No money, Now What? Part 3

14 Dec No money, Now What? Part 3

So you have no money. You”ve come to that realization. You’ve sat down and figured out your goals – you know where you want to go. So, what now? If you have nothing to lose, then you have nothing to lose by doing nothing.

A valid option that can apply to some people is to simply do nothing. Before you make that decision, you need to know what your exposure is. What is the worst that could happen to you?

Start with a list a list of everything you own. Then get values of the big ticket items. Real estate values can be found online at various sources like Zillow, but the most dependable source is a local realtor who is familiar with the local market. Some quick research of your home’s features and location will reveal its value. Vehicles are easier since there are thousands of car out there just like yours. Visit Kelly Blue Book or the National Automobile Dealers Association for some value estimates. Value your clothing, jewelry, bank accounts, household goods; not at what it cost you to buy, but what it might be worth if you had to buy that item used and in the same condition as your item. Don’t be so sure your stuff is worth all that much.

Next you need to subtract from those values, any balances you owe on secured debt to determine your “equity” or net value in that item. (Secured debts are loans where your property is pledged as collateral for the loan.) For instance, if your home is valued at $250,000 and you owe $210,000 on your mortgage(s), then you have $40,000 of “equity” or net value in your home. The same is true for vehicles – cars, trucks, trailers, campers, boats, etc. Total up the net values, this is your net worth.

Now there is no magic to getting sued. If you do not pay a creditor, there are only a few things the creditor can do to you. If it is a secured creditor, repossession or foreclosure can occur. If it is an unsecured creditor, usually their only remedy is to sue you. Since defenses can be limited in these types of collection cases, judgments result. But if you cannot afford to pay the judgment, what can the creditor do? The prison for debtors has been outlawed so you cannot go to jail for not paying the judgment. The usual way to enforce a judgment is to place a lien on something you owe or seize it with an execution order issued by the court. This is how your pay can get attached, your bank accounts garnished or or other property seized.

Finally, you need to learn your state’s exemption laws. Exemptions are laws designed to let you keep certain property so you don’t become dependent on the state for survival.

If you have no net value, no income subject to attachment, no property to lose, then you can almost safely do nothing – for a while. Nobody’s situation is permanent and you have to be constantly vigilant to make sure collectors and creditors do not step over the line. And someday, you will have something to lose and you don’t want to do that. Then it will be time to look at your other options.

“ConnecticutGene Melchionne is a bankruptcy lawyer covering the entire State of Connecticut. He can often be found on Google+ and Twitter, where he shares information about consumer protection issues and personal finance.

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