Dear Bankruptcy Adviser,
Recently I got a call from the police. They told me that a creditor has filed a lawsuit against me as a result of a personal loan from that lender. I made payments and I could not make payments anymore because I lost my job. Now I am still without a job and can't afford to fight any legal battle. What should I do?
I completely understand the approach you took to your financial distress: head in the sand. You simply could not pay the debt and could not afford to respond to the lawsuit that the creditor filed against you. So you decided the best approach was to do nothing and hope that ignoring the problem would resolve it. This is not uncommon, but unfortunately, the sheriff's department in your county or town is very aggressive and acts on this type of judicial order.
Here is basically what happened: The lender considered all available options when you started to miss payments. The lender sent letters and made phone calls asking for payment. These collection efforts went unanswered. You had a good reason since you had no job and could not pay. But the creditor does not care.Then the lender filed a lawsuit against you. The lender was supposed to serve you with papers regarding the lawsuit. This does not always happen. As I have written before, some unscrupulous lenders serve you via "gutter service," meaning the lender's process server -- the person that hands you the lawsuit papers -- simply discards the papers into the gutter and claims he or she served you with them.
Even if you had been properly served, all you could have done was file a response -- called an answer -- with the court. Filing an answer does not require too much legal sophistication, but you must file it within 30 days of receiving notification of the lawsuit. In some cases, you can file a one sentence answer. Failing to file an answer allows the creditor to get a default judgment against you without a hearing. Filing an answer will give you a chance to explain to the court that you are unemployed and cannot afford to pay much, if anything, on this judgment.
You owe the money and that is not in dispute, but you cannot create money out of thin air, of course, unless you are the U.S. government. The creditor still would receive a judgment against you even if you had filed an answer. But if you had, you would have bought yourself some time to find a job and start making payments again.
After a judgment has been entered, the creditor started to make additional collection attempts. Those attempts include bank levies, where the lender legally takes money directly from your bank; wage garnishments, where the lender legally takes money directly from your paycheck; and property liens, where the lender legally files paperwork with the county recorder's office to secure the judgment against your home.
Also, after the judgment has been entered, the creditor filed a motion with the court to have you appear before the court and explain why you are not making payments. This also is done in order to uncover any other assets you may own. The creditor could seize those other assets and sell them to satisfy the judgment. When you fail to appear at this hearing, the court will issue a bench warrant for your arrest.
This appears to be where you are now. The sheriff has contacted you because a warrant has been issued for your arrest to appear in court and explain why you are not complying with the court order. This is very serious and you will need to respond properly. This does not mean you are going to spend time in prison for failing to pay the debt; rather you could spend time in prison for failing to comply with a judicial order. You have been ordered to appear before the court and you need to appear.
In most counties, the sheriff's department does not actively waste time pursuing people that have failed to pay on consumer debts. However, as in this case, some do.
At this point, you have these four options:
- Appear before the court and explain why you have not listened to prior judicial demands.
- Start paying on the judgment.
- File for bankruptcy, which should wipe out the judgment.
- Move to a foreign land and become a wandering Gypsy.
Obviously, No. 4 could be expensive.
Regardless, you need to do something because the head-in-the-sand approach can only go so far. Immediately contact the sheriff's office and ask what you need to do to avoid arrest.
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