What do I do if a creditor sues me for a lot of money that I don’t have? That’s easy, consider bankruptcy as an option.
June 4, 2012 1 Comment
If a creditor files a lawsuit against you should be notified by a Summons and Complaint that should be personally served on you at your home or at work. In that lawsuit the creditor will be listed as will the amount of the debt and the lawyer that handles the case. Once you have been served you will have 30 days to file an answer and if you do not the creditor will get a default judgment against you. (See my updated blog here.)
The default judgment will allow the creditor to begin to collect on the debt that you owe him. He will then do some sort of search to see if he can find out where you work, what assets you have, and where your bank account is. If he finds out where you work he will begin to garnish wages. With a wage garnishment the creditor can take 25% of your net earnings which will greatly reduce your earnings.
It is also possible that you do not get served and you do not get notice of a lawsuit being filed against you. You nay be in the dark until the collector gets a wage garnishment or takes your money in the bank. If you are not properly served then you do have a case against the creditor. You can try to set aside the judgment but that requires a lawyer unless you want to try the process yourself.
You can apply for an exemption from this garnishment arguing that you need the money to live but there is no guarantee that you will receive it from a judge. If the creditor finds your bank account he will levy it and take all the money he finds there. I believe that creditors wait until you are paid so that your bank account is at its highest balance so they can take the most money they possibly can.
If you have assets the creditors can go after those too especially if they lien them. They can also get you into a debtors exam and ask you about your assets, bank accounts, and your job. They then use this information to collect all the money they can from you.
The good news is that bankruptcy will end all of the collection madness. Once you file bankruptcy a stay descends upon all of your financial affairs. The lawsuit then must be dropped by the creditor and all collection efforts must stop immediately. Even money taken from you recently can sometimes be recovered.
It all therefore ends with the bankruptcy filing. The calls stop, the harassment stops, and so will the worrying and psychological distress. If you qualify for a bankruptcy and you cannot pay the debt then contact a bankruptcy attorney to discuss whether a bankruptcy makes sense in you case.
I am a San Diego bankruptcy attorney. For further questions please visit my websites at www.farquharlaw.com or www.freshstartsandiego.com. Or call my office for a free consultation or for any other advice about bankruptcy or debt at (619) 702-5015. Call now for a free credit report and analysis!
For a free e-book on “13 things to do to prepare for your bankruptcy filing” please e-mail me at firstname.lastname@example.org.
Scales of justice courtesy of SRBichara, Courthouse courtesy of w.marsh.