A credit card company says they plan to sue me if I don't pay them. I can't pay, and plan to file Chapter 7 bankruptcy, but probably not for another 6 months or so. If they get a default judgment now, will a bankruptcy discharge it at a later date?
My wages are disability income only, and my home has homestead exemption plus no equity at the moment.
I don't want to file the bankruptcy yet, just because they are threatening to sue.
Yes. Plus, a default judgment is no different than any other kind of judgment as far as bankruptcy is concerned.
Yes, the bankruptcy filing will discharge the debt and the default judgment provided that the underlying debt is dischargeable (e.g., you did not run up the balance on the account for "luxury" items in contemplation of filing for bankruptcy).
Keep in mind that if the creditor pursues a collection action against you, you do run the risk of having your bank account attached and a lien filed against your home if a judgment is entered against you. Even if the lien and attachment are susceptible to being removed in a bankruptcy filing, you do not want to risk the hassle and inconvenience of playing that type of timing game. Also, if a bank account was frozen and the funds turned over to the creditor, it would be difficult to recover them.
Is there a particular reason that you want to wait to file for bankruptcy?
It is possible that the company will not sue you or sue you too late (known as the "Don't Pay a Dime Strategy). You could wait and see what they do before you decide to file for bankruptcy and then reassess your situation at that time. See my blog posting below on the strategy. It is possible also that they may sell the debt to a debt buyer, which may make it harder for them to get a judgment against you, if you have an experienced attorney defend the credit card lawsuit in state superior court.
Robert Stempler (please see DISCLAIMER below)
NOTICE: The above statements are provided for general information purposes only and are not intended as legal advice or advice of any sort for a specific case or legal matter. If you do not have a signed attorney-client fee agreement with the Consumer Law Office of Robert Stempler, APLC ("the Firm"), then until such written fee agreement is provided and signed by both a prospective client and attorney for a particular case, neither Mr. Stempler nor the Firm will represent you nor will they be your attorney in any matter and you remain responsible for retaining your own attorney and for compliance with any and all deadlines and for any statutes of limitations that may pertain to potential claims. Comments made on a public forum, such as Avvo.com, to not have any confidentiality because others may read them. If you desire a private consultation with Mr. Stempler that is confidential, please go to www.StopCollectionLawsuits.com and submit a free eCase Review.
Even though your house has no equity, if the creditor does sue you & obtains a judgment, that judgment can be expensive to remove in your bankruptcy. Although you might expect that homestead laws will protect you, the protection a homestead provides is limited to a forced sale of your property. If the creditor records the judgment, it will become a lien affecting any property you own. Sure, the creditor can't force the sale of your property, but when you go to refinance or sell, you will have to pay off the lien or have it removed through the bankruptcy.
Hope this perspective helps!
Yes a default judgment is dischargeable in bankruptcy. However, if this aggressive creditor is taking the effort to obtain a judgment it is safe to assume that this creditor will proceed to record a lien against your property. If a lien is recorded and if you do not have it remove with a 522 motion during bankruptcy, then the lien will survive bankruptcy.
Most consumer bankruptcy attorneys offer free consultation, my office does as well, and we serve Riverside Division with our Riverside office which is where you will be filing if you need to file bankruptcy. You really should consult an attorney in the area and discuss the best course of action. It is best to be proactive.
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