Is it necessary to file for bankruptcy?
Whether or not you must file for bankruptcy depends on your situation. If your get behind in your credit card debt or other unsecured debt then the creditor can sue you to get a judgment against you for the amount of the debt, plus interest, penalties and attorney fees. You will know when you are being sued as you must be personally served with a petition and you will have a certain amount of time to respond to it. All of the instructions for your response and to whom you must respond will be included in the summons attached to the petition. If you do not respond to the petition, then a default will be entered against you and the creditor will obtain a judgment on what it has requested in the petition.
That a creditor will sue you is a possible scenario; however, it is also possible if you don’t have a means to pay the creditor that it will write off the amount of your debt and not attempt to collect it. In essence, whether you will be sued or not depends on your ability to pay the debt back. If the creditor believes you’re unable to pay it back then it will not waste money paying an attorney his or her fees and costs to obtain a judgment and take the steps necessary to collect it.
If a creditor determines that it will be able to collect its judgment against you, then it will proceed with the action. Once it has obtained the judgment, the judgment will continue to accrue interest until it is paid. Furthermore, it will be listed on your credit reports and it will result in substantially reducing your credit score. Judgments will stay on your record for a certain amount of time depending on your jurisdiction, and even if the judgment is paid, your credit report will reflect that it is paid, but it will remain on the report for at least seven years. Furthermore, judgments can be renewed when they expire and the length of time depends on your state laws.
Collecting the Debt
In general, the creditor may do one or more of the following to collect the debt:
A. Require you to complete an information subpoena where you are required to answer detailed questions regarding your income, assets, etc. or you may be required to attend a hearing before the court to be questioned on your income and assets.
B. The creditor may place a lien on any real estate you own by filing a copy of the judgment in official records in the county where your property is located. When that property is sold, the lien must be paid to clear title to the property.
C. The creditor may garnish your wages up to a percentage regulated by state law.
D. The creditor may seize personal property which has value, such as a vehicle, antiques, bank accounts, etc. Pursuant to your state law a certain amount of personal property is exempt from the creditors
Every state has different regulations as to how a creditor may collect a judgment, the length of time the judgment is valid, the amount of personal property exempt from seizure and the percentage of your pay that can be garnished. Therefore, it is necessary to obtain specific information from an attorney where you live.
If your credit score has been demolished by unpaid bills, you have nothing to lose by filing bankruptcy. In actuality, bankruptcy is a new beginning and chapter 7 will wipe out all or most of your debts and often times you will be able to obtain credit again shortly after your discharge. Most bad consumer debt will remain on your credit report for 7 years whether paid or not, while paid or unpaid judgments may remain on your credit report for 7 years or longer depending on state law. Lenders are less likely to lend to you with bad credit, then to lend to you after a bankruptcy.
Article By: Lynette Silon-Laguna Google+
