The Perils of Not Responding to a Collection Lawsuit
When you are served with a summons and complaint in a collection matter, ignoring these papers will likely have costly consequences. You might not only lose the opportunity to defend yourself, but also put yourself at risk of collection measures that can take your assets and income from you, or even force you into bankruptcy.
California law permits creditors and debt collectors to sue for debts of any amount. If you are being sued, you generally have 30 days to file a response to the lawsuit. If you fail to respond, the creditor can ask the court to enter a default and then a judgment by default. When requesting a default judgment, the creditor can often tack on additional amounts for interest, lawyer fees, court costs and other amounts that were not part of the original debt. These expenses can be significant.
Once a creditor obtains a judgment, they can proceed with collection measures. They can obtain and record and abstract of judgment. This creates a lien on any real estate that you own or may come to own in the county in which the abstract is recorded. This lien is valid for 10 years and requires the underlying debt plus accrued interest at 10 percent per annum to be repaid if you sell or refinance the property. In some cases, creditors can force sale of your real property to pay the judgment. In addition, a creditor may be able to get funds directly by garnishing your wages or attaching your bank accounts. This can cause you more difficulties as you may not be able to pay other bills once the money is seized.
Going forward, a judgment can affect your ability to borrow money by negatively affecting your credit rating.
A debtor may be able avoid a default judgment by immediately engaging a qualified debt settlement lawyer who can raise effective defenses and take steps toward resolution of the underlying debt. Debt collection lawsuit papers often contain errors. Some suits are altogether invalid, such as when the person filing the suit has no legal standing to bring it. Occasionally, creditors’ records are incomplete and they will not be able to prove the debt. Some creditors file a lawsuit too late. California has a statute of limitations on debts. After the statute date passes the creditor can no longer legally collect. It is up to the debtor to raise any defects in the lawsuit, which is why an attorney’s services can prove invaluable.
The Law Offices of Michael Jay Berger in Beverly Hills is one of Southern California’s most experienced bankruptcy and debt relief law firms. If you are being hounded by creditors or have been served with court papers in a collection lawsuit, feel free to contact us online or call 310-271-6223 to schedule an initial consultation.