Mrs. C comes into my office and looks distraught. She tells me that she has been putting money away to buy her dream home. But before she could put that hard-earned money to good use, a creditor came in and took most of it right out of her bank account. How could this happen and can she get the money back? Things like this can happen when you ignore a lawsuit and sadly for Mrs. C, it was too late to get her money back. Don’t let things get this far. If you are being sued, follow these four simple steps to prevent Mrs. C’s situation from happening to you:
Step 1: Don’t Ignore a Lawsuit.
Simply put, a creditor had garnished Mrs. C’s bank account. It all started when a process server came to Mrs. C’s house and served her with lawsuit paperwork, i.e. a “Summons” and a “Complaint.” Instead of taking action, Mrs. C tossed the court papers in the trash and buried her head in the sand. In doing so, Mrs. C allowed the creditor to win the lawsuit against her and obtain what is called a “default judgment.” With a default judgment, the creditor could then take action to collect its money, including by taking or “garnishing” a certain amount of money from Mrs. C’s bank accounts and/or wages. A garnishment is difficult to stop and once your money is taken, it is even more difficult to get it back. Mrs. C learned this the hard way.
Step 2: Take Action in the Lawsuit.
Instead of doing what Mrs. C did, be proactive in the lawsuit. After you are served with court papers, you have a limited amount of time to respond (20 days if served in Arizona). Because time is of the essence, you should seek legal advice to help you file an Answer in the lawsuit along with any claims you may have. Additionally, you may also want to reach out to the Plaintiff(s) to see if a settlement can be reached. Filing an Answer does not guarantee that you will win the lawsuit, but it will prevent a default judgment from being entered against you.
Step 3: Seek Legal Advice Regarding Other Options.
You should also seek legal advice regarding your bankruptcy options. A bankruptcy will at least temporarily halt a lawsuit and may/may not eliminate the need to file an Answer in the lawsuit, depending on the timing of the bankruptcy. I am not suggesting you file a bankruptcy just to halt a lawsuit, but if you already qualify for bankruptcy and have a variety of debts, bankruptcy may be a good option for you.
Step 4: Follow the Above Steps Even if You Don’t Have Any Bank Accounts or Wages.
You may be thinking, “but I don’t have any bank accounts or wages so why should I care?” Well, because you may now or in the future own other property such as real estate. After obtaining a default judgment against you, the creditor may also record its judgment and therefore, possibly put a lien against your real property. This means that when you go to sell your property, the creditor’s judgment may have to be paid out from the proceeds of the sale. Generally, if the property you are selling is your homestead and you are an Arizona resident, you are entitled to keep the first $150,000.00 worth of equity after the mortgage(s) is/are paid off. Arguably, recorded judgments cannot become liens on homestead property per Arizona law, but a judgment creditor’s recorded lien can still cloud the title to your house when you go to sell it and present all sorts of issues for you in the future.
Disclaimer: The information provided here should be used for informational purposes only and does not constitute legal advice or create an attorney-client relationship with anyone. The services or benefits described are with respect to bankruptcy relief under the Bankruptcy Code. We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.
Olga is a graduate of Payson High School (Class of 2000) and the founding attorney of the Law Office of Olga Zlotnik, a locally grown firm specializing in bankruptcy, debt, and civil litigation issues. You can contact here at firstname.lastname@example.org or (928) 978-2896.