Credit Card Debt and Bankruptcy: Will I Get Sued? - Westgate Law

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Credit Card Debt and Bankruptcy: Will I Get Sued?

As a bankruptcy attorney, I am often asked about credit card debt. More often than I would like, however, those questions come in the style of, “How bad am I going to get sued by the collection agency?” Other variations on this topic include concerns regarding whether or not a bankruptcy filer can include a legal judgment in a bankruptcy claim and when such a claim should be filed.

How Bad Am I Going to Get Sued by the Collection Agency?

First off, you will get sued. In this type of situation, the collection agency is most likely going to file a suit as they do have good reason to do so. This is because in most cases, your account was acquired by the collection agency, whether directly or through a third party, from your original creditor. This means the collection agency paid just a fraction of the original cost of the account, allowing them to get a cheap deal on the continual collection of any payments made to the account.

In basic figures, a collection agency could buy a $1,000 outstanding balance for about $50, which is just five percent of the original cost. Even at this obscenely low price, the agency would still be able to collect on the entirety of the balance, and could charge an interest rate as high as 34% applicable to the entire account until it’s all paid off. What all this means is that, because they paid so little for your account, they won’t mind shelling out a few extra dollars to pursue a court judgment.

However, this judgment can be included in a bankruptcy claim, as long as it’s not fraudulent. If there’s no fraud involved in your inability to pay on the loan, the unpaid sum can be eliminated in bankruptcy. Some choose to pay the agency for a little while as they put together their bankruptcy petition. This is fine, though it shouldn’t be your first choice, as it requires that you pay both the collection agency and the attorney working on your petition.

Hopefully this article provided you with some assistance if you’re currently dealing with credit card debt and considering filing bankruptcy. If you do decide to file, don’t forget to make a plan to rebuild your credit post-bankruptcy. If you need additional assistance or have more questions about how to obtain a discharge of your credit card debt through bankruptcy, please get in touch with the southern California bankruptcy attorneys at Westgate Law.

About the Author

Justin Harelik

Justin has a singular goal: to get people out of financial distress and move them to financial stability and prosperity. He does this by combining 15 years of in-depth experience in bankruptcy, credit management, debt negotiation and student loan modifications, and he does it with both English and Spanish-speaking clients.

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