Will Bankruptcy Stop a Credit Card Lawsuit?

Bankruptcy Attorney St. Petersburg FloridaWill Bankruptcy Stop a Credit Card Lawsuit?

These days, it is crucial to possess at least one credit card. Try renting a car without one. If used properly, credit cards can be a very valuable tool. Some credit cards carry “rewards programs” that bring with them some pretty useful benefits. For example, if you use your credit card for everyday living expenses, and then pay it off in full each month (so as to not incur any interest charges), you can earn enough “points” to go on a vacation every year. There are many advantages to properly using a credit card. In a perfect world, we would use our credit cards wisely, reap tremendous benefits, and nothing bad would ever happen to us. Doesn’t that sound nice?

As you are no doubt aware, we do not live in a perfect world. “Life” gets in the way of even our best plans. Be it injury or illness, marital problems, job loss, or poor financial planning, there are all kinds of reasons that could lead someone to seek legal advice from someone like myself. Let’s look at an example of where someone started out with good intentions, but unforeseen circumstances led them to a credit card nightmare:

“Mr. G” had very good credit. So good, in fact, that a major credit card company (we’ll call them “Bank of USA”) offered Mr. G a pretty good deal. If Mr. G put at least $5,000.00 on his new Bank of USA credit card in the first 90 days after activating the card, Bank of USA would give Mr. G 50,000 “points” that Mr. G could use for travel (airfare, hotels, car rental, etc…). They also gave him a pretty low-interest rate, so even if Mr. G didn’t pay off his balance each month, he wouldn’t have to pay very much in interest. Mr. G had a pretty well-paying job in St. Petersburg, Florida, and lived a pretty stable life. He quickly realized that the more put on his Bank of USA credit card, the more points he would receive. Mr. G was planning a fishing trip in Costa Rica at the end of the year, and his goal was to pay for the trip using only credit card points. In a matter of six months, Mr. G had incurred credit card charges of $50,000.00. Normally he liked to pay off his balance every month, but with Christmas coming, he figured he would just make a few minimum payments so he could free up some money for presents for his family. That’s when things took a turn.

Mr. G was fishing on the beach one day when he stepped on a piece of glass, slicing open his foot. It hurt a bit but didn’t seem like a big deal. In the days to come, he realized that his foot was infected. The doctor told him that he had contracted a rare blood disease. Mr. G’s health quickly deteriorated. The doctors told him that he would have to stay in the hospital for a prolonged period of time. After using up all of his allotted “sick time” at work, his job told him they couldn’t keep him employed and had to replace him. Suddenly Mr. G found himself unemployed, hospitalized for a long period of time, and all of his money was going to co-payments, deductibles, and other unforeseen expenditures. The very last thing on Mr. G’s mind and the lowest priority for Mr. G at that moment was his sizable credit card bill with Bank of USA.

Mr. G had to skip a payment. As almost all banks will do as soon as a payment is missed, Bank of USA raised Mr. G’s interest rate on the card from the low percentage rate to more than 20 percent. The minimum payments skyrocketed and now it was impossible for Mr. G to catch up, especially with no income. After a few more missed payments, Bank of USA turned the account over to a third party debt collector, who called Mr. G repeatedly. Once the debt collector realized that Mr. G wasn’t going to pay them, they hired a lawyer and filed a lawsuit. It was at this point that Mr. G decided to contact a lawyer.

This example is not all that uncommon. One seemingly minor life event can lead to catastrophic consequences. So what are the options available to you if you are facing a lawsuit for missed credit card payments? Assuming there are no good legal defenses to the lawsuit (you actually do owe it), then filing for bankruptcy might be your best option.

The good news is that once you file for bankruptcy, an Automatic Stay goes into effect. Think of an Automatic Stay as a tool used to freeze any and all lawsuits pending against you. While an automatic stay is in place, the credit card company, or third party debt collector, is unable to prosecute their case against you. They are now subject to the protections afforded by the bankruptcy court. The vast majority of individuals filing for bankruptcy do so under what is known as Chapter 7 or Chapter 13. While these two different kinds of bankruptcy have differing advantages and consequences, BOTH Chapter 7 AND Chapter 13 will immediately freeze a credit card lawsuit with an Automatic Stay.

Keep in mind that consulting with a bankruptcy lawyer, paying a lawyer, giving the lawyer financial documents, or signing a bankruptcy petition, will NOT give you the protection you need. It is not until a bankruptcy petition is actually FILED with the bankruptcy court where you will receive an Automatic Stay. This distinction is very important. You will come across many bankruptcy lawyers in Saint Petersburg, and all over the state of Florida, that will offer you what seems to be very enticing “payment options.” Before agreeing to any such payment plan, be sure to find out exactly when the lawyer intends to file your bankruptcy. A credit card lawsuit will contain strict timing deadlines. If you let the case go too long, without filing the bankruptcy to stop it, you could face severe consequences, such as wage garnishment.

Don’t wait until it is too late. If you are facing a credit card lawsuit, or fear that one may be coming soon, the time to act is now. Contact the experienced lawyers at Berkowitz & Myer so you can learn how the bankruptcy laws might help you with your particular financial situation. No two clients are the same and no two situations are the same. We look at each individual client and their unique state of affairs, and we come up with a plan of attack to guide them through this difficult time. The best part is that there is no cost to you, the client, for your initial consultation. You can meet with a lawyer, find out how the laws can help you, and not pay anything. We look forward to hearing from you.—

Jesse D. Berkowitz, Esq.

Attorney at Law

Florida Chapter 7 FAQ

There were more than 500,000 Chapter 7 bankruptcy filings from June 2015 to June 2016 in the United States. While many people may benefit from a Chapter 7 case, the process often remains a mystery to many and they may not realize how bankruptcy can help. The following are some frequently asked questions about Chapter 7 bankruptcy in Florida.

Who Can File Under Chapter 7?

Chapter 7 bankruptcy is fairly flexible when it comes to permissible petitioners. Any of the following can file for this type of bankruptcy:

  • Individuals
  • Married couples filing jointly
  • Businesses

If you are married, an experienced bankruptcy lawyer can help you determine whether it would be most beneficial to file as an individual or jointly with your spouse.

Will I Qualify for Chapter 7 Bankruptcy?

In order to be eligible for Chapter 7, you must pass something called the “means test.” This test examines your financial situation and is intended to determine whether or not you have enough money to pay toward your debts. If your income is too high, you may not qualify but there are other options in this situation, such as Chapter 13.

Will the Court Take My Property?

While the court can take certain property in a Chapter 7 case, most petitioners can protect much of their property by applying exemptions available under Florida law. Florida has fairly liberal exemptions and you can protect your home and much of your personal property. A skilled bankruptcy attorney can help you decide how to best apply exemptions to keep most of your property.

What Debts Can be Discharged in a Chapter 7 Case?

A successful Chapter 7 case will end with a discharge of many debts, which can include the following (among others):

  • Credit card debt
  • Personal loans
  • Some back taxes
  • Legal judgments
  • Medical bills
  • Past due rent and utilities

Consult With a St. Petersburg Bankruptcy Lawyer Today

If you have any questions about the Chapter 7 bankruptcy process or how it can help you, please do not hesitate to call the St. Petersburg bankruptcy attorneys at the law firm of Berkowitz & Myer. Call 727-344-0123 to discuss your options for debt relief.

1http://www.uscourts.gov/news/2016/07/27/june-2016-bankruptcy-filings-down-69-percent

2http://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0200-0299/0222/0222ContentsIndex.html&StatuteYear=2012&Title=-%3E2012-%3EChapter%20222

no-cost consultation: (727) 344 0123

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