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 get payments through phone calls, often harassing the debtor at work or home. Creditors have different policies on how long they will continue with phone calls and letters to try to obtain voluntary payments. They often make decisions based on the debtor’s job situation, assets and prior payment history.
When a creditor has decided they cannot collect through direct contact, they can then file a lawsuit attempting to obtain a judgment against the debtor(s). The purpose for the judgment is to expand the collection options. Once a creditor gets a judgment entered, they have the right to garnish wages, levy on bank accounts, and place liens on property owned by the debtor. If the debtor does not have a job, or any assets to attach, the creditor can wait a while to enforce the judgment because the judgment is good for 10 years in California, and can be renewed beyond 10 years in some cases.
Many individuals and couples contemplating bankruptcy 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 before the bankruptcy is filed cannot be recovered. However, any amounts the creditor has not collected can be discharged; judgment or not.
There are certain types of debts that are not discharged in bankruptcy, and thus, those debts are also not discharged if a judgment involves one of those non-dischargeable type debts. 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.