get your case filed as quickly as possible. If for some reason your small amount of wages could not be exempted from garnishment, it would put you in an endless hole of not being able to get your attorney fees paid.

But again, you are most of the way home. You decided to file bankruptcy and are on your way to cleaning everything up.

Good luck!

My name is Lewis Roberts and I’m an attorney licensed in Florida and Georgia. My practice focus is consumer bankruptcy, real estate issues/closings, and mortgages. I also have Florida real estate broker and mortgage broker licenses. I am a proud member of the National Association of Consumer Bankruptcy Attorneys (NACBA), National Association of Consumer Attorneys (NACA), and a graduate of Max Gardner’s Bankruptcy Boot Camp. I enjoy helping people with decisions that impact their financial well-being.

Legal Disclaimer: This is for educational purposes only. It is not to be relied upon as legal advice. It also does not create an attorney-client relationship. No such relationship is formed with attorney without a written agreement.

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