The Creditors' Collection Efforts and the Alternatives to Bankruptcy

Debt collectorIn order for a creditor to collect a debt that the debtor hasn’t paid, a creditor will begin legal action against the debtor.

If you are the debtor, this can make the relentless phone calls and non-stop badgering from creditors seem minor. You should contact an attorney. An attorney can help you determine whether bankruptcy is a reasonable and valid option for you.

An Alternative to Bankruptcy

An attorney can also attempt to negotiate with creditors regarding your debt.

Creditors would much rather receive some of what is owed than have you file bankruptcy and have the debt discharged. Beware, however, not all debts are dischargeable.

Don’t Default

If you owe a debt and you are served with a Complaint but you don’t serve an Answer, the court will most likely enter a default judgment against you.

The Information Request

Next, the creditor will docket the judgment and then ask the court to order you to provide to the creditor information about your assets and liabilities.

The creditor does this to try to determine whether you have anything the creditor can take to repay all or part of the debt.

If you are ordered to provide information to the creditor, and you ignore this order, the creditor will ask the court to order you to give a good reason, or cause, for violating the court’s order. If you have no good reason the court may sanction you for contempt of court. This sanction could be jail or a fine, or both.

The Creditors’ Request for a Show Cause Hearing

In order to request a show cause hearing, for your failure to provide the creditor with your financial information as ordered by the court, the creditor will need to file an Affidavit in Support of Order to Show Cause with the court.

If the court grants the creditor’s request and orders you to show cause for your failure to provide the creditor with your financial information, the creditor must serve you with a copy of the court’s order.

This service of the Order to Show Cause must be done personally, by either:

  • handing the Order to Show Cause directly to you, the debtor, at any location, or
  • leaving it with a person of suitable age and discretion residing at the your usual place of abode.

The person who served you will complete an Affidavit of Personal Service informing the court you have been served.

The creditor will then file the a copy of the Order to Show Cause and the Affidavit of Personal Service with the court.

Explore Your Alternatives to Bankruptcy

If you are in this circumstance, you are probably seeing the hole you are in get deeper.

Bankruptcy may be an alternative. However, working it out with creditor may also be an alternative. It is important to determine what action to take right away.