If you are thinking about bankruptcy, you are probably dreading that decision and hoping that you can avoid it, or at least put it off as long as possible. When you come in for a consultation, one of the things we’ll talk about is when you should consider filing.
Oftentimes, the biggest factor that comes into play when deciding when to file is whether or not you have been served with a lawsuit. Once a lawsuit has been served, the clock starts ticking and several things can happen within four to eight weeks. Unless you respond to the lawsuit by filing an answer or negotiating settlement terms, the creditor will ask the court to enter judgment in its favor. Lawyers call this “default judgment”.
Once judgment enters, the creditor can do several things, including taking money from your paycheck (garnishment), taking money from your bank account (levy), or recording the judgment with the county recorder, which places a lien on any real estate you own.
If you file bankruptcy before the creditor gets judgment, you can prevent any of the from happening. Of course if you file after the creditor gets judgment, it will have to stop any garnishment or levy. However, if it has recorded its judgment, we will have to file a motion to get the county recorder to remove the lien. Most bankruptcy attorneys will charge extra to prepare this motion.
If you come into my office a few days before a response is due to the court, I might advise you to file an answer. This will cost you some money, but we will need the time to prepare your petition. As you can see, filing bankruptcy before you get sued, or at least before the creditor gets an order for judgment, will save you from many headaches.
If you haven’t been served with a lawsuit, you might not need to file bankruptcy right away. If you’ve just recently stopped making payments to your creditors, it’s likely it will take at least 60 to 90 days before they send your account to their legal department for a lawsuit.
Also, if you’re unemployed and don’t own real estate, even if a creditor gets judgment there isn’t much they can do. They can’t garnish your unemployment benefits, and they can’t take any money from your bank account if it is all from unemployment benefits. The same rules apply to social security benefits.
If you’re wondering if bankruptcy is a good option for you, we hope you’ll come in for a free, no-obligation consultation with an experienced bankruptcy attorney. You can make an appointment with our online scheduling system or call 303.331.3403 to set up a time that is convenient for you.