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The major advantage of
Wage Earner Plan, besides not being recorded permanently on your credit record, is that you get to keep all your assets, exempt and non-exempt alike (assuming you still have any left!). This is quite important, if, for example, you have a good paid-up car, or expensive household furnishings or a boat or other valuable assets that you want to keep. Under Chapter XIII, you can get your current debts "stretched out" to three years, which may well result in lower total monthly payments than you are currently paying, and as long as you pay off your debts in accordance with agreement files with Court, month by month, no creditor will be able to sue you to try to seize any other of your assets, and force their public sale at disadvantageous prices.
Even if they have begin to sue you, once you file for relief under Bankruptcy Act, either under Chapter XIII or under Chapter XI, straight voluntary bankruptcy, they can't touch you! They are immediately restricted to getting from you only what referee or trustee will give them and that only after court proceedings have been completed. Often, if creditor threatens to sue you, most effective thing you can do to stop him (besides paying debt!) is to tell him frankly that, if he sues you, you have no other recourse than to declare bankruptcy. This will often make your creditor willing to negotiate debt, and you may be able to satisfy him by paying debt back, but over a longer period of time (with smaller monthly payments) than you originally contracted for. Creditors know well that if you file bankruptcy, chance of their getting payment in full on their overdue account is very low, so it is in their interest to try to ease your credit burden at least for a while.
Make Yourself "Judgment-Proof"
If a creditor goes ahead and sues you, and gets a judgment against you, he can then get a court order directing sheriff to seize your personal property, sell it and pay creditor amount of your debt. However, if you have no valuable assets, there is nothing for sheriff to seize, and you are what is generally called "judgment proof", or in other words, can't be made to pay debt. Because they know this is likely to happen, street-smart debtors often hide their possessions, or move them out-of-state, before sheriff (or marshal) arrives. This is, of course, illegal. The creditor's next move is to try to "garnishee your wages, which he does by getting a court order directing your employer to set aside part of your wages or salary every pay period and turn amount over to him. However, he can only do this if he knows, or can find out, where you work. But even if your wages are garnisheed, there are limits on what a creditor can take! Laws vary from State to State. In some states wages cannot be garnisheed at all while in others only small amounts are exempt from garnishment.
If you have no job, and no visible assets, or you live in a State where your wages cannot be garnisheed, your creditors actually have very few ways of ever collecting on that judgment!
Harassment and Other Creditor Tools
Before your situation gets bad enough to need bankruptcy relief, and before your creditors actually sue you, they will try to make you pay up using informal techniques, rather than formal court orders, as this is far less expensive and time-consuming. First among these informal attempts may be turning their bills over to a collection agency which may then begin harassment, by calling you often and at odd hours by telephone, by trying to talk to your employer about your debts, and/or by threatening you with legal actions, etc. Many of these techniques that they use are illegal! Yes, a creditor or agency can write you letters, call once a day seeking payment, try to bring legal action against you, but he is forbidden by law to harass you or invade your privacy, or use deceptive means to get you to pay your bills. He may not use foul and abusive language over telephone, tell anyone beside you reason for his phone call, insist on payment for a product or service that you claim to have a legitimate grievance about, nor issue false threats (such as saying that he is going to drag you into court to collect $35, when in fact his agency's policy is not to file suit on accounts of less than $100, because of high legal costs involved). He may not inconvenience you (by calling you at work when you are not easily able to receive calls), or invade your privacy (telling your employer or your neighbor that he is trying to collect a debt from you).
There are books that provide detailed additional information on personal bankruptcy, and include sample letters with which you can try to arrange "stretch-outs" on your own with your creditors before bankruptcy is necessary. Some include sample bankruptcy forms filled out that you can use as a model. Since accurate filing of all your debts and assets is so important, it's a good idea to follow their detailed instructions closely, with or without a lawyer, so that once you get your creditors off you back, they stay off!
