Paying Credit Cards While Neglecting Mortgage Payments Can Hurt Your Future
Credit card delinquencies have dropped slightly while foreclosures continue to rise; but one of the reasons cited for this shift is debtors’ neglect of mortgage payments in favor of keeping their credit cards current. Current high levels of unemployment and financial uncertainty have conspired to create an incentive for debtors to neglect their mortgages while making payments on their credit cards. Many debtors are afraid that they may lose their job soon and they want to have a source of easy to get to cash so they keep their credit cards in the black. Other debtors are already falling behind on mortgage payments, are unemployed or soon to be unemployed and figure that they will lose their home to foreclosure anyway so why bother trying to make payments. Many are betting on the fact that foreclosures in this country are so numerous that mortgage companies are backlogged for as much as a year which will give more homeowners time to live “rent free.” But there is a catch, even if mortgage companies don’t crack down on delinquent homeowners as fast as their credit card counterparts, they will eventually come after delinquent borrowers even after foreclosure. Because of the rapid loss of value in the housing market, many homes sold at foreclosure are sold for significantly less than the mortgage that the original homeowner owes. This means that the mortgage company will come after the debtor for the balance of that loan and will have the legal right to file lawsuits and use judgments to seize assets and garnish wages. Even if a debtor is without assets and jobless, the mortgage servicers are betting that eventually the debtor’s finances will improve and that they will be able to get repaid. Many debtors find that without the help of a bankruptcy discharge, once they regain employment and assets, old debts such as unpaid mortgages come back to haunt them. This is why debtors who find themselves neglecting their mortgage payments in order to pay credit cards, should really consider how bankruptcy can help them. Remember, bankruptcy will discharge unsecured debt and make it impossible for creditors to come after you once you’re financially on your feet again.



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If a debtor has become delinquent on their debt payments for long enough, creditors will eventually file a lawsuit against them and may win a judgment. With a judgment in place the creditor can garnish wages and get the right to use non-wage garnishments which typically means they will seize bank accounts. If a creditor serves the debtor’s bank a non-wage garnishment affidavit, the bank is required by law to hand over the debtor’s money on deposit up to the amount owed to the creditor, even if that puts the debtor’s bank account at a zero balance. For example if a debtor owed $3,000 and had $1,500 in their bank account, the non-wage garnishment could wipe out the account handing over the $1500 to creditors. But there are things a debtor can do to protect their bank accounts from non-wage garnishments:
