Navigating Credit Card Debt, Collection Agencies, and Bankruptcy - Westgate Law

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Navigating Credit Card Debt, Collection Agencies, and Bankruptcy

Many people can find themselves facing financial hardships at some point in life. Therefore, understanding their rights and options can be critical in finding a way out of debt and towards a fresh financial start.

If you’re in a similar position, this article delves into three specific circumstances concerning debt settlement to help you make informed decisions about your situation.

Case #1. If Your Credit Card Debt Has Been Transferred To a Collection Agency

If your credit card debt has gone to a collection agency, there is a strong chance that the agency can sue you and get a judgment against you. In most cases, the collection agency purchases your debt from the original creditor at a significant discount, and thus, the agency gets the right to collect the entire outstanding balance. It strongly incentivizes them to pursue legal action and recover the total amount owed. While the agency may spend some money on the lawsuit, the potential returns make it worthwhile for them.

Here’s a quick example – the agency could buy a $1,000 outstanding balance for as little as $50 (5% of the outstanding balance). It can also charge an interest rate as high as 34% on the entire outstanding balance until it is paid. If the collection agency has paid only 5% for an account, it likely will pay a little more to sue and get a judgment.

Case #2. Including the Judgment in Your Bankruptcy

In most cases, you can include the judgment and the underlying debt in your bankruptcy filing. Many people mistakenly believe that a judgment makes the debt non-dischargeable in bankruptcy, but that’s usually not the case. Unless the judgment resulted from a fraud claim, which is a rare scenario, most judgments for unpaid credit cards, loans, medical bills, or business debts could be eliminated through bankruptcy.

Case #3. Filing Bankruptcy After Paying the Collection Agency for a While

This is a common approach – you attempt to make payments to the collection agency for a while but then comprehend that it’s impossible to keep up with it. You try to buy some time, then compile your bankruptcy petition. It is permissible. While it may not always be financially sensible to pay both the collection agency and your bankruptcy attorney simultaneously, there are situations where employing this strategy can be beneficial.

The Bottom Line

Facing credit card debt and dealing with collection agencies can be overwhelming. But knowing your rights and options can help you navigate through the challenges. Remember that collection agencies have the right to sue you, but most credit card judgments can be included in your bankruptcy filing for discharge. If you struggle to make payments, considering bankruptcy might give you a fresh start to rebuild your financial life. But remember to always consult a qualified bankruptcy attorney to understand the best course of action for your situation.

Talk to an Experienced Attorney for Better Assistance

This article strives to provide general insights into credit card debt, collection agencies, and bankruptcy. Therefore, it is important to recognize that consulting with an experienced attorney is essential for obtaining reliable advice.

Every individual’s situation can be unique, and only a qualified bankruptcy attorney can offer the expertise and guidance necessary to navigate the legal complexities effectively.

Allow the Westgate Law Los Angeles bankruptcy and debt attorneys to minimize your stress and protect you from these legal hassles.

Contact us to schedule an appointment today.


Disclaimer: This article is for educational purposes only and should not be construed as legal advice. Seek the assistance of a qualified attorney to address your circumstances and make informed decisions.

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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