What Is My Responsibility After Receiving a Request for Entry of Default?

The primary goal of a civil lawsuit is to resolve a dispute in a nonviolent way. The parties do not have free reign in court, however. Civil procedure rules mandate issues regarding notifying the parties about claims and defenses and the way to ask for a default judgment. A default judgment may arise if one party fails to appear or otherwise defend his case.

Request for Entry of Default

The plaintiff is responsible for requesting an entry of default. After filing a lawsuit and serving the defendant with notice of the lawsuit, the court allows the defendant a period of time to answer the claims. If the defendant fails to answer the complaint, fails to appear in court on time or simply does nothing to defend his case, the plaintiff may ask the clerk for an entry of default. The clerk will enter the defendant's default and send the defendant a notice.

Default Judgment

The defendant can object to a request for entry of default. If the defendant does nothing in response, the court may hear the plaintiff's evidence, take what the plaintiff says as true (since the defendant offered no contrary evidence) and enter a default judgment. The default judgment entitles the plaintiff to whatever he asked for in his complaint. If the plaintiff sued the defendant for money damages, and the plaintiff proved what the defendant owed, the court can enter a default judgment for the sum asked for. The defendant is legally obligated to comply with the judgment unless the defendant has a defense against the default.

Defending Against Default

The defendant can ask the court to set aside a default judgment. Courts will only grant such a request under limited circumstances. The motion also must be timely. Common defenses to a default judgment include "excusable neglect" (such as being too sick or injured to respond to the debt) or lack of notice (meaning the plaintiff failed to properly notify the defendant about the claims).

Other Issues

Even if the plaintiff prevails by receiving a default judgment, collecting on the judgment may become another issue. While the judgment is a legal obligation, the defendant may still try to avoid it. The plaintiff would need to take additional legal measures to collect on the debt, such as by initiating a second lawsuit to seek remedies like wage garnishments.

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How Does Unsecured Debt Vs. Secured Debt Affect Credit Ratings?

Your credit score indicates how financially responsible you are for landlords, employers and lenders, and while a small percentage of your score depends on the type of credit you possess, the majority of your score looks instead at how you handle your debt. Still, it's important to understand the differences between your unsecured and secured debt and the ramifications each has on your credit and your life.

Unsecured Debt

Unsecured debt is always reported to the credit bureaus as a reflection of the way you manage your money. It is debt that isn't tied to any collateral, such as a car or home. The two biggest factors in calculating your credit score are whether you make your payments on time (35 percent) and how much debt you're carrying in relationship to your credit limits (30 percent). This second factor is called your debt utilization ratio. If you don't make payments on your unsecured debts within 30 days of the due date, your credit score may fall by as much as 100 points.

Secured Debt

Not all secured debt is reported to credit bureaus. Finance experts recommend that people who are building or rebuilding credit ask lenders whether the actions on their secured credit card offerings are reported to the credit bureaus -- if not, they aren't doing making any progress toward laying the foundation for obtaining credit. If a secured debt, such as a mortgage or auto loan, is reported to the credit bureaus, it is judged by the same factors as your unsecured debt, with timely payments and debt utilization ratio being calculated into the overall score. About 10 percent of your credit score is based on the variety of credit you have, and secured debts may help to contribute to the mix.

Credit Cards

Unsecured debt generally carries higher interest rates because it isn't tied to any kind of collateral. In most cases, people use unsecured credit cards; however, those who don't qualify for credit or who are only offered high interest rates because of a lack of or bad credit history may opt for secured credit cards. With secured credit cards, you make a deposit into an account, and that is typically the limit for that card. For example, if you have placed $500 into an account, you may only spend up to $500 on the card. After responsibly using a secured credit card for several months or a year, borrowers may be better qualified for unsecured credit cards.

Considerations

Large debts make a larger impact on your credit. For example, a mortgage is a secured debt. If your house is foreclosed upon, it may negatively impact your score by as much as 200 to 300 points, according to Bills.com co-CEO Andrew Housser. In bankruptcy, unsecured debts may be cleared, while secured debts are generally liquidated, meaning that the object or funds securing the loan are taken away and/or sold.

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Reliable Prepaid Debit Cards

If your credit score's not what it could be and you can't open a bank account that comes with a debit card, managing your everyday spending and making purchases can be a struggle. Fortunately, if you're in this position, you can apply for a prepaid debit card. They work in exactly the same way as a standard card when paying for goods and services but allow you the freedom of shopping and paying your bills with plastic without worrying about overspending.

Availability

Visa and MasterCard prepaid debit cards are available from a number of issuing banks around the country. You can apply for a card online, in an issuing bank's branch or over the phone. Prepaid debit cards are accepted by thousands of vendors around the world just like a standard debit or credit card. To the casual observer, a prepaid debit card looks and operates in exactly the same way as a regular Visa or MasterCard card.

Funding

You can add funds to most prepaid debit cards online, at a number of top-up points in shops around the country, and at your issuing bank's branches. You can also have your wages or benefit checks paid directly onto your card. Some issuing banks set a maximum amount you can add to your card, while others will allow you to load as much money as you like.

Cost

Some prepaid debit card providers charge a monthly fee for the service, while others will charge you each time you top your card up with funds. A few card providers will waive fees if you load a certain amount onto your card every month. a number of prepaid cards charge a fee if you withdraw money from certain locations, but the majority allow you to make purchases for free. Shop around for the card that's going to work best for you. If you're planning to top your card up frequently and regularly withdraw cash, you'll want to find a deal that charges low top-up and withdrawal fees.

Liability

As you can only spend as much money as you put onto your prepaid debit card, there's no chance of you incurring any overdraft fees or other charges. When your funds have run dry, your card will decline. The majority of prepaid debit cards allow you to check your account balance online if you're worried that your money's running out, helping you avoid any potentially embarrassing situations at the checkout. Some card providers will even send SMS balance updates to your cell phone.

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What Can Be Used to Secure Debt?

Lenders are often only willing to issue a loan if the borrower is willing to secure it. This means that the borrower must offer the lender collateral that the lender can seize if the borrower fails to pay back the loan under the terms agreed. There are different forms of collateral a lender is willing to accept, although objects of significant value, such as houses and cars, are most common.

Purchase Loans

Collateral is often used to secure a loan that is used to purchase a specified object. In these cases, the object being purchased will be used as collateral on the debt. When a person purchases a home, he will do so by taking out a mortgage on the loan. The lender who issues this home loan will commonly make the house act as collateral.

Liquidity

Almost any item can be used to secure a debt. However, most lenders will especially value assets that are "liquid," meaning readily convertible into cash. Some assets are significantly more liquid than others. Most securities, such as stocks and bonds, can be readily sold on the market and converted into cash. However, other assets, such as real estate and certain types of retirement accounts, such as 401(k)s, can be converted into cash only with much greater difficulty.

Alternative Forms of Collateral

According to the Denver Business Journal, a number of surprising objects have been used to secure debts. The common factor is that all of them have monetary value and have a value that the investor can expect to remain relatively consistent. These include watches, jewelry, tickets to sporting events, golf club memberships, opera tickets, antique furniture, vinyl record collections, insurance policies, medical instruments, wine collections and tires.

Money As Collateral

In some cases, money itself can be used to secure a debt. This may seem senseless -- if the borrower has money available, why is he borrowing money and paying interest? However, a borrower may be borrowing money simply to build his credit history. Many borrowers with little or no credit take out secured credit cards -- credit cards secured by money in a bank account -- to help them build their credit score.

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How to Mix Personal With Business Accounting

Many people with small or home-based businesses freely mix personal and business accounting. They may use a single checkbook to buy groceries, pay the mortgage -- and purchase supplies for their business. They may use their cell phone for business and personal use and pay the cell phone bill out of the family checking account as well. Some separate bookkeeping is often necessary, but the Internal Revenue Service does recognize one business structure that is perfect for mixing personal and business accounting.

Instructions

1

Conduct your business as a sole proprietor. The IRS describes a sole proprietor as someone who owns and operates an unincorporated business by herself or himself. The IRS reports that the business structure is common and freely allows people to mix personal and business accounting. No special forms, licenses or applications are necessary for a sole proprietorship. You're free to immediately begin business as a sole proprietor and to mix personal and business accounting.

2

Maintain accurate records of all expenses for tax purposes. Sole proprietors use standard personal federal income tax forms to deduct business expenses or report earnings. However, proper record keeping is necessary to separate personal expenses from business expenses.

3

Review your personal and business accounting situation regularly -- perhaps annually -- with an accountant or attorney. A major drawback to sole professorships is that you assume full liability for the business. That means all of your personal assets are at risk if someone files a lawsuit against you for actions by your business. A person selling arts and crafts probably does not have to worry about liability issues. But a roofer or electrical contractor may need a different business structure that does not mix personal and business accounting while offering significant personal liability protection.

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Credit Questions & Answers

Credit cards and other forms of credit involve borrowing money and paying it back at a later date. Credit can be a convenient alternative for purchasing goods and services, but it can be costly. It is important to understand the basics of credit use and credit scores to be financially responsible.

How do Credit Cards Work?

Credit cards allow a consumer to borrow funds up to a specified credit limit, with interest accruing on money spent that is not paid back by the end of the month. The interest rates on credit cards are often very high; when you make minimum required payments on a credit card, a large proportion goes toward interest and not the principal. Paying back the full balance each month will allow you to avoid interest charges and improve your credit history.

What is a Credit Score?

A credit score, also called a FICO score, is a number calculated by credit reporting agencies that is an estimate of the risk you pose to lenders. Credit scores range from 300 to 850. A high credit score will make lenders more willing to give you new credit and loans at favorable rates, while those with low credit scores may have difficulty getting approved for credit and loans.

What Goes into a Credit Score?

Several things affect a credit score. Your payment history -- paying on time -- is the most important factor in determining a credit score. The amount of credit available to you vs.your total credit debt is the second most important factor. Other factors include the length of your credit history, the types of accounts you hold and how much new credit you have received recently.

What Hurts and Helps my Credit Score?

Making debt payments on time and carrying a low balance of debt vs. your total credit limit will help your credit score. A long credit history and avoiding new debts will also tend to help your credit score. Foreclosure and bankruptcy can severely harm a credit score. Co-signing a loan (agreeing to pay a loan if someone else doesn't pay) will also tend to hurt your credit score.

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How Do Collection Agencies Obtain Your Social Security Number?

A Social Security number is one of the most significant pieces of identifying information that any company or individual can have about a consumer. Regardless of how closely an individual guards his Social Security number, a collection agency may still obtain it along with other private financial information in its effort to collect a debt.

Facts

The Fair Credit Reporting Act allows any company or organization access to a consumer's credit report as long as it can demonstrate a permissible purpose for pulling credit records. One example of a permissible purpose as defined by the FCRA is a creditor's right to periodically review its clients' credit files. Once an individual's debt is remanded to a collection agency, the agency becomes a creditor and can legally access the debtor's credit report--which contains personal information such as his address, date of birth and Social Security number.

Function

A collection agency's purpose is to collect consumer debts. Whether it works in conjunction with the original creditor, or purchases the account and collects independently, the original creditor provides information about the debtor to the collection agency to facilitate the debt collection process. If the original creditor possesses the debtor's Social Security number, it may turn that information over to the collection agency--along with any other information it has about the debtor--when the debt is sold or transferred.

Misconceptions

Some consumers believe that a collection agency already has Social Security numbers when, in fact, it does not. The Fair Debt Collection Practices Act prohibits debt collectors from making false representations about the collection agency itself or its intentions, but this doesn't stop the practice from occurring. Thus, a debt collector may claim to already know the debtor's Social Security number in an effort to coerce the debtor into voluntarily giving up the information. Some collection agencies even send out form letters asking debtors to "verify" their information in order to obtain missing Social Security numbers.

Considerations

A 2006 report by the United States Government Accountability Office states that public records about an individual, such as bankruptcy petitions and property records, often contain the individual's Social Security number. Public records, and the personal information they contain, may be accessed by anyone. As long as a collection agency knows an individual's address, it may investigate any public records that exist about the debtor in that county in an effort to obtain his Social Security number.

Warning

Collection agencies occasionally have the Social Security numbers of consumers who do not legitimately owe a debt due to identity theft. When identity theft occurs, the thief steals a consumer's personal information to apply for new credit in the innocent victim's name. The thief often uses the victim's Social Security number when applying for fraudulent accounts. The unpaid debts are then sent to collection agencies--along with the Social Security number of the victim.

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