When a person stop paying on her unsecured debt like credit cards, usually the creditor will file a lawsuit as an attempt to collect on the debt.  Once the creditor receives a judgment in its favor at the completion of the lawsuit, the creditor can collect on that judgment for 10 years.  Before the 10 year expires, the creditor can renew it for another 10 years, and so on.  With the judgment, the creditor can either obtain a wage garnishment order or bank levy order or record abstract of judgment with the county recorder, placing a lien on the borrower's real estate in that county (aka judgment lien or judicial lien).

From time to time, I have clients tell me that they did not expect that their creditors was going to garnished their wages several years or over a decade after receipt of judgment. You have to reason that if a creditor spend time and money filing a lawsuit to collect on credit card, medical bill, deficiency from car repossession or foreclosure, he or she wants to recoup their cost and debt owed.

If the judgment is from a credit card or medical bill, wage garnishment or bank levy will stop upon filing of Chapter 7 Bankruptcy or Chapter 13 Bankruptcy and the debt will be eliminated upon discharge. Personal liability for those debts is discharged in the bankruptcy. However, if the creditor recorded an abstract of judgment with the county recorder and thereby placing a judicial lien on borrower's real estate, a motion to remove lien must be filed in addition to the bankruptcy petition. You must let your bankruptcy attorney know of any recorded lien on your real property or home.  You must obtain an order to avoid lien from the bankruptcy court to remove judicial lien or judgment lien. The motion to remove lien will not be successful if there is too much equity in the real estate.  Another reason why procrastination works against debtors in bankruptcy.

Keep in mind that creditors can add costs, attorney's fees and interests to debts that you owe in a lawsuit. After the lawsuit it completed, judgment can grow by accruing interests. The statutory interest rate in California is 10%.

For more information, call to schedule a bankruptcy consultation with Muoi Chea, Sacramento CA Bankruptcy Attorney.