New bankruptcy cases increased 13.8% over the last year. This continues a trend that started several years ago. Since 2006, new bankruptcy case filings have increased. Expect the case filings to rise during the next year.
Its not difficult to understand why this is happening. High unemployment, foreclosure and credit card payment defaults also continue to go up. People need protection from creditors because their income doesn’t keep up with expenses.
I advise my clients to stop paying on credit cards once they decide to file a bankruptcy case. What happens if you stop paying them? You can expect to receive collection notices from the credit card company for about three months. Your account then gets sold to a collection company. The collection company will attempt to collect the debt for about three months. Finally the debt is sold to a lawyer. It takes the lawyer about three months to obtain a judgment from court. The judgment can lead to garnishment and a judgment lien on real estate.
So why do I tell clients to stop paying credit cards? To eliminate unnecessary spending prior to filing bankruptcy. Clients use their income to pay for the fees and costs of bankruptcy. Getting the bankruptcy case filed stops all debt collection activities. Stop paying credit cards helps to get the bankruptcy case filed quicker.
Did you know you can be sued on old credit card debt for 15 years? Even worse, every time you make a payment the 15 year time frame is extended. Some companies specialize in collecting old debts. They try to get people to make payments on debts that are more than 15 years old. The Federal Trade Commission recently issued a report recommending changes to the law. But for now, collectors will still try to collect on the debts. Even if the debts are so old th law will not allow them to sue you.
