Expert: Regan Shinski - 12/29/2010

Question
My partner was laid off in March of last year. We have already gone through foreclosure on our house with the first mortgage company and are trying to do credit counseling with the credit card companies. I am concerned that the second mortgage company and one of the credit card companies that will not work with the credit counseling agency will try to come after me for their balances and garnish my wages. How long does the second mortgage company have to come after me for their balance and should I consider bankruptcy at this time?

Answer
Hi Sam:

Technically, any creditor can come after you as soon as the contract is breaching - meaning the payment is missed - unless the contract or state law specifically addresses collection process.  Mortgages are specifically addressed by state law, so I suggest a simple internet search for answers to this question.  Time for eviction varies dramatically by state and different states give different options to second mortgage holders.

The credit card companies have to take you to court and obtain a judgement.  They can do this quickly, take many months, or pass it on to a collection agency who then has these same options.  Once a lawsuit is filed a court date is set.  Assuming you lose or don't show up, a judgement would be entered against you.  This then allows the judgement holder to collect on it.  Again, different states have different laws, but the techniques could include wage garnishment, attacking bank accounts, placing liens on property and even having law enforcement confiscate personal property for sale at auction to pay the judgement.  Again, many states do not allow all these collection techniques and there are exemptions, so complete an internet search for the techniques allowed in your state.  The key is to really avoid getting the judgement in place.  They are hard to remove from credit reports and really provide a hammer for the creditor.  Many are open to reduced settlements or payment plans prior to the court date.

It is really hard for me to say if you should be considering bankruptcy - actually impossible for me to say.  There are so many factors including if you would even qualify to file bankruptcy.  I would suggest setting two free consultations with bankruptcy attorneys where they can review your specific situation.  I would say bankruptcy should only be a very last resort.  I'm not convinced you are at that point yet but you should keep all options, including this one, on the table.

Good luck, I hope this helps,
Regan

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