Most people do not like to think about their debt burden, which often leads to procrastination. We know that we owe payment on a medical bill or credit card, and we want to pay them but can’t. So far, they have only sent us threatening statements and phone calls. But the day comes when we find ourselves being served legal papers – a summons and complaint in a court where we live. If a creditor obtains a judgment against us, the creditor can often garnish wages and take money from our bank accounts. Too often, we only start to do something about our debt when the threat of losing money becomes critical.

How do I respond if a creditor has filed a legal judgement against me?

As a bankruptcy attorney, people often contact me and ask if they need to respond to a complaint.  Normally, I advise people to file a response to that complaint if you have a legitimate defense that would prevent a judgment from being entered against you. Common defenses are:

  1. The debt is owed by a corporation you once owned, and not by yourself personally, yet the creditor is mistakenly suing the owner and not the corporation.
  2. You were in active duty in the military when the debt accrued, and you cannot be sued because you still are on active duty.
  3. The applicable statute of limitations has expired – most states have a time limit for suing someone from when the debt went into default status, and the creditor is too late.
  4. Your identity was stolen, and the debt was charged fraudulently by someone else.
  5. You were a minor when you entered into the contract that formed the debt, and you lacked the capacity to enter into that agreement.
  6. The dollar amount demanded by the creditor is incorrect.
  7. The person or company that is suing you does not have a valid legal interest or ownership of the debt.

If a person has one or more of these defenses, then it may be worthwhile to file an answer or response to the complaint. But if there is no defense, then filing an answer to the complaint really only buys you a small amount of time and does not solve the issue.

When should I consider bankruptcy as an option?

If the creditor suing you is one of many creditors, or simply the first in a long line of debts, then a bankruptcy may be necessary to stop the lawsuit and discharge, or partially repay all the debts. If the creditor suing you is the only debt you have and you can afford to make payments, then it might be more useful to negotiate a payment plan with the creditor, if possible. It could also be that your wages and bank accounts are exempt (protected) because your income is all from a protected source.

Since it is impossible to go through all of these scenarios over a telephone call, I invite a panicked person in to meet with me where I can assist in educating the caller about all of their options – bankruptcy and non-bankruptcy alike.  At Nicolet Law our bankruptcy and restructuring attorneys all offer a free consultation and we can assist you, even if you have waited until the last minute. We understand that sometimes it takes a lawsuit and the threat of wage garnishment for people to face their debt issues.

By Attorney Peter C. Greenlee