Q&A: Will I Lose My Rent-Controlled Apartment After a Judgment?

Lee,

My husband and I seem to be judgement proof according to what I have read on the internet. Our yearly income is derived from monthly Bank deposited SS direct deposit checks and quarterly by mail small retirement annuity checks. We have no savings, and barely get by each month on my husband’s retirement income outlined above.

I am also in my early 60’s and an ill housewife confined to the home, with Acute Asthma, Incontinence, COPD, and Degenerative Rheumatoid Spinal Arthritis. I can barely stand long enough to walk a few steps. I became ill shortly after 9/11 transpired and could no longer breathe, walk, or function properly to seek employment. (Husband also has life sustaining medical problems).

We can no longer pay our monthly credit card debts as we are already doing without many food items, other basic survival necessities, and many life sustaining meds. (Also our medical bills through the years have been quite numerous).

We do not want to end up like Mrs. Santiago who had her rent stabilized lease and succession rights taken away from her last year which made televised newscasts and public headlines, when her landlord paid the trustee for all of her credit card debt after she filed for chapter 7 bankruptcy. 

Also they still raise credit card limits without even asking if the person wants a higher limit, knowing people are aging and there may come a time when due to situations beyond their control, they find themselves unable to continue making high interest credit card payments.... (there is an element of risk credit card companies are willing to take to make higher interest earned profits), and yet there were never any real safeguards enacted by them, in order to prevent giving out unrequested higher credit limits??

Where are the safeguards for the average citizen in all of the above??? This is indeed very sad.

If we could continue to make the monthly CC payments, believe me we would. Now our American pride is gone, and death seems to be the only escape, but we could never result to that. It is sad we have no living relatives to offer any advice or other options, but find ourselves all alone. If one of us dies the other will probably not be able to survive alone, but so far prayers seem to keep us here. (We believe where there is life there still may be some hope).

Questions and options of concern are outlined below, and greatly appreciated would be your advisement Lee, of which I thank you in advance for any options you may feel we could safely utilize.

1) In view of this situation since we are elderly, ill, and judgement proof should we stop all credit card payments and in writing return receipt requested notify both credit card companies of these circumstances? Please kindly advise.

2) I read some internet web sites stated to notify them all in writing that we are judgement proof, and can no longer make payments, and some web sites stated do not call or notify anyone at all, and to stop answering the telephone, and also just stop all credit card payments. (Please kindly advise).

3) Also we do not wish to make newscast headlines and also need to know if we are sued anyway, should we go to court if we are served with legal documents, and if we do can we still lose our rent stabilized Scrie entitlement apartment legal rights? (We also cannot pay legal fees for legal court related representation, so if we should still go to court what is the most advantageous way to defend ourselves, and also present our situation to the Judge, and hopefully win?). (Please kindly Advise)

Thanks again Lee and please know you have helped so many people in this type of situation and I am sure you will receive just rewards when the time arises, and rightfully so.......Bless you and many thanks Lee!

--Anonymous

Dear Anonymous,

For starters, you're not going to end up like Mrs. Santiago. Mrs. Santiago ended up in the situation she's in because she filed Chapter 7 bankruptcy. In a Chapter 7 bankruptcy, the court has the right to seize all of the debtor's non-exempt assets and sell them in an effort to pay off as much of their debt as possible before discharging the rest. In her state, her rent-controlled lease counted as one of those assets. You aren't filing for bankruptcy, and the odds are you don't live in a rent-controlled apartment in New York.  You're simply considering strategically defaulting on your credit cards.

The eventual consequences you're so worried about aren't even a factor unless the credit card company or the collection agency that will eventually buy your debt sues you. There's no guarantee that's going to happen. And if the collector waits too long, the statute of limitations passes and POOF! You have an airtight defense in court. You didn't mention how much you owe, but not every collection debt ends in a lawsuit--especially if the collector knows you're judgment proof (and we'll get to that in a minute). First we have to figure out if you're actually judgment proof.

It's important to note that exempt income alone doesn't make you judgment-proof. If you own a home and the creditor sues you and wins, it can place a lien on your property. If you plan to stay there forever and ever amen then this really isn't that big of a deal. A lien simply means that the creditor is claiming a right to a portion of your home's value. If you sell the property, the lien holders get paid before you do. You don't mention your state, but most liens expire after ten years (although in some cases they can be renewed).

If you own a car, the same thing can happen (although, for some reason, this is a lot less common). If you own the car outright and aren't still making payments on it, the judgment holder can attach a lien to the car, seize it and then sell it to recoup some of your unpaid debt. This is a factor you have to consider. But none of these things are even possible until the creditor sues you and gets a judgment.

That being said, I'm going to do my best to answer your specific questions.

1) In view of this situation since we are elderly, ill, and judgement proof should we stop all credit card payments and in writing return receipt requested notify both credit card companies of these circumstances? Please kindly advise.

Legally, I can't sit here and advise you to stop paying your credit card payments. I don't know how much you owe and without that information, I don't know what your risk is of being sued. What I can tell you is that, if it were me and I were elderly, judgment proof and living on a fixed income, the credit card payment would have to go. I've always had strong feelings about the lack of care given to the elderly in this country. Social Security is simply not enough. No one should choose between eating and paying their credit cards. You, and everyone else out there like you, deserve to live comfortably. If it comes down to the wire, prioritizing your debt is smart.

Now where on earth did you get the idea that you need to notify the credit card company via CRRR that you plan to stop paying? That's just kicking the hornet's nest. Letters sent CRRR are done solely for the purpose of creating a paper trail that you can use later, if necessary, to back yourself up in court. You don't need to back up the fact that you stopped paying your credit card bills. Don't bother notifying them. Trust me, they'll figure it out soon enough.

2) I read some internet web sites stated to notify them all in writing that we are judgement proof, and can no longer make payments, and some web sites stated do not call or notify anyone at all, and to stop answering the telephone, and also just stop all credit card payments. (Please kindly advise).

This is my opinion and nothing more, but the only reason to notify a company that you are judgment proof is if you're in danger of being sued. Nine times out of ten, the lawsuits come from the collection agencies, not the credit card company. I wouldn't notify the credit card company of anything. The last thing you want is for your letter to be read by someone who wants to play hero and assumes your letter claiming that you're judgment proof is smug. If you're planning to strategically default, calling attention to yourself in any way whatsoever right now is just going to cause more of a headache for you. You don't need that. You and your husband have had enough. And answering the phone when they call? Even more of a headache. Consider getting a new number. After the statute of limitations passes and the main lawsuit danger passes. you can send the collection agency that has your debt a full cease and desist order. Then you can start answering the phone again without fear. 

3) Also we do not wish to make newscast headlines and also need to know if we are sued anyway, should we go to court if we are served with legal documents, and if we do can we still lose our rent stabilized Scrie entitlement apartment legal rights? (We also cannot pay legal fees for legal court related representation, so if we should still go to court what is the most advantageous way to defend ourselves, and also present our situation to the Judge, and hopefully win?). (Please kindly Advise)

Your biggest worry is your rent-stabilized apartment, that much is clear. So listen carefully: If you get sued and lose, you end up with a civil judgement against you. A civil judgment is an entirely different beast than a Chapter 7 bankruptcy and will not result in the loss of your rent-stabilized apartment. The worst case scenario for you here is the judgment--which, again, will NOT cost you your apartment. 

I don't know what state you're in, but most states offer Legal Aid services of some sort for those who cannot afford them. Now, if you start getting intent to sue letters that's when you want to make the creditor aware of the fact that you are judgment proof. You certainly don't want to come out and say, "I'm judgment proof so you can't touch me!" because that's a challenge. You merely want to make the creditor/collector aware of the fact that you have NO assets with which to pay the debt either before or after a lawsuit. No property, no non-exempt income, etc. 

Also, many states offer low-cost or free legal aid to residents who can't afford a full-priced attorney. I don't know what state you're in, but consider looking into that ahead of time just in case. And be calm. You're not going to lose your apartment simply because you chose food over your credit card bills. 

Best of Luck, 

Lee