When a Lawsuit Because of Inability to Pay Credit Card Debt Can Lead to a Chapter 7 or Chapter 13 Bankruptcy

What are the consequences of a lawsuit due to debt?  How can  a Chapter 7 or Chapter 13 bankruptcy be a solution to being sued because of credit card debt?

It used to be that putting monthly expenses on a credit card was a wise money management choice.  After all, you’d be paying off the balance in a month or two, would acquire “reward points” you could spend like cash, and the interest rate was low, especially if you’d been accepting offers for transferring balances .  Remember?  That was then.  This is now.

Now one major cause of personal bankruptcy cases is unmanageable debt through the “over-use” of credit cards.  (How can it be “over-use” when we were urged to use them as much as possible in the first place?)  Never mind, it’s the economy — and the fact that our credit limits have shrunk, interest rates and fees have increased, and now most debtors are unable to keep pace with bill as they come due.  Some have even had to default on payments and now they are being sued over credit card debt.

Here’s some things to consider:

It’s easy to accumulative credit card debt so fast that you don’t realize you have a problem until you are in way over your head.   After all, you just have to swipe a little plastic card at the check-out register, and you can buy anything you want within minutes.   It all seems like a game played with Monopoly money.  But credit card debt is just as real as a car loan or a home mortgage, and if ignored for too long, you can be sued by your creditors for recovery.

You might be tempted to “stay under the radar” using debit cards and cash transactions.  If you ignore all phone calls, letters, and e-mail long enough, your creditor’s statute of limitations will run out and they won’t be able to sue, right?  That’s what everybody thinks, right up until the process server hands them a subpoena with a court-date on it.

• Option No. 1:  Ignore: You ignore your lawsuit or fail to appear in court, your creditor will win a default judgment against you.  They can then either garnish your paycheck, put a levy on your bank account, or put a lien on any real estate you might own.  But it doesn’t have to come to this, there are several ways you can pro-actively face up to your debt problem and avoid a lawsuit.
• Option No. 2:  Contact: You can contact your creditors prior to being sued or prior to your court-date, and try to work out an out of court settlement and some type of monthly repayment plan. It depends on how willing they will be to negotiate to avoid the expense of going to court.
• Option No. 3:  Automatic Stay and Discharge: You can retain a bankruptcy attorney and file a petition for bankruptcy before the creditor’s case against you comes to court.  Once you file either a Chapter 7 or Chapter 13 bankruptcy, the actions against you are put on hold by the automatic stay of your bankruptcy case.  In most cases, your unsecured debt will be discharged, so the creditor lawsuits against you will be dismissed.

Please contact our Sacramento office at 916-313-9069 or via email at info@california-bankruptcyattorney.com