When an individual with debts can no longer afford to pay on their accounts, creditors have a variety of collection options. Most creditors begin by sending past due notices or demands for the delinquent amount. Some creditors will attempt to coerce payment through phone calls, often harassing the individual at inopportune times. Creditors have a variety of policies as to how long they will continue with phone calls and letters to try to get payments voluntarily. They may also make collection decisions based on the individual’s job situation, assets owned, and prior payment history.
When a creditor has decided that they cannot collect through direct contact, they often opt to file a lawsuit in an attempt to obtain a judgment against the individual. The purpose for the judgment is to expand their collection options. If a creditor gets a judgment entered, they then have the right to attempt to garnish wages (if the individual has a job), levy on bank accounts, and place liens on property. Some individuals may not be working at the time the judgment is obtained, and may have no assets that can be attached. However, a judgment is valid in California for 10 years, and can sometimes be renewed for periods beyond 10 years. Thus, a creditor will often get a judgment even when they may not be able to collect on it in the near future.
Many individuals contemplating bankruptcy erroneously assume that a judgment cannot be removed by a bankruptcy discharge. That is incorrect. As long as the type of debt involved would normally be dischargeable in bankruptcy, the debt can still be discharged even after the creditor obtains a judgment. It is usually best to file a bankruptcy prior to the entry of judgment to avoid any collection of money prior to the filing, because any money collected by the creditor cannot be recovered after the bankruptcy is filed. However, any amounts not paid to the creditor can be discharged, whether there is a judgment or not.
There are certain types of debts that are not discharged in bankruptcy, and thus, those debts are also not discharged if the judgment falls into one of those non-dischargeable categories. To determine which debts can be eliminated with a bankruptcy discharge, it is best to consult with an attorney to review your situation.
For more information or a consultation, please call 661-210-5657, or email mjf4bk@ca.rr.com .