[COLUMN] Know your options to get out of debt

ARE you seriously in debt and don’t know what to do about your situation? Are you afraid that unless you do something about it, thing will just continue to get worse every day?

When people are going through financial difficulty and are unable to pay their bills, their first reaction is often to ignore their debts and avoid contact with creditors. They think that by doing this, somehow the creditors will simply give up and go away.  Then one day the problem blows up in their face. They either get served a wage garnishment at work or they find out that their bank account has been frozen by a judgment creditor that they have ignored. I see this happen all the time.

That’s when they rush to see a bankruptcy attorney to find out what can be done to protect themselves. This is when they realize that they should have done something about their debt problems sooner in order to avoid the unpleasant consequences of their inaction. Most states have a statute of limitations- this is the period of time in which a creditor must file a lawsuit in order to collect on an unpaid debt.

In California, that is generally 4 years from the time you stopped paying. A debt can go unpaid for years and you may not hear anything about the debt at all. Well, don’t hold your breath. When the collection accounts get close to the 4-year mark for the creditor to file suit, that’s when you often get served a lawsuit before the statute runs out.

If a creditor does sue you and obtains a judgment, the judgment is good for 10 years in California and can be renewed thereafter. That’s a pretty long time for a creditor to be chasing you and your assets, if you have any. If you own a home and a judgment lien is filed against it, the debt becomes a secured debt and it must be paid in full plus accrued interest when you sell your property someday.

Filing a bankruptcy doesn’t automatically remove a judgment lien but under certain circumstances, there is a procedure by which it can be removed. This will depend on the value of your home, outstanding loans on the property and your homestead exemption amount. Your homestead exemption is the amount of the equity in the property deemed protected by law if the house is your primary residence. An attorney can explain to you how this works.

OK, so before any of the above happens, what are the ways to get out of debt before things take a turn for the worse? The key to your success is to be pro-active instead of being reactive. In other words, take action now instead of waiting until something bad happens.

There basically only 4 ways to get out of debt if you’re on the verge of insolvency: (1) increase income so you can start paying larger amounts on your debts to hopefully avoid filing bankruptcy, (2) reduce expenses so that you can increase your disposable income and have more money available for debt repayment, (3) Convert assets you don’t need into cash and use the money to negotiate with creditors, and (4) File bankruptcy to wipe out debts or consolidate your bills (This requires filing either a Chapter 7 or a Chapter 13).

If you’re feeling paralyzed by debt and can’t think clearly at the moment, you need a good attorney who can properly evaluate your situation and recommend possible solutions. The first thing you need to do when you don’t know what to do is to realize that sometimes, you cannot do it on your own. There is nothing wrong with getting legal help. The sooner you get help, the sooner you would be able to protect your home, your job, your car, your bank account and other assets.

For a free evaluation of your case, please call our office at Toll-Free 1-866-477-7772 to schedule a free consultation.

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NOTE: Due to the virus lockdown, I am currently offering consultations via phone or video. Please call the office to schedule your appointment with me. Questions? Email me at [email protected].

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None of the information herein is intended to give legal advice for any specific situation.  Atty. Ray Bulaon has successfully helped over 5,000 clients in getting out of debt. For a free attorney evaluation of your situation, please call RJB Law Offices at TOLL FREE 1-866-477-7772.

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