Creditors may go through the courts to get you to pay what you owe if your account becomes delinquent. Once a creditor files a complaint or motion for judgment against you, you must address the complaint. You have some options during this process, but unless the creditor withdraws the complaint, you likely will lose some of your assets.
Summons
When a creditor files a complaint against you, you have the legal right to know about it. The court sends you a summons asking you to come address the complaint. The summons tells you that the court has scheduled a hearing for your case and provides the hearing date and time. After you receive the summons notice, you typically have a month to respond and let the court and the creditor know what you'd like to do. If you don't want to contest the complaint, you can just write a letter to the court acknowledging the complaint and the right of the creditor to collect from you. If you want to contest the complaint, your letter should state this and briefly explain your reasons for wanting to contest. You can ask the court to reschedule the hearing, although the courts may not be able to do so.
The Hearing
At your hearing, you can present the judge with any evidence you have such as financial records that show the creditor's claims are not accurate. You also can explain how your debt came about and why you cannot pay currently. Sometimes it is possible to negotiate at the hearing to work out a payment deal, but if this doesn't work, the judge has to make a ruling on the complaint. If you don't show up to the hearing, the judge will consider you in default and rule in the creditor's favor, so it's important you go to the hearing.
Judgment
If the judge in your case finds that the creditor's claim was unfounded, he rules in your favor and dismisses the case against you. This is the best-case scenario. If the judge finds in favor of your creditor, he orders you to pay your balance.
Writ Request
If the creditor receives a favorable judgment in your case, the next step is for the creditor to ask the court to place liens or levies on your property and assets. A lien means that the creditor has a right to the property and you can't sell it unless you pay your debt. A levy is similar but usually involves funds like money in your bank account -- you can't spend money in a levied account until you honor your debt. Creditors may ask the court for permission to garnish your wages, as well. They get a formal writ of judgment from the judge indicating what liens, levies or garnishments the court has prescribed. They then file the official writs with the court.
Contact of Third Parties
Once your creditor has filed any issued writs, it contacts any third parties involved in collecting the debt. For example, the creditor may contact your employer to garnish your wages. The third party then complies with the writs according to your state laws, halting activity on your account or withdrawing the money you owe and giving it to your creditor.
Considerations
Generally, a creditor loses the right to file six years after writing off your debt -- that is, six years after the last account activity. However, the statute of limitations is anywhere from two to 15 years, depending on the state in which you live. You may use the statute of limitations as a defense if a creditor files a complaint outside of the statute for your state.
Usually, after a creditor gets a judgment against you, your creditoscore goes down. The judgment can stay on your credit report for up to seven years.
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