Let's say you have been sued by a creditor (i.e. a credit card company) and have lost that lawsuit or a default judgment has been entered against you. The creditor now has multiple ways to enforce this judgment and take the money that is owed to them. Creditors can now garnish your wages, levy your assets and in some cases, put liens against your personal property.
Here is a list of assets that are vulnerable to getting taken by your creditors:
1. Wages, commission and other income. In California, a creditor can garnish up to 25% of your income, which is usually taken right out of your paycheck.
2. Bank accounts. Creditors can get a court order to go directly to your bank and take funds.
3. Stocks and bonds. Creditors can do a discovery of your assets and get a court order to have you turnover or sale certain assets to satisfy a judgment.
4. Life insurance policies that have a cash surrender value
5. Vehicles with high equity
6. Accounts receivable. Creditors can get a court order to take money that is owed to you.
7. Investment/vacation real estate
8. Your home. In some cases, a creditor can put a lien on your property so that when you do sell your home, they will receive a portion of the proceeds.
When faced with aggressive creditor collection activities, a bankruptcy will stop all collection activities and in most cases, eliminate the debt that you owe to your creditors!