When a debtor(s) defaults on an account, the creditor has a variety of collection options. Most creditors begin by sending past due notices or demands to see if the debtor can/will bring the account current voluntarily. Some creditors attempt to get payments through phone calls, often harassing the debtor at work or home. Each creditor has its own policies as to how long they will attempt to collect through calls or written demands, which both require the debtor to pay voluntarily.
Creditors will often consider the likelihood of collecting by other means when they evaluate their collection process.
When a creditor decides they cannot collect through direct contact, they will often hire attorneys to file a lawsuit on their behalf to get a judgment against the debtor. The purpose of the judgment is to expand the collection options. Once a creditor obtains a judgment through a legal proceeding, they then have the option of trying to garnish wages, levy on bank accounts, and attaching liens to property (such as houses or cars). If the debtor does not have a job, or any assets to attach at the time the judgment is entered, the creditor can wait until later to try to enforce the judgment. In California, the judgment is valid for 10 years, and in some cases, can be renewed beyond 10 years.
Many individuals considering bankruptcy assume that a judgment cannot be affected by a bankruptcy discharge. That is incorrect. If the creditor’s judgment is for a type of debt that would normally be discharged in bankruptcy, the debt can still be discharged even after a judgment has been entered. It is best to file a bankruptcy before a judgment is obtained because any money collected prior to the bankruptcy filing would not be recoverable, and liens on property often survive the bankruptcy case and can still be enforced against the property. However, after a bankruptcy discharge, the creditor is prohibited from collecting any remaining judgment amounts against the debtor directly (such as wages or bank accounts).
Certain types of debts are not discharged in bankruptcy, and those debts are not discharged whether or not there is a judgment related to them. 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 e-mail mjf4bk@ca.rr.com.