Quote:
Originally Posted by Ann-NWIowa
If a creditor sues and garnishes wages which means you cannot pay your regular bills or buy food, bankruptcy can be your only option to survive.
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That describes someone who has unmanageable debt. He needs to have his debt discharged somehow, but not necessarily through bankruptcy. Bankruptcy has significant legal fees, creates a public record, and stays on your credit report for a very long time. Bankruptcy might be worth it if you have assets to protect, but where there are no attachable assets there are better ways to discharge debt.
Not all assets are attachable. A declaration of homestead may protect your home, depending on the laws in your state. They can't normally take your car if it's your primary transportation. They also can't garnish some income, such as social security, some pensions, and weekly income that's less than 30 times federal minimum wage (50 times in my state).
Attaching property and wages requires a judgment from a court of law, but unsecured debt creditors seldom seek judgment. Legal fees to secure a judgment are perhaps $8,000 to $10,000 today. Most consider that to be throwing good money after bad because the debtor can end the judgment lawsuit at any time by simply declaring bankruptcy.
If you are comfortable that you don't have any assets to lose then bankruptcy will do more harm than good. Walking away from the debt will cost no legal fees, remain a private matter, and be on your credit report for a shorter period of time.
But don't ignore creditors or collection agents. You have to exchange letters with them, making demands in accordance with the fair debt collection practices act. If you do that they'll leave you alone to concentrate on softer targets.
Evaluating debt requires a knowledge of what kind of debt exists and what assets need to be protected. Defaulting on secured debt, such as a car loan or mortgage, normally isn't a problem because the creditor will usually settle for repossessing the collateral, but there are still things you can do to stop a foreclosure. Most unsecured debt is dischargable, such as credit card debt and medical debt. Government debts are normally not dischargable, such as delinquent taxes, child support, alimony and student loans. Mechanic and tax liens placed on property are usually there to stay. Of course your local government can force the sale of your home for delinquent property taxes.
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