Can Filing Bankruptcy Prevent An Increase In Out Of Court Settlement?

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We have a debt that we are owing. It was two credit cards from the same bank that they were going to take us to court on. We did a settlement out of court with a payment plan before we got there about a year and a half ago and the total amount about $13,000. At the time I was out of work, so we settled on a like a $150 a month payment agreement. They just came to us last week saying that they wanted us or they needed us to increase our payments to $300 a month or else they were going to take us back to the court for garnishment.

We can’t do $300 a month and don’t have anything where we could try to settle that off. I didn’t know if there was any kind of leverage or court if it did go back to court, you know, we could prove that we didn’t have that in our current finances. If the court would let us keep that payment or that something that, you know, if they take it there we may end up filing bankruptcy on.

Well, when you are settling debt like this it’s really just the two parties. It’s you and the lender. Let me just ask this real quick. You don’t have any bank accounts or any assets with bank any longer, do you?

No, this is in another state.

Wonderful. Congratulations on that first deal you cut. That’s really amazing deal. I don’t see them done that well very often.

They can do what they’ve threaten to do I mean that’s their recourse. they take it down to county court. They get a judgment at county court and then at some point they take that judgment back to the same county court and get a writ of garnishment where they would either come after your wages or your bank accounts. Now wage garnishments usually have a little bit a heads up on that your employer supposed to give a copy of the writ of garnishment when they receive it. Not a great deal of heads up but somethings better that nothing.

The bank garnishments are the really dangerous one. I spoke with a client of ours about 8 or 9 o’clock last night. He just had his pay check put in and the very next day a bank garnishment hit took the entire thing. That’s the worst case scenario. There is no warning on a bank garnishment. You have the hearing where they get the judgment, but, of course, if they sent out a notice that they were going to garnish everybody would just take the money out of the account so they don’t do that.

Most people don’t find out they’ve had their bank account garnished until they are at the grocery store or the gas station trying to use their debit card and unfortunately doesn’t work. So, where you are at now, I mean that’s a great deal you cut at first but it’s not uncommon for them to come back because you know they kind of have the ultimate leverage there, where they have a judgment in hand or one just around the corner.

So they know if you are working the can take 25% of your net income on every check so, you know, they are demanding $300 a month or a wage garnishment which I’m assuming is going to be more than that per month. If you’re paid two times a month or every other week you may end up looking into bankruptcy to just eliminate the debt entirely and be done with it. It just all boils down to feasibility. If you can handle that $300 a month payment, I mean I wouldn’t do just for sake of doing it. If you only $15 is going towards principle, you are not settling a debt you are buying time. That’s just going to be there for long time and I would be surprised once they go back and add on attorney’s fees and interest every so many month if that 13,000 is really going down at all. But that’s kind of getting into bankruptcy territory there that might end up being what you have to look into just to be done with it and get on to the next thing in life.

To continue reading the answer, see the text below or jump to another question using the links below:

  1. How Do You Know If You Qualify For A Bankruptcy?
  2. What Is Unsecured Debt?
  3. What Is The Process Of Bankruptcy Like?
  4. Can A Chapter 13 Be Converted To A Chapter 7?
  5. What Is the Process Of Bankruptcy Like – Part 2
  6. When Is The Best Time To File?
  7. How Can I Rebuild Credit After A Chapter 13?
  8. Can A Chapter 13 Be Amended?
  9. Can Filing Bankruptcy Prevent An Increase In Out Of Court Settlement?
  10. Is There Any Way To File Bankruptcy And Keep My Car Or My House?
  11. Will People From The Bankruptcy Court Send Someone To My House To Look At My Stuff?


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