Why You Should Answer a Summons on Debt Collection

If you can’t pay a debt, creditors are willing to settle out of court with you for a lump sum payment of less than the amount you owe, or a monthly payment plan, but they also will not hesitate to sue you for the full amount of the money you owe them.

So what should you do if you receive a summons and complaint from a creditor? Answer it.

What Happens If You Do Not Answer the Complaint
If you choose not to answer the complaint, the Court will enter a judgment against you, determining that you owe the creditor whatever amount they asked for. You may even be told to pay their attorney fees. The creditor can then use that judgment to garnish your wages, take money from non-exempt bank accounts or put a lien on your property.

If You Do File An Answer
If you answer the complaint (and you usually have about 20 days to respond to the plaintiff’s claims), you preserve your right to be able to argue your position in Court. You also will be notified of any future Court dates. You can use your time in Court to state why you don’t owe the money they claim.

What If You Do Owe the Money they Claim
Even if you do know for sure that you owe the exact amount the debtor claims, you can still use your time in Court to state another amount that you can afford to pay. Although typically if you admit you that amount, you will receive a judgment against you for said amount. The real leverage comes simply by answering. The debtor does not want to appear in Court no more than you do. They simply want to get paid. Once they see how time-consuming this may become for them since they are not receiving a default judgment, they may be more willing to enter a settlement agreement with you.

Debtors will take you to court for their money

What If You Don’t Have the Money to Pay?
It doesn’t matter if you don’t have the money. The debtor can still sue and the Court can still enter a judgment against you. Being broke is not an excusable reason to back out of your financial responsibilities, as the debtor is willing to shake the money out of you if it could. In cases like that you might just want to consider filing for bankruptcy instead. However, if in your financial statement and affidavit you can show how you don’t have the funds to pay, nor have a steady income, the debtor may be more willing to negotiate with you for a settlement plan.

What If You Offer to Make Monthly Payments?
A debtor does not have to enter into a payment plan with you. They can reject your offer and then sue you for the full amount. A debtor is more likely to reject a payment plan if they believe you have the means to pay, you have wages they can garnish, property they can attach a lien to, or a bank account they can raid. It is often, however, in the debtor’s financial interest if they reach a settlement plan with you if you don’t have the means to pay.

Try to settle a debt

Negotiate Your Debt
You’re in a better position to negotiate your debt before you stop making payments. However, if you’re receiving debt collection notices, that means you’ve already stopped. So, the older your debt gets, the better your chances are to get a good deal on a lump sum payment. At some point some creditors may have “written off” your debt as a bad debt expense. If they’ve written it off but then you come to offer to make a payment, they should be willing to take almost any amount from you, as any amount is better than no amount. If you’re offering a lump sum, try offering one-quarter or one-third of what you owe. Be careful with offering a monthly payment plan. Because if you miss a payment, the clock can start all over again for the full amount of the debt you owe.

If you need further guidance, sign up for a free consultation about how you can improve your financial situation.

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5 Tips if You’re Facing Court Action from a Debt Collector

5 Tips if You’re Facing Court Action from a Debt Collector

 

 

 

Comic by Dan Gibson @ DestroyDebt.com

 

 

Creditors can sell your debt. When your debt is sold to collectors, some might use the threat of court action to try to intimidate you in order to get you to pay up.  

Technically, it is illegal for collectors or creditors to threaten court action if they do not intend to carry through with it.  Taking you to court is time consuming and expensive for them, and there is no guarantee it will result in the outcome the creditor wants.  So typically, a court action is a tactic to get you to pay up, or to obtain a default judgment against you if you don’t respond to a summons and complaint.

Here are 5 things you should know in case you are presented with a court action.

1) Answer a summons and complaint.  If a creditor serves you with a summons and complaint, not merely a letter saying you owe debt, then you must answer within a certain timeframe set by your state laws (perhaps 10, 20 or 30 days), in order to avoid a default judgment. I’ll speak more on how to answer a summons in the coming days.

2) Know the statute of limitations. There is a time limit on how long creditors have in which to try to obtain a judgment against you for the money you may owe them.  That “statute of limitations” varies by state and type of debt.  Typically, it is anywhere from 3 years to 10 years. A creditor can use the limits in your state or the state where they are located. They will often use the state with the longest statute of limitations, because it is obviously beneficial for them. Click here for a state-by-state list of limitations timeframes for debt. 

3) Credit bureaus limits are not the same as debt statute of limitations. Federal law typically requires credit bureaus to drop negative information after about seven years from the date of your first missed payment. (There are exceptions, such as bankruptcies can stay on for 10 years, and tax liens can stay on for longer). If you live in a state with a 3-year statute of limitations on legal collection of debt, it will still show up on your credit report.  If live in a state that allows judgments to be entered for 10 years, it is possible the debt came off your credit report after 6 years.  So do not use your credit report to help you determine if you owe debt. You can use it, however, to check to see when the creditor first considered you to be delinquent.

4) Statute of limitations can start over. Please note that if you enter a payment agreement, make a payment — even a partial payment—, or promise to make a payment, you will restart the statute of limitations to day one.

5) Show up to court.  If you are sued, make sure you or legal representation on your behalf appear in court.  If you don’t, the court can issue a judgment against you for the full amount the creditor requests.  Even if you make a settlement agreement prior to court, don’t trust the debtor to notify the court that it has been settled. Appear in court for any date that was set and let the judge or trustee tell you to go home.