What You Must Do When You’re Sued For A Debt

03 Oct What You Must Do When You’re Sued For A Debt

Being sued for a debt is serious. You can either act quickly to protect yourself or stick your head in the sand and suffer the consequences.

So far this morning, I’ve gotten two calls from clients who received suit papers over the weekend. Credit card companies (or the debt buyers who bought the accounts) have filed civil suits in state court, seeking a judgment for the amount owed.

One of the suits was accompanied by a letter from the law firm that filed the suit, insisting that the client contact them immediately. Getting sued is a scary thing.

Should you hit the panic button?

What does it mean, and what can you do?

Getting Sued Doesn’t Mean A Judgment

A civil suit is nothing more than a request that a court decide that you owe the plaintiff money. That’s it. You are being put on notice, and you have the right to respond and dispute that you owe the money, or that the amount is incorrect, or that you don’t owe that particular claimant. It is not an arrest warrant (there are no debtors’ prisons in this countryremember 9th grade civics class?).

If you don’t file a response to the suit (called, appropriately enough, an Answer) the court will usually find in favor of the plaintiff, granting them a civil judgment in the amount they requested.

Once the court grants the plaintiff a civil judgment, however, you may effectively lose the right to challenge that the amount is correct, or that you actually owe the money.

If you don’t dispute that you owe the debt, a judgment is nothing more than a piece of paper that says you owe what you already knew you owed.

What Happens When A Judgment Is Filed?

What comes after a judgment is granted depends on where you live and what you own.

If you want to know how a civil judgment will affect you and your property, you have to consult a lawyer in your state. Don’t rely on your internet research skills or your brother-in-law (unless your brother-in-law is a lawyer) because every state is different, and your situation is not exactly like anyone else.

In fact, my advice to my two clients this morning was different. One is what lawyers call “judgment-proof.” That means what it sounds like–a judgment doesn’t change anything, because there is nothing the judgment creditor can do, no property for the judgment creditor to take, that will change anything for my client. The second client, who owns real property, may need to respond differently.

Can Bankruptcy Help?

Bankruptcy may also be a solution. A bankruptcy can stop a suit that has been filed, and prevent a judgment from being granted. Bankruptcy can also sometimes alleviate the affect of a judgment that has already been issued.

Whether is is necessary or advisable, again, depends on your situation. Only an experienced bankruptcy lawyer can tell for sure.

See Beyond The Hype

Oh, remember that letter I mentioned, insisting that my client contact the creditor’s lawyer immediately? The language of the letter suggested that dire consequences could result if she did not contact them. Leaving aside whether the letter is itself actionable, if you get such a letter (or phone call), remember that they are trying to get you to pay them money. Their stock in trade is to create a sense of urgency, and stampede you into making a commitment that you wouldn’t otherwise make. Again, your best defense is to consult with someone who is on your side, who can tell what you really need to worry about, and what is, as my Daddy used to say, “all bark and no bite.”

And, as a final note, don’t delay. It may be tempting to just stick your head in the sand and wait to see what happens, but remember what part of your anatomy that strategy leaves exposed. (If you need a reminder, see photo above.) Check it out, and make sure you know what can happen, and what you can do about it. You may be pleasantly surprised by the advice you receive.

Photo credit: jGroup/iStock

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