How to Protect My Assets From Credit-Card Default

When a creditor approves you for a line of credit, you become obligated to repay the debt. The creditor's right to compensation allows it to sue you in a court of law for restitution. A judge can seize your assets on behalf of the creditor, including wage garnishment, bank account seizure and property liens. Protecting yourself and your assets when you default on a loan is not always easy, but there are strategies you can put into action to retain your assets.

Instructions

1

Contact the creditor and arrange payment in the event that you receive a summons to appear in court. Many creditors do not want to go to court, and may be willing to settle the debt before the court date. In most cases, they may not be willing to set up payment arrangements, but they will accept a full payment or perhaps a partial settlement if you act quickly.

2

Work with a credit consolidator. Credit consolidators will often buy your debt, paying off the creditor you owe and reassigning your payment to them. You can consolidate outstanding balances into one monthly payment, which is often lower than the payments owed to your various creditors.

3

File for Chapter 7 bankruptcy. Chapter 7 bankruptcy is considered a "fresh start" opportunity. When you file Chapter 7 bankruptcy, your assets are reviewed to determine if they are worth liquidating to pay off your debt or exempt from liquidation. You may not be able to protect all of your assets, but those considered exempt can be protected from seizure. You will need to pay lawyer fees and filing fees when filing for Chapter 7 bankruptcy.

4

Review the rights provided by your state in relation to asset seizure and wage garnishment. Not every state allows creditors to seize your assets or garnish your wages when you default on your credit cards. For example in the states of Texas and Florida, you are allowed to exempt up to 200 acres of your personal property due to the homestead law. However, moving to a state that provides asset protection when a suit has been brought against you is often considered a fraudulent transfer of assets and could result in further legal action against you.

5

Create a domestic asset trust. A domestic asset trust allows you to turn over assets to a third-party trustee, but you must give up command and control of all assets assigned to the trust. Any assets that remain in your control may be available for seizure if your state laws grant creditors the ability to seize personal assets.

6

Purchase a home with money earned from the sale of your assets. In most cases your personal residence is exempt from seizure by creditors and you are allowed to turn non-exempt assets (your personal belongings) into an exempt item (your personal residence.)