Bankruptcy Lawyers

This question seems to always come up and rightfully so. It is important for everyone to know what creditors can do “if I don’t pay them”. This question should be answered and understood when deciding whether or not to file for bankruptcy. Why file if nothing can happen to you!

Collection actions by creditors vary from state to state, but generally they can do a number of things to collect a debt. First, they usually make harassing phone calls to you, your family, and even your job. If this doesn’t work, the creditors sometimes take it a step further by filing a lawsuit in order to get a judgment against you for the amount of the debt owed (plus fees, interest and attorney’s fees). Once the creditor obtains a judgment the creditor must then take the proper steps to enforce the judgment.

In general, creditors have a number of options to collect judgments. In the majority states, the most common action taken by creditors to collect judgments is to garnish wages. Wage garnishment usually has a devastating effect on personal finances (even with a cap of what percentage can be garnished)and leads people to bankruptcy(bankruptcy can stop wage garnishment). However, there are some states that do not allow the garnishment of wages (Texas being one of them), but most of them do.

Creditors also have the option of turning judgments into liens against real estate (real property) and making the once unsecured debt now a secured debt against any real estate the debtor owns. What does this mean? Well, it means that when a debtor tries to refinance, sell or transfer the piece of real estate, the debt must be paid in full (with interest).

Third, creditors can seek to set aside transfers of assets, such as money paid to family members. If the debtor paid money or gave assets to family members over the last few years, creditors can seek court orders to have the money or assets turned over to the creditor – in order to satisfy the money owed or a portion thereof.

Fourth, creditors can seek a court order to force the sale of assets to satisfy the debt. Therefore, if someone owns personal property like automobiles, collectibles, furniture, ect….that are worth more than a particular state allows the debtor to exempt, the assets can be sold (upon court order).

Finally, creditors can also attempt to freeze the debtor’s bank accounts. Again, the creditor must seek a court order to take the money out of the debtor’s financial accounts, and can only take amounts that exceed the state’s applicable exemption.

Clearly, there are a number of actions that creditors can take in order to collect a judgment against a debtor. Every state has laws governing collection of judgments, so the above list is not complete and exhaustive for every state, but rather a basic look at what can happen in general. In order to properly understand the laws in your state, it is recommended to discuss your situation with an attorney in your state.

A good attorney can prevent most of these undesirable events from happening to a debtor by assisting them with a bankruptcy filing under either Chapter 7 or Chapter 13.