In today’s world, ignoring a debt collector is practically impossible. Debt collectors can be persistent and even if you've been directing their calls to voicemail, they could still try to get in touch with you through other channels, such as through social media. If you ignore or block a debt collector, they could bring a lawsuit against you to collect the debt.
However, if you’ve just received a complaint and summons, you should speak with a lawyer as soon as possible. Consulting with your lawyer can help you look at your situation with more clarity and optimism. This blog discusses what happens when you fail to respond to a California collection lawsuit. Read on to learn more.
Responding to the Collection Lawsuit After the Deadline
Receiving lawsuit papers is often intimidating. The papers may be delivered to you personally by a process server or, occasionally, the local sheriff's deputy. The contents of a lawsuit can also be quite unsettling. There are typically two documents that you can be issued, a complaint and a summons. The Summons informs you that you've been sued and also that you've got 30 days to submit a written response to the court. The Complaint then outlines what debt collection company or creditor wants the judge to enforce.
When a debt collector files a lawsuit, they hope that you will not respond early enough, so that they will bring a default judgment against you. If the creditor's request is granted, the court may allow them to seize your earnings and property. This is why you need to take the initiative and respond quickly when a debt collector contacts you or files a lawsuit against you.
To begin, it may still be possible to consult an attorney and file a response to the Summons, even if more than 30 days have passed since the Summons was issued. In certain situations, you could be given additional time to respond provided the opposing side obtains a default judgment.
Secondly, after the time limit for responding has passed, the majority of creditors will follow up by requesting the court for an entry of default and render a judgment against you. A duplicate copy of the document needs to be sent to you. Without an affidavit verifying that the document has been sent to you, the creditor cannot obtain a default judgment.
However, the law also states that in case you fail to obtain an official copy of the default entry, that "will not disqualify or form grounds for overturn the judgment." Therefore, don't be shocked if your creditor asks for a default judgment but you don't receive a copy. In most cases, the judge will officially enter a default judgment against you for the benefit of the lender in a very short amount of time after they have filed the request.
The Effect of a Default Judgment
A default judgment may appear to be nothing beyond a confirmation by a court of what you previously knew, that is, you owed money and failed to pay. A default judgment is, nevertheless, far greater than that.
It's important to keep in mind right off the bat that judgments typically amount to a lot more money than what's owed. This is because the attorneys' fees, court fees, as well as other costs incurred by the lender to file the legal action and obtain a judgment are typically included in the final judgment amount. You do become obligated by law to cover the debtor's costs associated with pursuing you.
The judgment additionally grants the creditor extensive control over you. Debt is nothing more than a contractual agreement between you and your lender. There are a few options available to the creditor for collecting that debt from you. However, as soon as the creditor receives a judgment, it effectively has an order from the court requiring you to cover the judgment's sum. The law subsequently gives the creditor plenty of ways for obtaining payment from you.
What Does a Default Judgment Give a Creditor?
When a creditor receives a judgment, the very first thing they can do is place a judgment claim on your real estate. The creditor doesn't have to put much effort into this, and it can seriously harm you. The lender needs only to submit an Abstract of Judgment to the presiding judge where the ruling was rendered. This is merely a shortened version of the verdict that the court's clerk has signed and closed off.
Creditors can file a judgment lien against your property by delivering the Abstract to the recorder in the jurisdiction where the property is located. Any property you might possess in that region at the moment of documenting the Abstract—or in the future—becomes subject to a lien. It is valid from the date the judgment was entered for ten years.
What Impact Does a Judgment Lien Have on My Property?
A lien typically transforms unsecured debts into a debt that is protected by the asset upon which a lien is put on. This means that judgment liens on your house secure the debt using the equity. As a result, when you sell or refinance your property, you will typically be required to shell out the entire judgment sum, plus the constantly accruing interest.
Meanwhile, the debt from the judgment eats into the value of your home, harms your credit rating, and limits your ability to make a living. In addition, even when you don't have any home equity at the moment the liens are first recorded, it will still attach to any equity that accrues over time.
Furthermore, we're not just referring to the ten years following the entry of the judgment. Once the initial 10-year period has passed, the judgment could be extended for an additional 10-year period. And during this time, the equity in the property will continue to be diminished by this increasing sum.
Is My Home at Risk of Foreclosure Because of a Judgment Lien?
A judgment lien, in some cases, could lead to foreclosure, which is a forced disposal of the property to repay the creditor. However, the homestead exemption often prevents this from happening. That shields the value of your property from any potential debt collectors.
Recent increases in the homestead exemption sums have protected many properties from foreclosures on judgment liens. To understand the potential loss of your property and your legal options, speak with a lawyer who specializes in debtor-creditor law.
The Effect of Judgment Liens on Other Real Estate
When a judgment is granted in California, the lien attaches to each of the interests in the property in the region where the liens are created (whether it's future or present, contingent or vested, equitable or legal).
If you possess any property that is not considered to be your primary residence, the creditor who obtained the judgment is much more inclined to foreclose on its lien when there's any appreciable equity in the property. This is because the exemption does not apply to the property.
Additionally, if you purchase any property in subsequent years while the judgment lien continues to be active in that jurisdiction, the lien is attached to such interests at the moment when it's obtained.
Judgment Liens and Personal Property
Judgment liens can attach to your property. The creditor merely submits a Notice of Judgment Lien to California's State secretary. This results in a lien being placed on all of your private property in the state. This gives a creditor a way to try and seize your properties that aren't protected by the property exemptions in California.
Additionally, this judgment lien will appear on each of your credit records, which would probably make it more difficult for you to obtain a car loan or other types of credit. A creditor has the same unlimited power to extend judgment liens against personal property as against real estate.
Notably, mobile homes and registered vehicles are exempt from this method of establishing property liens. A creditor does, nevertheless, have other ways to access any equity you may have in your mobile home or vehicle.
What You Shouldn't Do When a Debt Collector Sues You
Understanding your rights and acting appropriately is crucial if you are facing a California collection lawsuit. However, some actions can make things worse or hurt your likelihood of getting the debt settled successfully. Below are certain things you should avoid doing when a creditor sues you.
Don't Ignore the Collection Lawsuit
Ignoring a debt collection lawsuit is a common mistake that can have disastrous consequences. Failure to respond to a collection lawsuit could result in a default judgment being entered against you, and this would mean that the lender would win the lawsuit automatically. The court could then issue a directive for garnishing your wages or seize any bank accounts you have to satisfy the debt.
Don't Admit Guilt
If you are being sued by your creditor, another thing you should avoid doing is admitting guilt. Admission of guilt could increase the creditor's negotiating power thereby rendering it more challenging for you to reach a satisfactory settlement. Rather, think about retaining a debt settlement attorney to act as your advocate before the court and guide you through the legal proceedings.
Be on the Lookout for Fraudulent Debt Relief Companies
It's important to be wary of firms that promise to assist you settle your financial obligations for less than you owe. Some of these businesses may take your cash and do absolutely nothing to assist you in paying off your debts, while others will make things worse. Before employing a debt relief firm, do some research, and think about hiring an experienced debt settlement legal company.
Refrain From Making Hasty Decisions
It's best to keep your cool when a creditor calls and requests payment. Never give personal details or consent to anything through the phone without first confirming the legitimacy of that debt. Before continuing, request a written confirmation of the legal action or a letter of debt validation.
Take your time to check the facts and avoid making snap decisions. A trustworthy debt collector shouldn't have any trouble presenting evidence to back up their claims. To avoid falling victim to debt collection scams, double-check the company's legitimacy by calling them back through the contact details you found on the internet or through your state's Secretary.
What to Look for in Debt Collection Scams
There are some red flags to watch out for that might point to debt collection scams. A few of these are:
- Generic email address domains, like @yahoo.com or @gmail.com
- Unusual or implausible statements, like a collection agency warning you that the police or immigration are on their way
- Pressure to send a payment through an unusual means, like a money transfer
If you notice any of these red flags, it is best to exercise caution and postpone making any payments until after you have carefully examined the debt's legitimacy.
Can You Resolve a Debt After Getting Summons?
Yes, you are still able to settle your debt after receiving legal notice from a creditor. Settling your debt after receiving a summons is frequently a better result than allowing the matter to proceed to court. That's because settling enables you and the creditor to come to an understanding regarding the conditions of the payment, possibly reducing the total amount you have to pay, and averting an expensive and laborious court battle.
If you're facing a debt settlement lawsuit, don't sign anything until you've got a firm understanding of your current financial standing, the exact debts, as well as the conditions of the debt settlement. Having a knowledgeable lawyer on your team can help ensure that your interests and rights are safeguarded during the settlement process. Debts can be settled by negotiating a reduced repayment amount with the debt collector or creditor.
Find a Bankruptcy Lawyer Near Me
We at the Sacramento Bankruptcy Lawyer are familiar with the intricate guidelines and financial matters associated with debt lawsuits. Our skilled debt settlement attorneys are dedicated to providing individualized, hands-on legal representation and to assisting our clients in achieving the best results.
We're here to assist because we understand how overwhelming and stressful it is to fight against a California collection lawsuit. We will walk you through the entire procedure and are available to respond to any questions that you might have. Call us today at 916-800-7690.
