Legal Question in Credit and Debt Law in Pennsylvania

When you have difficulty paying your debt, you have 3 options, negotiate, ignore, or bankruptcy. A lawsuit will likely result in a judgment and can also result in loss of bank accounts and personal property.

There are generally two types of bankruptcies, Chapter 7 and 13. The former is generally for those who simply require the elimination of unsecured debt such as credit cards. The latter is generally for those who have fallen behind in secured debt such as a mortgage. Chapter 13 allows you to repay any arrears over five years.

A bankruptcy protects just about all consumer assets. There is a $20,000.00 minimum homestead exemption in your principal residence per person. The contents of your home, if any one item is not worth a great deal, are exempt up to at least $10,000.00. There are many other exemptions, as well. Vehicles are exempt to a minimum amount of $3,500.00 and, there is what is commonly known as the "wildcard" exemption. You may use up to one-half of the homestead exemption for any asset you want to protect.

An exemption is a dollar amount assigned to an asset so that, if a Trustee ( the person charged with liquidating assets) were to attempt to sell such an asset, he would have to pay the exemption amount to you. Since the stated exemptions usually cover the value of the assets, most consumer cases are determined to be "no asset". Thus, you simply obtain a discharge of your debt.

You should speak with experienced bankruptcy counsel to discuss all the ramifications.

I trust this has been helpful, but feel free to call or e-mail with further questions.

There is no wage garnishment in PA. If you are on SSI, then all of that income is exempt. You need to make sure that you do not have a bank account with another person and that the creditor knows that all of this income is exempt. Do not commingle the money into any other account.

If the creditor gets a judgment against you, they can levy on your car (if it is paid for - I do not know what it is worth). They can also levy on other assets. I know of a creditor who got a judgment against an elderly client of mine and threatened to sell his home furnishings and television! I do not want to alarm you, but this is a possibility and you should be aware of it. Whether it will actually happen in your case will depend on the creditor and how nasty the creditor wants to get.

I do not know the amount of the debt. Is this your only debt? Do you want to try and pay off the debt? Bankruptcy should be used only when a person has enough debts to make it worthwhile. You will have to speak to a bankruptcy attorney regarding the costs of that to see if bankruptcy will make sense in your case.

Or, you may want to hire a lawyer to defend the lawsuit. If you go this route, know that you have 20 days after you have been served to file an answer. You should only do this if you have some kind of a valid defense to the debt. Examples of valid defenses are: (1) statute of limitations - its been more than 4 years since the debt was owed (if the debt was created in PA); (2) you did not create the debt, like in a case of identity theft; (3) you paid the debt and do not owe the money; (4) you do not owe as much as the creditor says that you owe (not counting interest that has been added to the debt); or (5) the complaint does not attach the required documents (the credit card agreement and any proof of assignment) or the complaint is otherwise defective.

If neither bankruptcy or getting a lawyer to defend the suit is right and you want to pay off the debt, then feel free to contact me to try and work something out. I can negotiate a settlement of less than the full amount of the debt, but it will depend on what you can pay. If you do not have the money yet, then save up until you have 50% of the debt. Remember, the debt will grow as it will earn interest at the statutory rate of 6% per year so you will have to allow for this.

Rachel Hunter

Attorney at law

[email protected]

(678)-687-9693

Admitted in GA, PA & NC