Over time, debts you don't pay pass from creditor to creditor. This process continues until you either pay the debt or one of the debt buyers files a lawsuit against you. Your state's laws determine how long a creditor has to collect a debt through a lawsuit. Should you receive notice of an impending lawsuit, you must prepare to defend yourself in court or acknowledge your liability for the debt and accept a court judgment.
Notification
When a creditor sues you, it must formally serve you with paperwork notifying you of the lawsuit. This paperwork consists of a summons and complaint. The summons contains the details of the case, the date and location of the hearing, and instructions for filing an answer with the court. The complaint notifies you of the amount the creditor claims you owe. A creditor can serve you with a summons and complaint in person or via mail, depending on your state's specific service guidelines.
Filing an Answer
After you receive the summons and complaint, you have a limited amount of time to file a formal answer with the court and the creditor; this time period varies by district. If you plan to defend yourself in court, your answer must contain the defense you plan to use. If you don't file a formal answer with the court, the court grants the creditor a civil judgment automatically. The necessary forms for filing an answer are available at your county courthouse.
Discovery Period
During the discovery period, you can request that the creditor turn over any documents it has and intends to use in court to prove its case against you. This helps you formulate a more effective defense strategy. The creditor also reserves the right to demand copies of any documents you plan to use in your defense. You only have the right to use discovery if you filed an answer with the court stating your intention to defend yourself against the impending lawsuit.
The Hearing
At the court hearing, the judge hears both your case and that of the creditor. He examines the evidence that both of you present and renders judgment accordingly. Should the judge side with the creditor, the creditor wins a judgment against you. If the judge decides the case in your favor, however, the process is over. If you file an answer with the court yet don't appear at the hearing, the creditor wins a judgment by default.
Aftermath
If you win the case, you can return home without fear of further repercussions or collection activity from the creditor. If you lose, the creditor requests proof of its judgment from the court and then uses its newfound status as a judgment creditor to seize your assets. The assets a creditor can seize vary depending on your state's specific judgment recovery laws, but, in general, judgment creditors can seize a portion of your wages, levy your checking and savings accounts, and attach liens to your personal property and real estate.
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