What Happens when you Ignore the Debt Collector's Lawsuit
A common problem today is a collection lawsuit. Debt collection now is a massive industry. In 2010, there was $150 billion in debt that was placed out for collection. There are 4100 debt collection companies in the United States, and they employ 450,000 people. It's considered a growth industry, and the Bureau of Labor Statistics says that debt collection employment will grow 23% over the next four years.
So, other than calling you every 20 minutes, what do all those people do every day? A fair amount of time is also spent suing people. When the debt collection industry sues you, they expect you to do nothing; that happens probably 3 times in 4. Here's what happens when you become a member of the "just ignore it" club.
When you are sued, you have a set time frame in which to file a written response with the debt collector and the court, called the "answer". Depending on local rules, you have between 20 and 30 days to do this.
If you don't file the answer, the debt collector will take your "default". This is a document filed with the court which blocks your answer from being filed. Essentially it says that you have waited too long and nobody expects you to answer and appear in the lawsuit.
After the default is taken, the debt collector will apply for a "default judgment". This normally means that a sworn statement and a group of documents are supplied to the court in an attempt to prove the case to the satisfaction of the judge. The case is essentially tried and found against you on the strength of this paperwork. The paperwork, unless you object to it, will be accepted and admitted at face value; whatever the court is told is what the court will believe.
After the court has reviewed the default judgment materials, the court will issue a money judgment against you. Once this is issued, you have a certain amount of time, normally 30 days to six months, to object to the judgment. If you don't object, the judgment becomes "final" and the debt collector can begin judicial collection against you.
The debt collector normally starts by filing a "notice of judgment" or "abstract of judgment" with the county recorder or clerk. This puts everyone on legal notice that you owe the money. This also appears on your credit report and trashes the report. If you own a house and later sell it, the proceeds of the sale will be used to satisfy the abstract of judgment.
The debt collector can also file a "writ of attachment" or "writ of garnishment" at that point. This is a court order authorizing the garnishment, or seizing of your paycheck. The amount that can be seized varies from state to state, but it is normally between 25% and 33%. This payment comes off the top, before you receive the check, and is submitted by the employer to the debt collector or state official responsible for collecting. Having this suddenly appear can put a real dent in the family finances.
After these two things are done, the debt collector will seek to have a "judgment debtor's exam" scheduled. This is an interview, under oath, normally conducted at the courthouse. Unlike what you see on TV, in the judgment debtor's exam you must answer all the questions presented; there's no privileges and protections, you have missed that opportunity already. You can also be required to produce lots of books and records like bank statements, tax returns, title documents to cars, etc. If you don't produce this information, you can simply be ordered to get it and return at another date.
If the judgment debtor's exam seems like a huge hassle, it is. The bigger hassle is when you blow off appearing. If you don't show up at the appointed time and location, the court will issue a "bench warrant" against you. A bench warrant means that you are in contempt of court, and a police officer who runs across you has the authority to arrest and jail you for contempt of court. Depending on where you live, police handle this in one of two ways.
In the first situation, they are not actively looking for you, but run your information if you are pulled over for example, a traffic stop. The police officer will run your name, the bench warrant will come back, and you can be arrested on the spot for the failure to appear. In the second situation, the police department has figured out that arresting you is a source of revenue, and they come actively looking for you to arrest you.
Once arrested, you get to appear in front of the court, pay some substantial fines and costs (this is the revenue source) and then have to make arrangement to pay the judgment. It's hard to do that from a jail cell.
Think this doesn't happen? Think again. The debt collectors have figured out that the threat of jail is a huge incentive to get paid. And like the IRS, they don't need to audit everybody to get high compliance; they just need to jail a few people to keep everyone else in line.
Conclusion: don't ignore summons and complaints. File a response. If you don't do so bad things can and will eventually happen.
So, other than calling you every 20 minutes, what do all those people do every day? A fair amount of time is also spent suing people. When the debt collection industry sues you, they expect you to do nothing; that happens probably 3 times in 4. Here's what happens when you become a member of the "just ignore it" club.
When you are sued, you have a set time frame in which to file a written response with the debt collector and the court, called the "answer". Depending on local rules, you have between 20 and 30 days to do this.
If you don't file the answer, the debt collector will take your "default". This is a document filed with the court which blocks your answer from being filed. Essentially it says that you have waited too long and nobody expects you to answer and appear in the lawsuit.
After the default is taken, the debt collector will apply for a "default judgment". This normally means that a sworn statement and a group of documents are supplied to the court in an attempt to prove the case to the satisfaction of the judge. The case is essentially tried and found against you on the strength of this paperwork. The paperwork, unless you object to it, will be accepted and admitted at face value; whatever the court is told is what the court will believe.
After the court has reviewed the default judgment materials, the court will issue a money judgment against you. Once this is issued, you have a certain amount of time, normally 30 days to six months, to object to the judgment. If you don't object, the judgment becomes "final" and the debt collector can begin judicial collection against you.
The debt collector normally starts by filing a "notice of judgment" or "abstract of judgment" with the county recorder or clerk. This puts everyone on legal notice that you owe the money. This also appears on your credit report and trashes the report. If you own a house and later sell it, the proceeds of the sale will be used to satisfy the abstract of judgment.
The debt collector can also file a "writ of attachment" or "writ of garnishment" at that point. This is a court order authorizing the garnishment, or seizing of your paycheck. The amount that can be seized varies from state to state, but it is normally between 25% and 33%. This payment comes off the top, before you receive the check, and is submitted by the employer to the debt collector or state official responsible for collecting. Having this suddenly appear can put a real dent in the family finances.
After these two things are done, the debt collector will seek to have a "judgment debtor's exam" scheduled. This is an interview, under oath, normally conducted at the courthouse. Unlike what you see on TV, in the judgment debtor's exam you must answer all the questions presented; there's no privileges and protections, you have missed that opportunity already. You can also be required to produce lots of books and records like bank statements, tax returns, title documents to cars, etc. If you don't produce this information, you can simply be ordered to get it and return at another date.
If the judgment debtor's exam seems like a huge hassle, it is. The bigger hassle is when you blow off appearing. If you don't show up at the appointed time and location, the court will issue a "bench warrant" against you. A bench warrant means that you are in contempt of court, and a police officer who runs across you has the authority to arrest and jail you for contempt of court. Depending on where you live, police handle this in one of two ways.
In the first situation, they are not actively looking for you, but run your information if you are pulled over for example, a traffic stop. The police officer will run your name, the bench warrant will come back, and you can be arrested on the spot for the failure to appear. In the second situation, the police department has figured out that arresting you is a source of revenue, and they come actively looking for you to arrest you.
Once arrested, you get to appear in front of the court, pay some substantial fines and costs (this is the revenue source) and then have to make arrangement to pay the judgment. It's hard to do that from a jail cell.
Think this doesn't happen? Think again. The debt collectors have figured out that the threat of jail is a huge incentive to get paid. And like the IRS, they don't need to audit everybody to get high compliance; they just need to jail a few people to keep everyone else in line.
Conclusion: don't ignore summons and complaints. File a response. If you don't do so bad things can and will eventually happen.
