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I have more than $200,000 in credit card debts; I don't think I will make it. What will happen if I don't file for bankruptcy and just stop paying? I don't have any assets, and my business went bad. What do you think? -- In debt and desperate
I'm sure a lot of readers are wondering what they would do in your situation: unable to pay the bills and not wanting to file for bankruptcy.
Though many people would disagree, filing for bankruptcy after trying to start your own business is perfectly reasonable. Many notable Americans have faced the same troubles. Walt Disney and P.T. Barnum, both entertainment pioneers, filed for bankruptcy. Milton Hershey, the owner of the Hershey's chocolate empire, filed for bankruptcy four times! Before you decide to walk away or ignore the debt, you should consider whether you want to try again.
Even though you describe yourself as having no assets and a defunct business, I'm going to assume that you have some assets and that your business continues in some way. I hope you won't take offense; my experience is that when people say that they have nothing, they usually have something. My purpose is to give you an answer that will be helpful in describing what is likely to happen whether you have assets or not.
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First, each creditor will contact you by phone, letters, e-mail -- any way they can. They will make demands and threaten you with lawsuits. If that doesn't work, they will hire a collection attorney to sue you or sell your debt to a collection agency that will probably sue you immediately.
The creditors (or collection agencies) may possibly get a judgment against you. If you own a home, a lien could be filed against it. If your bank accounts can be located, a levy can be filed against any money in the account, and that money can be given to the judgment creditor. If your business continues to function in any way, a receiver will be sent into your business office. This person will look at all mail that comes to your office and open it, looking for checks. Any checks made out to you or your business may be taken by the receiver.
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Receivers take a certain percentage of the money for their fees; the remaining balance will be paid to the creditor. The money ultimately paid to the judgment creditor will be credited against the total amount of the judgment against you. This type of action can continue until all amounts due under the judgment, and all costs incurred in collecting the amount due, are paid in full to the judgment creditor.
The judgment creditor could also have you served with a subpoena or order requiring you to come to court and be questioned under oath. You would be required to answer questions about all your assets and explain why you are refusing to pay the amount due under the judgment. By doing so, it is hoped that enough pressure would be put on you to pay something, at least a partial payment.
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