Olga Zlotnik
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Credit Card Debt

Credit Card Debt
Navigating the Bankruptcy Tide:
Tips to Help You Stay Dry and Steer Clear of Bankruptcy

When people are being hounded by creditors and going through tough financial times, they come to me for help.  In listening to, advocating for, and helping my clients, I have had the privilege of learning some financial do’s and don’ts.   The truth is that financial trouble can happen to anyone.  For example, job loss, which often times means that there is no longer enough money to pay the bills, is one common reason why someone you know may be forced to file for bankruptcy.  The loss of a job usually is the type of financial hardship in life that is out of our control.  But, some financial issues can be avoided with help and guidance.  In last month’s issue, I introduced you to the first three tips to staying out of bankruptcy. Here are the next three tips:

Tip 4: Don’t Put It on a Credit Card if You Can’t Pay It Off.

A big reason why someone you know may be forced to turn to bankruptcy is because he has too much credit card debt that he just can’t pay on anymore for some reason or another, such as job loss.  A good rule of thumb is as follows: If you don’t have the money to pay off the credit card purchase within a reasonable period of time, don’t purchase it.  Credit card debt accumulates when you make purchases that you can’t pay off.  Before you know it, the debt snowballs into something that you just can’t pay on anymore. When this snowball of debt is coupled with job loss or a decrease in income, the result can be lethal.  I understand that using the credit card is sometimes unavoidable and necessary to make ends meet, i.e. you make a purchase on a credit card because you have to pay the bills and are hoping that the finances improve so that you can pay off the credit card at a later date.  This tip just says that if you can help it, avoid unnecessary credit card purchases or purchases that can’t be paid off within a short time.

 

Tip 5: Don’t Put All of Your Liquid Assets into Non-Liquid Assets.

Do you currently have enough money to pay your bills for 3-12 months in the event you lose your job or suffer a decrease in income?  In case of an emergency, it is a good idea to have sufficient access to liquid assets so that you can pay the bills for at least a few months or longer to hold you over until the income stream picks back up.  When all your money is tied up in real estate and other non-liquid assets or assets that take time to liquidate, you lack the financial means to survive in the event of an emergency (unless someone else is willing to give or lend you money.  This tip assumes that this is not an option).  And when you can’t pay your bills, you may be headed towards bankruptcy.  Investments are good to have but not if the investment will leave you with nothing to pay bills with in the event of an emergency.

 

Tip 6: Do Deal with a Lawsuit Early in the Game.

If you get served with a “Summons” and “Complaint,” this means you are being sued.  You must act quickly because you have a limited amount of time to respond (20 days if served in Arizona and 30 days if outside of Arizona).  You should seek legal advice to help you file an Answer in the lawsuit along with any claims you may have.  You may also want to look into your bankruptcy options because a bankruptcy will stop a lawsuit.  Do not bury your head in the sand and ignore the lawsuit paperwork.  When you ignore a “Summons” and “Complaint,” the creditor suing you can and eventually will obtain a default judgment against you in court. After a creditor obtains a default judgment against you, the creditor becomes a “judgment creditor” of yours and can then enforce that judgment, including by garnishing your wages and/or bank accounts, and/or putting a lien against your real property.  And if your wages are being garnished, you may start thinking about bankruptcy, as a bankruptcy will stop the wage garnishment.

Stay tuned for next month’s issue on additional tips to help keep you dry and out of bankruptcy.  For more information on bankruptcy, debt, and litigation-related issues, please visit www.olgazlotniklaw.com

DISCLAIMER

Please note that the information provided is for informational purposes only and does not constitute, and should not be considered legal advice. Transmission of the information contained here and receipt by the reader is not intended to create and should not be construed as creating an attorney-client relationship. The only way to create an attorney-client relationship with us is through a written and signed agreement with us.  The bankruptcy law services described herein are with respect to bankruptcy relief under the Bankruptcy Code. We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.