Are you judgment proof?
Bankruptcy filings increased by 14% during the first half of this year. And we all know the reasons why people are filing. Jobs are hard to find, home values are plummeting, and fear and uncertainty are preventing business owners from expanding their business. So when people find themselves down and out, it is quite normal to consider filing for bankruptcy.
Bankruptcy Not Always the Answer
But is bankruptcy always the right solution? Unfortunately, there is not always a clear cut answer. But one option that some people overlook is to simply do nothing. If you are “judgment proof”, and intend to stay that way for sometime, your best bet might be to simply do nothing at all. By “judgment proof” I mean that even if a creditor wins a judgment against you, they would not be able to collect anything. Why do I recommend to some of my clients to do nothing? Simple. Because sometimes, my clients do not have anything that a creditor can seize.
Know Your Exemptions
Each state has a list of exempt property. That is just a fancy way of saying that certain property is off limits to creditors. For instance, income from social security is exempt from creditors. If you qualify for the homestead exemption in Kansas, your house is also exempt from creditors. So how does this impact whether you should file for bankruptcy?
If you do not own anything a creditor can take, you might be better off riding out the storm. Now, creditors will try to collect the money. You should expect to receive lots of phone calls and letters. Your creditors might even take you to court. But if you do not have anything that they can collect, your creditors are really just spinning their wheels.
Creditor Calls Will Likely Continue
But there are downsides to this approach. First, if your circumstances change and you come into some money or get a job you will be at risk of your creditors collecting against you. Second, you will have to endure collection attempts. In my experience, some people are really bothered by the constant collection attempts. Others do not care a whit. So, know thyself and figure out whether this is a big deal.
If you are facing tough times, do not rush in and file for bankruptcy. First you need to talk to a skilled bankruptcy attorney and determine your options. You might not be in a position where you have to file for bankruptcy. Or your best option might be to simply do nothing. But that can only be determined on a case by case basis. Talk to an attorney and see if you need to file for bankruptcy or if you should sit on the sidelines and simply do nothing.
Jacob McElwee Topeka Bankruptcy Attorney