Have you ever had your paycheck garnished, your bank account taken, or a lien placed on your assets because you received a lawsuit document from a creditor and didn’t know how to respond or didn’t respond within the time limit? This article lets you understand what your options are and how to negotiate with debt collectors.
Ignoring a credit card debt lawsuit can lead to serious financial repercussions. Once you are served with a “Complaint,” you have 35 days to file an “Answer.” If you do not file an “Answer”, you will be in “Default”. After the case goes into “Default”, the creditor will obtain an award of money called a “Default Judgment.” Judgments are valid for 20 years.
A Judgment allows the creditor to do the following:
- Garnish your wages
- Levy your bank account
- Put a lien against your home and other property
Filing an “Answer”
Filing an “Answer” can be relatively simple and self-help forms are available at:
1) Small Claims Part (lawsuits of $5,000 or less) https://www.njcourts.gov/self-help/small-claims-court
2) Special Civil Part (lawsuits of $20,000 or less) https://www.njcourts.gov/self-help/special-civil-court
3) Civil Part (lawsuits over $20,000) https://www.njcourts.gov/self-help/civil-court
Common Defenses to Raise in a Credit Card Case:
- Unauthorized Charges you are not liable for unauthorized charges resulting from identify theft, data breaches, lost or stolen card, etc.
- Disputed Charges you did not receive an item you purchased or the goods were defective and you disputed the charges
- Statute of Limitations depending on the type of debt, the creditor will generally have 4 to 6 years to sue you after you fail to pay
- Bankruptcy if you filed for bankruptcy the debt may have been discharged
- Debt Buyer Defenses if a debt buyer (not the original creditor) is suing you, they must (a) have a consumer-lending license, and (b) show the complete chain of title of the purchased debt
You should also request copies of statements as well to confirm the amount in dispute, charges made to the account, and the last known address where the statement(s) was mailed
Know Your Options
If you have other debts, you may want to either pay the other debts first, or file for bankruptcy. For example, private student loans, tax debt and child support are generally not discharged in bankruptcy, so you may want to tackle those obligations first.
If you have a lot of debt and you have income or assets you want to protect, you should consider filing for bankruptcy. Bankruptcy will eliminate or “discharge” most kinds of debt, including credit card, automobile, utility, personal and medical debt.
Negotiating with Debt Collectors
If you are able to pay a good portion of the debt, try offering a lower lump sum as a final settlement. If you cannot afford a lump sum, you should still try offering less than the full amount over a period of time – perhaps a period of 12 to 36 months.
You Settled Your Case … What Next?
- Get the settlement agreement in writing before making any payments
- Keep a record of your payments
- Consider paying by money order so they do not obtain your bank account information
- When the debt is paid, insist that the debt collector provide you with “Stipulation of Dismissal with Prejudice” to file with the court to ensure you are not sued again for the same debt
- If a judgment was entered against you, ask for a “Warrant of Satisfaction” to be filed with the court once it is paid off
What Happens If You Default on a Settlement Agreement?
If you fall behind on your settlement payments, the creditor will file a Motion for Default Judgment. Once the default judgment is entered, the creditor will send you an information subpoena, which you must fill out and send back to the creditor’s attorney. Failure to respond to an information subpoena may result in the creditor’s attorney filing a motion for a bench warrant for your arrest, so it is important that you complete and send it back to the creditor’s attorney. The purpose of the information subpoena is to determine if you have any assets that the creditor can seize to pay the debt.
Creditors may consent to either an extension of time to pay or reinstating the agreement, which is why you should always contact them immediately before or after you default.
If you receive a lawsuit from a creditor, be sure to respond as soon as possible. If you need help negotiating with the debt collector to obtain more favorable terms, Central Jersey Legal Services (CJLS) has enthusiastic and professional lawyers at your service. CJLS provides free civil legal assistance to low-income families and seniors. If you have landlord-tenant disputes, domestic violence, social welfare, consumer issues, etc., please call 732-249-7600. We have Chinese-speaking staff at your service.
