Protecting Your Assets When In Debt

If you are experiencing trouble paying your debts, you may have received notification that your assets are at risk of seizure by creditors. Missed mortgage payments can quickly lead to foreclosure and missed car payments can result in having the car repossessed. Creditors may even garnish your wages if you are severely delinquent on your debt payments. However, you don't have to let creditors take your assets; there are ways to protect your property while working to get caught up on debt payments.

Foreclosure

Mortgage lenders pursue collection actions much faster than other creditors. The reason is because the loan amount is much higher and they lose money quickly when payments go unpaid. If you want to keep your house but are late on your mortgage payments you have two options.

First, you can contact your lender directly to negotiate a mortgage loan modification. A loan modification can change the terms of your mortgage loan, resulting in lower monthly payments. Lenders may be willing to lower the interest rate on the loan, forgive delinquency fees or penalties, extend the life of the loan or even suspend monthly payments temporarily.

Secondly, you can file for bankruptcy. When you file for bankruptcy, the foreclosure process is halted or prevented and your lender must give you time to arrange a plan through the bankruptcy court. Depending on the state you live in, your home may be fully protected from seizure in a Chapter 7 case or you can ensure full protect by repaying your mortgage debt through Chapter 13 bankruptcy.

Repossession

Secured debt lenders, such as a car loan lender, have more collection rights when attempting to collect on a debt than an unsecured creditor. The reason is because the property that you have in your possession is used as collateral in the event you default on the loan. There are two ways to stop or prevent repossession when you default on the payments.

Firstly, you can negotiate with your creditor directly. Your creditor may be willing to suspend repossession action while you work towards getting caught up on your payments. However, you must contact your creditor as soon as you miss a payment. If you wait too long to contact the creditor, you may not be able to arrange a deal and the property may already be in the process of repossession.

Secondly, you can file for bankruptcy to stop or prevent repossession. Again, the state you live in has specific bankruptcy exemption laws that dictate the amount and type of property that is protected from seizure during bankruptcy.

Wage Garnishment

Creditors use wage garnishment as a last resort collection attempt because to do so they must first obtain a court order. Wage garnishment can be serious and could lead to 25-50% of your wages being garnished each paycheck, leaving you in worse financial trouble. The good news is that you can prevent wage garnishment two ways.

First, contact your creditor to explain your financial situation. You may be able to negotiate a repayment plan that better suits your budget.

Secondly, bankruptcy can stop your wages from being garnished in most situations if you do not have the financial means to maintain an arrangement directly with your creditor. However, back due child support or back taxes rarely are able to receive protection under bankruptcy and may continue to be garnished by a court order.