Should I File Bankruptcy Or Just Not Pay?

If you are overwhelmed by credit card debt or medical bills, you may be considering Chapter 7 or Chapter 13 bankruptcy. Or, you may be considering simply not paying. Here’s why bankruptcy is the best long-term approach to managing overwhelming debt.

What Can Creditors Do If I Do not Pay?

If your debt is secured by a vehicle, the creditor can repossess the vehicle. In North Carolina, this is a contractual agreement between the creditor and the vehicle owner and does not typically require court approval.

If your debt is mortgage debt or home equity line of credit debt, the lender can use the North Carolina statutory provisions under N.C.G.S. Sec. 45 to begin the foreclosure process. Essentially, if you cannot ‘catch up’ on the mortgage with the lender, your home can be sold to pay the mortgage creditor.

If your debt is unsecured debt like credit card debt or medical debt, the creditor’s primary recourse is to contact you in attempts to collect. Many unsecured creditors will use this method for months before resorting to taking legal action against you. Keep in mind, an unsecured creditor can file a lawsuit against you to prove the amount you owe, and secure a judgment. Once a creditor has a judgement against you, they can pursue your assets with the backing of the judicial system. Additionally, if you own a home, the judgement will attach to the home. This means when you sell the home the judgment will need to be paid in most cases.

Creditors And The Writ Of Execution

Once a creditor obtains a judgment, they can file a writ of execution with the sheriff to pursue your assets. This includes your home, vehicles, cash in bank accounts, etc. For the most part, you can protect the same property you would be able to protect or exempt in a bankruptcy. The remainder of your property is available to the creditor. When a creditor is pursuing your assets, you may receive a Notice of Right To Claim Exemptions. This puts you on notice that you must report your assets to the creditor. It also lets you know the creditor is pursuing your assets.

Bankruptcy Stops All Collection Attempts

By filing a Chapter 7 or Chapter 13 bankruptcy, you put your creditors on notice that they are no longer allowed to attempt to collect on debts. This is a function of The Automatic Stay in bankruptcy. Additionally, you pay a fixed amount of money to your bankruptcy attorney or the bankruptcy court, in exchange for discharging the entire balance of the debt. If you have unsecured debt more than $10,000, it makes sense to consider bankruptcy. If your debt is $20,000 or more it will almost always make sense to file bankruptcy as compared to attempting to pay the debt.

We have written many articles about using bankruptcy to stop a foreclosure and recover if you are behind on mortgage payments. We hope those are helpful.

Speak With A Charlotte Bankruptcy Lawyer Today

If you have questions about whether to stop paying on debt, we are here to help. Once a client decides to file bankruptcy, we advise you stop paying on any debt which will be discharged by the bankruptcy. If you would like to speak with a bankruptcy lawyer, call us at 704.749.7747 or click HERE to request a free consultation by phone or in person.