I have been sued! Now what?
What happens if I do nothing?
In Small Claims Court:
There will be a date set for a trial. You can go there and argue your case. If you lose you have a right to have a new trial in Superior Court if you appeal the decision. If you do not have a legitimate defense in the court or you do not appear for trial, a judgment will be entered against you.
In Superior Court:
You will have 30 days to file an answer to the complaint. If you do then you will go to a “status conference” or a similar hearing. There the Judge will set dates for “discovery” to close. In a relatively uncomplicated case the Judge may set a trial date. If you lose at trial a Judgment will be entered against you.
I’ve Been Sued and The creditor got a law suit judgment against me! Now what?
A judgment is a Judge’s decision that you owe the money.
Once the creditor gets their judgment they have to wait for the appeal time to run. In California the normal appeal period is 60 Days. After the appeal period is over they can start to try to collect the money from you.
What can the creditor do to collect the money from me?
The judgment creditor has several options to try to collect what you owe them.
1. The usual harassment.
They will continue the harassing phone calls and constant letters. These are the usual calls, letters and in person “visits” to your home, your job, your family and neighbors. Whether legal or not, they do happen.
2. A Court Order Requiring You to Appear and be Examined.
This is commonly referred to as an “Order of Examination.” Your are required to appear in front a Judge and be sworn in under “penalty of perjury.” Then you are ordered to tell the creditor’s attorney about where you work, all of your income, what bank accounts and safe deposit boxes you have or have any legal rights in. You will have to tell them about any land, buildings or homes you have any rights to. Yes they will ask and you must answer truthfully. In addition, they will want to know what vehicles you have, what you have for jewelry, as well as any stocks or bonds you have. Then they will use that information to take everything they legally can to pay the money you owe them.
3. Garnish your wages.
The creditor can have an order that your employer to give them ¼ of you gross income after taxes. If you have other items taken out like health or life insurance, retirement, union dues, loan payments they are not counted.
4. Take money out of your checking or savings accounts.
This is called a “levy.” This can leave you with no money for food, mortgage or rent payments, utilities or even gas for your car. It will bounce checks that have not cleared your bank. It will cause your debit card to be declined.
5. Have your car seized and sold.
The first $2,900 “exempt equity” would be paid to you. Anything above that would be first used to pay the cost of the seizure and sale. Whatever is left would be used to pay down what you owe.
6. Sell your home.
The creditor can sell your home if it has more “equity” than the exemption laws can protect. The typical California exemptions are:
$75,000 for an individual;
$100,000 for a married couple; and
$175,000 for senior citizens, disabled or certain low income people 55 or older.
7. Go to anyone that owes you money and demand it be paid to him or her instead of you.
If you have a small business this could take away the accounts receivable you need to operate your business with as well as chase off repeat business. If you are a landlord they can go directly to your renter and demand that your tenant pay them the rent instead of you. A law enforcement officer can even come in and take the money in your cash register.
Can you afford to let this happen to you? No??
What are my options if I can’t pay the creditor After?
The non-bankruptcy options:
1. Pay the debt in full out of all that spare money you have under the mattress.
What? You don’t have any money under the mattress to pay this debt and all the other ones hounding you? Well, I guess that is not going to work, is it?
2.You can appeal to the generous nature of the creditor.
You could ask (or beg or plead) that they agree to accept payments you can afford. Yes, I know. If they had been willing in the first place to work with you they would not have sued you. Even if they were willing to take payments the payments are certain to be more than you can afford and still survive. Besides paying one creditor when you have many others you cannot pay is not going to solve the problem anyway.
3. Make your problem someone else’s’ problem by borrowing from them.
Of course, it would have to be family or friends, as no one else would loan you money. Inevitably, these always end in disaster with hurt feelings, angry disputes and broken relationships.
4. You can sell your future to pay for your present problems.
You can sell or liquidate stocks, bonds, life insurance, retirements, IRA accounts, 401(k) accounts, thrift savings plans that you were counting on to have for your retirement. You know, those things that would make the difference between eating “normal” food and being glad to have a can of “Alpo” dog food for dinner. You do not want to be like Esau in the Old Testament of the Bible who sold his future inheritance to his brother Jacob for a bowl of pottage. Do not risk your future to deal with present problems even if you can because you will never get the chance to replace that money. You may add new money but you could have done that anyway if you had not given away your future retirement.
The Bankruptcy Options:
5. If you can qualify, you can file a Chapter 7 bankruptcy to wipe out your personal liability on most debts.
This is the preferred tool if you can use it because you get rid of most or all your debts without giving up what you have set aside in retirements, IRA’s, 401(k)’s and other things you will need for the future.
When a Chapter 7 bankruptcy is filed, there is an immediate “automatic stay” restraining order that stop Creditors from:
• calling you
• threatening you;
• harassing you or your relatives;
• contacting you or your employer;
• filing or continuing a law suit; or
• Trying to collect a court judgment. A Chapter 7 Bankruptcy will wipe out almost all consumer debts like: • Credit cards • Payday loans • Personal loans • Prior landlords • Old utility bills • Debts from vehicle repossessions • Medical bills • Foreclosed junior mortgages • Cell phone and cable bills • Automobile accidents (if not alcohol or drug related.) • Some income taxes • Some overpayment of unemployment or disability benefits
6. If you can afford to, you can reorganize your debts to pay some or all of the debt in an amount you can afford to do through Chapter 13 Bankruptcy reorganization.
You can use Chapter 13 bankruptcy as a tool to control your debts; and pay priority debts like taxes; and pay secured debts on vehicles, arrearages on mortgages and 0-100% of general unsecured debts. The nice part is you can often reduce the interest on most secured non-mortgage debts. In many situations, you can even cram the payoff amount on secured debts down to the value of the item no matter what the actual debt is. You also get to do this with NO INTEREST being paid to the taxman and any unsecured debts you may pay through the plan. This can often save you tens of thousands of dollars in interest alone.
Both Chapter 7 bankruptcy and Chapter 13 bankruptcy reorganization plans stop all your lawsuit creditors from trying to take things from you.
I Have Secured Debts Like a Loan On My Home, Car, Furniture, Jewelry or Appliances. What Happens to These In Bankruptcy?
If you owe money on a car, you can keep the car by “reaffirming” the debt. Other debts secured by things like jewelry, furniture, appliances, electronics and even your home can be kept simply by continuing to make the payments.
Ok. What do I do now to stop these creditors After I Have Been Sued?
Immediately contact an experienced bankruptcy attorney that has a quality reputation with Avvo.com, Yelp, the Better Business Bureau and the State Bar (Some states like California have a list of elite attorneys that they certify as bankruptcy law specialists. You have a hard time going wrong when the state bar says that the attorney is one of the best in the field of bankruptcy.)
With a lawsuit filed against you or even threats of a lawsuit, you cannot afford to wait. Call a qualified bankruptcy attorney IMMEDIATELY. You cannot afford to let the Creditors have their way with you which is just what you are letting them do if you do not solve this problem on your terms.
There is a saying “knowledge is power.” Isn’t it time for you to get your power back?
I’m Gary Fraley. I founded the Fraley & Fraley Bankruptcy law firm. I am a Sacramento Bankruptcy Attorney with over 35 years experience helping people just like you.
I am a California State Bar Certified Bankruptcy Law Specialist. I have a perfect 10.0 rating by the Avvo.com rating service. I have an A+ rating with the Better Business Bureau as well as a five star rating on Yelp. I have been endorsed by attorneys all over the United States and have taught bankruptcy law seminars for bankruptcy attorneys.
If you happen to live in Northern California, the Delta, the Bay area, the Sacramento Valley or the Sacramento – Stockton – Modesto region, I have my office in Sacramento. I do telephonic appointments for people who live more than 60 miles from my office if they are going to have serious problems coming to my offices.
Oh, I almost forgot. I am at least temporarily giving my clients a FREE $1,000 14 week credit rebuilding program from an outside company to my clients. They regularly charge $1,000 for their program (you can confirm this at their web site when you retain us) but you get it at NO CHARGE as I buy rights in bulk for my clients to take this program because of the quality of their reputation and the fact that they do the credit rebuilding honestly with no games like all the “credit repair” scam companies. I can tell you more when you have a free initial consultation with an experienced attorney in my office or click here to learn more.
Call me now at (916) 485-5444 and schedule your free attorney consultation to see if filing a Chapter 7 bankruptcy or a Chapter 13 reorganization could help you now that you’ve been sued.