Collections Law/debts


QUESTION: I may decide to take time off this fall and do my student teaching because that's the only thing that's standing in the way to becoming a fully certified teacher. The problem is I may run out of money mid way through to pay credit cards and student loans and I'm afraid I may end up in collections. That would probably be with the student loans if I had to make a choice. Would my property be ok since I own a house?

Another question I have is some of the credit cards are in my mother's name but I am an authorized user. How does that work if they go into collections? I've noticed when I pull a credit report that they show up on my account as well.

ANSWER: If you owe enough money to someone (credit card or student loan) then can sue you.  If they get a judgment, they'll file a lien against your house.  Your house (if it is your home and not a rental property) may entitle you to a homestead exemption (the amount depends on the state it is in).  If you house is worth $200,000 and you owe $170,000, the equity is probably all exempt.  But the lien will remain on the house and eventually increased equity may make it worthwhile for them to foreclose on the lien to get the equity.

Student loans are not dischargeable in bankruptcy, and bankruptcy is the ultimate way of getting out of paying debts.  So pay the student debts in preference to the credit cards.

Both you and your mother may be liable on the credit cards.  When you say that you are an "authorized user," I do not know if you can be sued for the amounts you charged on your mother's card or all the amounts on the card.  Or if only she is liable.  You should definitely discuss this with your mother!  But she would be liable for amounts you charged on the card and did not pay.

If you are running out of money and may have to file a bankruptcy for some reason, the house may be preserved for you (just the value of the homestead, so, again, it depends on what equity you have and how much of a homestead is permitted in your state).  Pay the student loans, don't charge on your mother's card, and if you had to file, you would discharge the amounts you owed on your personal cards (no point in trying to discharge your mother's card; they can still go after her).

Bankruptcy is no fun, but neither is being chased for debts owing.

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QUESTION: Thanks for your previous advice. I've been following it. I have another issue to deal with now and need some advice.

About this time last year I needed a loan, $1500, for a car repair. I borrowed it from a wealthy neighbor of mine and he had me sign a statement acknowledging that I owed him the money plus 6% interest due in one year.  So far I've already repaid him $500 and plan to repay him another $500-600 this month. It will take us a little longer to repay the remaining amount. He doesn't seem to act like it it's a big deal by needed extra time, but I don't completely trust him because I know he wants to end up buying our property because it's adjacent to his where he has built houses something similar to a subdivision in a resort community. If I don't finish paying the full amount right now, would it be likely he might put a lien on our property? He casually mentioned that last year when I took out the loan but then mentioned the court process wouldn't be worth it for just $1500. If by chance that did happen, how does the process work? How long would I be given to pay off the remainder? Would there be court costs also added in as well. I live in Georgia. I'm really nervous about this. Thanks.

ANSWER: He could sue for the unpaid amount plus 6% interest.  I'm assuming that the 6% would be applied only on the sums that are unpaid.  He could sue after one year for the unpaid amount, the interest, and court costs.  If the debt were unpaid by the time the case came before the court, he would obtain a judgment for the amount unpaid, interest, and court costs, and the judgment could then be recorded as a lien on the house.

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QUESTION: I see. I assume I would receive some sort of legal notice if a court case were filed? I'm thinking the court costs would be significant. I assume I could repay the remainder of the loan before the case even came to trial? I'm thinking the unpaid amount would only be $400-$500. Would an amount that small go to small claims court?

You have to be served with notice of the court case.   If it is served and then you pay the debt before the case comes up for a hearing, the judge may well award costs to the plaintiff.  Such a small amount could go to small claims court, but the plaintiff is free to file the case in the normal civil court.

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Michael T. Hertz


I can answer most questions concerning bankruptcy, whether business or personal, including questions by debtors, creditors, persons interested in purchasing assets from bankruptcy estates, and the like. Also have expertise in tort law, French and Canadian law.


Practiced bankruptcy for 27 years in California and taught bankruptcy for three years in Maine. This included Chapters 7, 9, 11, 12 and 13 cases, representing debtors, creditors (secured and unsecured), bankruptcy trustees, creditors committees, and persons interested in purchasing assets from bankruptcies. Debtors included persons with virtually no money up to large corporations.

Inactive member of the Bar of the State of California. Nonpracticing member of the Bar of Massachusetts. Formerly member of the Maine Bar and conseil juridique in France. Certified by National Committee on Accreditation in Canada.

Georgetown Law Review; California Bankruptcy Journal; Maine Law Review; Dalhousie Law Journal; University of Toronto Law Journal.

Harvard Law School (J.D. 1970; cum laude) and Pomona College (B.A., 1967; cum laude)

Awards and Honors
Selected as a "Superlawyer" in 2005 and 2006 for Northern California.

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