[COLUMN] What to do if you’ve been sued for a credit card debt

YOU’VE just been sued for a credit card debt after you’ve had trouble paying what you owe. After several months of getting harassing phone calls that you were ignoring because you didn’t have the money, now they’ve finally sent you court papers. What do you do? Should you file bankruptcy or are there other options?

Some people don’t realize that they could be sued for unpaid credit card debt. Generally, debt collectors don’t just sue you right away if they see that you are making the effort to pay them. But if you ignore all the collection calls and letters, at some point they will take legal action against you.

In California, generally, they have 4 years to file the lawsuit from the time you stopped paying. If they do get a judgment against you eventually, the judgment is good for 10 years and renewable for another 10 years after that. So yes, a creditor can have up to 20 years to collect the debt. The worst part is that the debt amount will continue to grow because legally, judgments are entitled to 10% interest every single year.  So, what may have started as a small debt can grow into an astronomical amount by the time you decide to deal with it. I see this happen all the time.

A lot of people come to me and say that they weren’t even aware that there was a judgment against them until one day their employer received a wage garnishment order or their bank notified them that their account has been frozen. This is a terrible situation to be in especially if you are caught unprepared. Last week, someone consulted with me after finding out that his life savings of more than $12,000 was taken by a judgment creditor that he had totally forgotten about. He owed them more than $20,000 but because he had not heard from them for a long time, he didn’t know that they could just one day seize the money in his bank account. Don’t let this happen to you.

As a bankruptcy attorney, I see a lot of cases where people do NOTHING when faced with a lawsuit. I think it’s because (1) they are so scared and don’t know what to do so they are hoping that somehow, it will just go away if they don’t communicate with the creditor, (2) they have no money to pay so why bother, or (3) they listen to wrong advice given by family and friends who tell them that it’s ‘not a big deal” for them to worry about it.  Some people who are in denial don’t even open their mail anymore and don’t even read creditor letters that come to them.  There are many reasons why this happens.

In California, if you don’t respond to the summons within 30 days of receipt, the creditor gets what’s called a “default judgment”. What this means is that because you did not respond to the lawsuit, they win- and you lose automatically. Once they obtain a judgment, the next step for the creditor is find ways on how to enforce it against you. The 2 common ways to enforce a judgment is by garnishing your paycheck and taking money that you have in your bank accounts.

If you own a home or other real property, a judgment creditor can also record the judgment in the county where you live. This creates a “judgment lien” against your property. If you ever decide to sell your house or refinance your mortgage, the judgment amount, attorney fees and court costs, plus all added interest will have to be paid in full. So, the best time to deal with the debt is before, not after they have filed a judgment lien. In some cases, it may be possible to negotiate an out-of-court settlement with the creditor for a reduced amount. Or if you cannot pay the amount in full, perhaps an installment agreement at 0% interest may work to your benefit. In cases where none of the above is possible, you may have no choice but to file bankruptcy to get rid of the debt. Filing bankruptcy is often the quickest and least expensive way to get rid of credit card debt. It also allows you to wipe out old debts on your credit report so that in 2-3 years, you can have good credit again.

The bottom line is this. NEVER ignore a lawsuit even if you are unemployed and are thinking that the creditor cannot get anything from you, anyway, and that you have nothing in the bank for them to take. Why? Because everything always changes. At a time when you least expect it, let’s say a year from now when you’ve totally forgotten about the lawsuit and are now working and/or have money in the bank, this is when the creditor finally gets you. And you would hate yourself for not doing anything about it sooner. For a free office consultation, please call Toll-Free 1-866-477-7772.

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NOTE: Due to pandemic safety concerns, I am offering free consultations BY PHONE to anyone who needs help in dealing with their debt problems. 

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None of the information herein is intended to give legal advice for any specific situation.  Atty. Ray J. Bulaon has successfully helped over 6,000 clients in getting out of debt. For a free attorney evaluation of your situation, please call RJB Law Offices at TOLL FREE  1-866-477-7772.

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