Bankruptcy or choosing to default on credit card debt. What are the ramifications of each?

in Bankruptcy

perkins asked:

I have A LOT of credit card debt from opening a business and having to sell it in one year because of family responsibilities. Saw a bankruptcy attorney, but the options don’t seem to work for me as there’s no way I could ever pay off these debts.
I know it’s very immoral, but what will actually happen if I just stop paying on them? I know I’ll be inendated with phone calls and lose my good credit standing, but can they attach my bank account or any other asset?

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10 comments

Lady Kay on April 6, 2009 at 9:42 pm

If you just simply do not pay, they can sue you in civil court. When they are granted a judgment, they will garnish your wages or attach your assets. That will come after you are inundated with phone calls, letters, and threats. Your credit will also be ruined. If you are able to get credit, you will pay twice as much for it. Did your attorney discuss Chapter 7 bankruptcy with you? I believe it is Ch 7 is where you eliminate your debt.
KatieKat on April 9, 2009 at 5:58 pm

Creditors can sue the debtor to recover monies owed, what property they can attach depends upon the laws of the state in which the debtor resides. All Social Security benefits and most pension benefits are exempt from creditor attachment. Personally I wouldn’t go bankrupt either. 1,200 dollars to be scarred for 7-10. Not thanks. They can call family members to harass as well if they cant get a hold of u
Mary & Mike on April 12, 2009 at 11:16 pm

Gawd, I was ready to answer this question when I remembered that the laws changed in California recently regarding BK’s. In my opinion, a lot would depend on the amount of your debt. Worrying about your credit at this point is secondary to your family’s welfare. Another thing to consider is getting with a company who helps you negotiate with your creditors….I’ve heard they sometimes cut your liability in half and set-up non-interest payments that fit your budget? Check it out,
and good luck, I’ve been there.
Scott B on April 15, 2009 at 10:05 am

Hate to sound immoral here but, not paying is better than filing for bankruptcy. Depending on how much you owe it can take years for them to get around to suing you. This gives you time to get your finances in order and then pay them at a later time. Bankruptcy stays on your credit report for 10 years, whereas a derogatory account only stays for 7. Whatever you do, when you decide to stop paying, stop paying! Do not make a payment here and there. Anytime you make a payment it resets the statute of limitations. Ignore letters and phone calls.
Ervin on April 18, 2009 at 6:46 pm

Did you tried debt consolidation??? As they are the experts in this field might be they can help you.

As defaulting on credit card will ruin your credit and bankruptcy will remain on your credit report for more than 10 years and if the individual is listed as having filed for bankruptcy, it results in a 160-220 point deduction on their credit score and if a delinquent account is added to the individuals credit file, 70-120 points are subtracted.

During the period of bankruptcy and after bankruptcy you would face difficulty in getting loan, purchasing and leasing and building your credit.

So its better if you pay off your debts. Here is the source of a debt consolidation company which I know that is for your reference
Steve R on April 21, 2009 at 7:52 pm

seriously?
Ms M on April 23, 2009 at 2:49 pm

You know, there’s really no need to do either. Bankruptcy is hard work, despite what you may hear about a clean slate. It also takes some money down, which you probably don’t have if you are desperate enough to be thinking about it.

If you default on your debts, you end up racking up so many late fees and penalties, that it is almost impossible to start fixing the problems again later. You’ll end up getting reported to credit bureaus and debt collectors. They can start calling you at WORK and starting all kinds of problems.

I would suggest trying to work with a credit counseling agency. Try something like this: Good luck!
Curly on April 23, 2009 at 5:06 pm

I am a paralegal for a bankruptcy attorney who specializes in Chapter 7 and Chapter 13. The first thing you need to ask yourself is–can you live if these creditors get garnishments against you? A creditor can get up to 25% of your paycheck. If the debt is small enough to where it can be paid off rather quickly through the garnishment, then it may not be so detrimental. However, if you are living paycheck to paycheck, it may not be the best situation for you to be in. The other issue is that a judgment, if certified, can attach to your assets, particularly any property you own. If you should want to refinance or even sell your home, those judgments will have to be satisfied and they can often ***** up any financing that you have acquired.
Bankruptcy is not as negative as everyone thinks it is. It can stay on your credit report for up to 7 to 10 years. It depends on the credit reporting agenxt. Experian typically reports for 10; transunion and equifax are typically 7 years. However, there have been a multitude of studies recently that show that after you get out of bankruptcy, your credit rebuilds faster than if you were to attempt to do it on your own.
A Chapter 7 bankruptcy usually lasts from 4 to 5 months. And for most individuals, depending on your income level and the exemption laws of the state you live in, you may be paying a miniscule percentage of what you owe. Think — you pay $1500.00 for attorney fees in a Chapter 7 and you discharge $40 or $50K worth of credit card debt. While some people think it is immoral–just open your Bible and turn to Nehemiah 10:31 and Deuteronomy 15:1-2. If bankruptcy were immoral, would it be legal and provided for by the U.S. Government — one of the most prudish governments there is? What you really need to look at is your income level. If you are below the median for your area (which you can find in bankruptcy code books or from the state statutes concerning exemptions, which vary from state to state) then you are eligible to file for a Chapter 7. There are other issues such as personal property and how much of it falls within the exemptions, as well as concerns regarding recent transfers of property. These can all be brought to the attention of a bankruptcy attorney and they can guide you in the right direction.
If your income is OVER the median, then you have no choice but to a Chapter 13 bankruptcy…which can be very long and painful for some people. They last from 3 to 5 years and eat up a lot of your income. The Chapter 13 is ideal for people who are behind on their loans to either mortgage companies or their vehicle lenders or if you are behind in taxes and/or child support payments.
The bankruptcy code is federal and does not change from state to state. However, what does change are the exemptions which are incredibly important so I would recommend seeking counsel on those matters.
I have had a lot of clients who have been screwed over by the credit negotiating programs but if you find one that has good references from people you know and is trustworthy-go for it.
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R543D on April 27, 2009 at 4:18 am

They can sue you, try to garnish wages and money from accounts and in some cases even go after your assets. Bankruptcy is a safer choice.