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Special section Managing debts in collection

You have five options, though moving and permanently changing your identity may not be the most convenient.

Taken to court for credit card debt

Dear Bankruptcy Adviser,
I just received a summons to go to court on an old credit card bill asking for judgment. What does this mean?
-- Shirley

Dear Shirley,
This is no time to fool around. At the point that the courts become involved it is a very serious matter. You might try to disappear, but most people who attempt to use this strategy incur a lot of costs moving from one job to another and eventually are still found by the creditor. In fact, the bank (the creditor) would not be suing you in the first place unless it thought it had a reasonable chance of recovering the debt. So step No. 1 is to accept that this is a big deal; it is really happening.

Now that you've received a summons, you can decide whether you need to go. In short, if the debt is not yours, go! For example, if someone opened up the line of credit without your permission, the judge should know that. However, if the debt is yours, there's no need to go -- the court will enter the same judgment (in favor of the creditor) whether you're there or not.

Once the judgment is entered against you the court will notify you by mail. Usually it will say that you have one month to begin making payments to the creditor. However, it can also say that a wage-garnishment order is in place and that your employer will be keeping 25 percent of your take-home pay until the judgment is satisfied. Another possibility is that the creditor will get a levy against your bank account. This would effectively freeze your checking account, making it impossible for you to deposit or withdraw cash.

Suppose that you've only been instructed to pay the creditor, and you do not. In that event, there will be another summons and another hearing to determine why you have failed to pay. You absolutely want to show up for that hearing. If you do not, the court can issue a bench warrant -- and while the police rarely show up at your door, they can. More likely is that you would be arrested after getting pulled over for speeding one day and the outstanding warrant will pop up on the officer's computer screen.

Effectively, you have five choices:

1. Pay the debt.
2. Settle with the creditor and pay a percentage of the debt in a lump sum.
3. Pay a debt expert to negotiate a settlement.
4. Move to Bolivia and become a candlemaker.
5. Get bankruptcy protection and either pay it through a Chapter 13 reorganization or a Chapter 7 debt elimination.

My choice for you would be No. 3 or No. 5.

Good luck!

To ask a question of the Bankruptcy Adviser go to the "Ask the Experts" page, and select "bankruptcy" as the topic.

Create a news alert for "saving" -- Updated: Aug. 16, 2006
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