If your creditor has sent a summon notifying you that they are taking legal action against you, do not ignore it. Otherwise, the court could pass a default judgment against you. The default judgment gives the debt collector more power to collect the loan, and depending on your case facts, your lender can place a lien against your property, garnish your wages, or withdraw funds from your bank account. The most effective move to take after receiving the summon is to contact a seasoned San Diego bankruptcy attorney. The lawyer will help you respond to the matter and develop a settlement plan with your creditor. Responding does not mean you agree that you have a debt or that it is valid.
An Overview of California Debt Collection Lawsuit
A debt suit is a legal measure a creditor takes to recover payment from a debtor. This legal process starts when an individual or entity believes a person owes them payment, including:
- Medical bills.
- Credit card fees.
- Personal loans.
- Automobile loans or various financial obligations.
If you fail to pay your debt, the lender can sue you to pursue a judgment for the due amounts.
The collection suit process involves the following:
- A demand letter — Before bringing a suit, the creditor can send you a demand letter informing you of pending debt and asking for payment. The demand letter is the last notice before initiating legal action against you.
- Making a complaint — If you fail to file your response to the creditor’s letter or disagree with a payment plan, the lender can bring a complaint to court. The creditor’s objection summarizes your debt, including money owed and fees or interest. You will receive a summons and a complaint copy notifying you of the collection suit.
- Response — Upon receiving the complaint and summons, you have a specific timeline of about 30 days to respond to the collection lawsuit.
- Judicial process — If you decide to fight the debt, the lawsuit will proceed to a California court. The parties present witnesses or evidence to strengthen their argument. The judge should then decide based on the presented proof.
- Entry of judgment — If the court’s verdict favors the lender, a decision is issued. The ruling lawfully confirms the pending debt payment.
- Debt collection attempts — With a case judgment, the creditor could take various measures to recover the payment, like garnishing your wages, taking over your bank accounts, or filing real estate liens.
Responding quickly to a debt collection suit is essential, whether by agreeing to a payment plan with your creditor or obtaining legal counsel if you think the debt needs to be corrected. Trivializing a suit can lead to a default judgment, resulting in more aggressive debt-collection actions.
Your attorney defends you against firms, banks, and debt collection companies.
You should understand that if a collection company has bought your debts, you should engage with the firm instead of your creditor. Nevertheless, federal and state laws safeguard you in multiple ways. Debt companies cannot harass or threaten you with violence. Additionally, they are only permitted to call you during specific daytime hours, and they should contact you at your place of work with your permission.
Default Judgment
A default judgment occurs when you fail to respond to a suit by your lender. A judge can render a verdict in your absence. Consequently, you are found guilty, and a default judgment is made against you.
In some cases, some judgments are also called automatic decisions due to how fast they happen. What follows could be garnishment of your wages or bank account levies, which permit a lender to seize your bank account for debt repayment.
After obtaining a judgment, the creditor becomes a judgment creditor, while the debtor is a judgment debtor.
A lien allows your lender to possess property belonging to you if you fail to meet their contractual responsibilities. A lien can be given against a person or business, granting the creditor access to assets like the debtor’s business, real estate, and personal property to satisfy the court’s judgment.
Once the judge rules in your creditor’s favor, they can bring an abstract of judgment to the court where the decision was made. The abstract of judgment is a record of the court’s decision, with the court’s clerk's signature and seal. To obtain the judge's lien on your asset, your lender submits their abstract to the county recorder where your asset is situated, creating the lien on your property.
Most unsecured debt holders, like those with medical expenses, personal loans, and credit card loans, should receive a court decision before using more aggressive debt collection strategies. For example, a lender with a judgment lien can garnish your wages or withdraw all funds from a bank account.
While the judgment creditor can seize all assets, you can protect the following using California bankruptcy exemptions:
- Real estate — A lien can affect your land, home, or building if your lender obtains a lien upon receiving a judgment. Disposing of your property can be costly, and the creditor might not pursue this option unless you have a lot of equity in your asset. The lender will only receive the remaining balance after paying a mortgage.
- Personal property — Typically, liens on private property are futile unless they are valuable. With California exemption, you can protect most of your personal property, allowing you to maintain possession. While most judgment creditors do not record personal asset liens, some can do so with the Secretary of State, making it easier to sell them to someone who does not know the existing lien.
- Motor vehicles — Additionally, your lender can bring a judgment to the Department of Motor Vehicles to obtain a lien on your car, motorcycle, or truck.
A judgment lien can lead to foreclosure of the lien. However, that is due to the homestead exemption. And with the increase in the exemption amounts, most houses previously vulnerable to foreclosure on judgment liens no longer are.
Please note that a judgment lien recorded in your county can be attached to an asset you obtain later. For instance, a lender can record a lien even if you do not have a home, only to learn an old lien is waiting for you if you purchase a home later. Many real estate liens expire after years, but some lenders renew them indefinitely.
What are Your Available Options?
Several options exist to clear your debt and avoid a judgment lien. The most effective relief option is paying your debt. After making payment, your creditor will remove the lien and file a lien release in the jurisdiction that issued the lien.
You can also prevent a non consensual lien on your property or auto in bankruptcy (lien avoidance) when these facts are correct:
- The lien is derived from a court-approved money judgment.
- If your car or real estate gets sold, the lien will lead to a partial or complete equity loss on exemptions.
- A judgment debtor can claim exemptions on some of their property equity.
Lien avoidance helps a judgment lien become null and void. Even when you do not want or require the asset, the lien is beneficial if you sell the property and channel the sale proceeds elsewhere.
Even obtaining lien avoidance in partial is helpful. Nevertheless, you should repay the balance that led to the lien because the lender can foreclose or repossess the property due to the outstanding balance.
You ask for lien avoidance by referring to the statement of intention and bringing a petition.
Some of those who petition bankruptcy do not know they have property liens or how to get rid of them. Others cannot remove the liens upon filing for bankruptcy due to a lack of exempt equity in their property but can be eligible later. The good thing is that bankruptcy courts are flexible in permitting a debtor to reopen a suit so that they avoid a lien by petitioning the court.
Avoiding Liens When Your Property Has No Equity
Some courts have previously permitted debtors to avoid judicial liens, even though their property had no equity. Their legal reasoning needs to be clarified, as it seems complicated to understand how a property lien can impair an exemption if no equity exists to exempt. Nevertheless, if the lien was attached to your home and you have zero equity, contacting an attorney about the possibility of lien avoidance in your bankruptcy case would be helpful.
Steps to Take After Receiving a Notice of Default Judgment
If you receive a notice of default judgment, consider doing the following:
Collecting Information
The collection procedure could take place a few years before the filing of a suit. Your debt might be sold or resold from one collector to another, and mistakes could creep in. You will want to ensure that the court judgment relates to the actual debt you owe and that the amount is correct.
Gather every piece of information in your possession, including:
- The original creditor’s bills.
- The debt collector notices, like a validation letter.
- Court paperwork in your possession relating to the issue.
If you have yet to receive notices for collections or the suit court notice, the collector could have breached your rights as a consumer. You could have a legal basis to contest the judgment. Hire an attorney if there is a breach of your rights.
An attorney will help you interpret the judgment, determine whether it is in order, and inform you of your legal options. The legal expert will assist you in fighting inappropriate and unjust decisions. They can also help you successfully obtain release from the default judgment.
Determine Your Legal Action Plan
You have four main legal options in a judgment to choose from. They include the following:
a) Agreeing With The Default Judgment
Accepting the lawsuit judgment is a wise option if you have a pending payment. You can repay the creditor in total if you have the means.
If you cannot, you will face bank account levies or garnishment of wages. However, during the garnishment procedure, you have a guarantee of certain rights, like being informed of the garnishment of your wages and bringing a petition if the court notice contains incorrect information.
Some income streams, like Social Security, have an exemption. You are permitted to fight an order of wage garnishment if there is a violation of your rights or if it prevents you from paying for necessities.
b) Settling the Judgment
You could settle the default judgment for a reduced amount, which happens if the creditor believes you could petition for bankruptcy and erase the debt.
Settling is a win-win. The lender receives partial payment, although you should pay in full. You repay less and prevent a long-term wage garnishment. The creditor then brings a satisfaction of judgment to the court.
Ensure your agreement is in writing, stating what you will repay, when, and that the payment covers the whole debt. Your skilled attorney can assist you in ensuring a successful lawsuit settlement.
c) Contest the Lawsuit Judgment
If a judgment was erroneous, you could have the legal basis to contest it and have it set aside. You can only fight the decision if you owe the credit, were uninformed of the suit, or if the judicial process was mishandled.
Garnishment court orders can begin within a month upon the rendering of judgment.
If you were aware of the collection lawsuit but failed to respond, you have 6-months to plead excusable neglect. You could state reasons like travel or sickness.
Contesting a judgment requires time and commitment, but it can be fulfilling. Most consumers can get money repaid through restitution. While the suit can be dismissed or reopened, there is no existing judgment if the collection suit is reopened. The lawsuit begins afresh, but you now have the opportunity to defend yourself.
d) Seek Relief
You can also deal with a judgment order by discharging the default judgment through filing bankruptcy. The bankruptcy court will stop all judgment and enforcement measures once you file bankruptcy.
Find a Skilled San Diego Bankruptcy Attorney Near Me
Ignoring legal notices and paperwork from your creditors will not make the lawsuit against you go away. The case will proceed without you, and the lender will win by default because you did not attend. A default judgment will allow the default creditor to place a lien on your assets and garnish your wages. A judgment on your credit report could also make it challenging to obtain credit in the future. While responding to the summon and going to court can be overwhelming, you have legal options. San Diego Bankruptcy Attorney can review your case to help negotiate an out-of-court settlement, determine if you are exempt, or file for bankruptcy, depending on your case facts. Please call our office at 619-488-6168 to learn how we can help you.