Unsecured debts are not attached to property. Thus, a creditor who does not receive payment from you cannot seize your assets when you neglect to pay off your debts. The creditor can, however, seek a court judgment against you by filing a lawsuit. If the judge sides with your creditor, the creditor can use the judgment to record liens against your personal property--effectively securing the unsecured debt. You have options after being sued for unsecured debts.
Check the Statute of Limitations
Should you decide to pay, a creditor can collect an unpaid debt from you at any time, but it cannot sue you beyond your state's statute of limitations on debt collection. State statutes of limitation differ considerably, but the office of your state's attorney general can inform you of how long a creditor has to sue you. If the statute of limitations on the debt has expired, informing your creditor of this will often result in the lawsuit against you being dropped. If your creditor proceeds with its lawsuit, the court will dismiss the case after you present proof that the statute of limitations for debt collection in your state has, in fact, expired.
Negotiate Payment
If the statute of limitations in your state is still in effect, negotiating a payment plan with your creditor prior to the hearing date helps you avoid the court levying a judgment against you. Not only does a court judgment appear on your credit report and damage your credit rating, it entitles your creditor to collection methods such as garnishment and liens. Should your creditor accept your payment plan, it has little incentive to proceed with its lawsuit.
Answer the Summons
Regardless of whether or not your creditor agrees to your payment plan proposal or whether the statute of limitations has expired on the debt, you must answer the court summons you receive. You must place your response in writing and note whether you agree or disagree with the complaint lodged against you and why. Mail or hand-deliver your response to the court.
Appear in Court
The law does not require your creditor to work with you regarding payments after filing a lawsuit. Depending on your state of residence, however, the law may require you to appear in court. Your failure to show up at the hearing leaves the judge with no choice but to grant your creditor a judgment against you by default--but ignoring the hearing can have other consequences as well. The Minneapolis Star Tribune reports that debtors in some states, such as Minnesota, Arizona, Arkansas and Washington, have faced arrest and temporary jail time for failing to appear in court after receiving a summons. Appearing in court also allows you to present the judge with a defense as to why you either do not owe the debt or have yet to pay it off.
0 comments:
Post a Comment