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Bankruptcy Law/Chapter 7 or not paying credit cards?

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Expert: - 3/26/2009


Question
Hi, thank you very much for answering my question yesterday. I have a follow up question please.

I live in New York City and  I have about $13K in unsecured loans/credit cards. I qualify for Chapter 7, but I don't even have enough money for the lawyer.

Long story short. What happens, theoretically, if I just stop making monthly payments to my creditors? What can they do in the worst case? Thank you


to clarify: can they or will they seize my wages? my money from checking account without my authorization? Can they sue me, etc?


I also have 3 unsecured loans from CitiBank - a credit card, a personal loan and revolving overdraft protection. They are tied to my checking account. Can they without my authorization withdraw money from my checking account if they see I have money there and don't pay them?

My friend had a similar set up with Bank of America and they started taking money out of his checking account to cover his monthly BoA credit card and loan payments. He complained to them, but they said according to some kind of NEW law they are allowed to do that.

Answer

Leon Bayer
Thank you for the kind words.

If you stop paying your debts, your creditors have the right to sue you for what you owe, plus court costs and attorney fees. After getting a court judgement, they can garnish your wages and seize your bank accounts.

If you have money on deposit in the same bank where you have an unpaid debt, the bank may seize money from your account without your authorization to pay the debt that you owe them. It is not a new law, it is called "set-off" and this rule allowing them to do it has been around for centuries.

People who want to do some general reading on the subject of bankruptcy can see my Bankruptcy Guide at http://www.debt-relief-bankruptcy.com/guide-new.asp

Los Angeles Bankruptcy Lawyer Leon D. Bayer

Expertise

Leon Bayer has successfully represented clients in bankruptcy for over 30 years. He is frequently called upon by the media, the California Bar and other associations to provide insight and help educate attorneys on bankruptcy issues. If you or other readers want to keep up with my blog postings about life in and out of bankruptcy, you can follow my blog at http://www.bankruptcyblogger.org/ and my personal web site at http://www.debt-relief-bankruptcy.com and A Human Guide to Bankruptcy at http://www.thebankruptcyguide.net/ Leon also writes about bankruptcy law for Nolo, see http://www.nolo.com/law-authors/leon-bayer.html and his "Ask Leon" bankruptcy law blog column at http://blog.nolo.com/bankruptcy/

Experience

Leon is a Certified Specialist in Bankruptcy Law by the State Bar of California, and has been a practicing bankruptcy lawyer in Los Angeles, California for 33 years.

Organizations
National Association of Consumer Bankruptcy Lawyers, California Bar Association, Los Angeles County Bar Association.

Publications
Author, ?The Essentials Of Chapter 13,? Daily Journal Report, December 18, 1987.
Contributing Editor, Basic Bankruptcy, California Practice Handbook, Matthew Bender 1992, 1993.
CEB Consultant, CEB-Personal and Small Business Bankruptcy Practice in California, 2003.


Education/Credentials
B.A., J.D.

Awards and Honors
President, 1995-1996-Los Angeles Bankruptcy Forum; Member - Los Angeles County Bar Association Committee on Commercial Law & Bankruptcy, 1988. Law Advisory
Commission-Personal & Small Business Bankruptcy Law of the State Bar of California, 1996-2000

MR. BAYER SAYS: The big banks and credit card companys have been working overtime for many years to undermine the Consitutional right of the American people to be able to claim bankruptcy protection. In 2005 the banking lobby successfully convinced Congress and the President to make the laws and proceedures more complicated, hopeing that it will stymie legitimate people from filing bankruptcy. They succeeded in gaining these complex new legal proceedures by greasing the legislative system with hundreds of millions of dollars in "campaign contributions." The good news for the American people is that while the new laws have made the proceedures needlessly complex to the point where inexperienced people can't help but trip over the maze of new rules and regulations, the process is still doable, especially with a lawyer who is well trained and experienced in this specialty.

Past/Present Clients
I have probably handled something on the order of about 15,000 bankruptcy cases thropughout my career.

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