If you owe money, most creditors will try to collect the debt by filing a lawsuit against you. If you have any good reasons why you think you don't owe the money, this is the time you must raise them – even if you think your judgment proof.
Why defend a suit if I am "judgment-proof"?
It is important that you take action to protect yourself immediately even it you are unemployed, have no money, and believe you have nothing to lose. Very few debtors are actually judgment. Most creditors obtain a judgment because they know at some point in time you will be able to repay the debt, and when that day comes, they will have a lawful judgment to enforce upon you.
It is true however that some debtors are "judgment-proof". What little property they have is "exempt" from collection under state law. But most debtors don't remain judgment-proof forever. As soon as a debtor gets a job, a creditor with a judgment will be able to "garnish" up to 25% of the debtor's wages to collect the court judgment.
If you are served with a lawful complaint, you should immediately consult a lawyer who specializes in debt and bankruptcy. The lawyer should, at the very least, be able to buy you some time - and might be able to negotiate a settlement or repayment plan with the creditor. Assuming the lawyer cannot negotiate a reasonable settlement, you need to think about your legal defenses to the debt.
What defenses might I have to a debt collection lawsuit?
First, if the debt is pretty old, it might be barred by the "statute of limitations". For example, in California a creditor must file suit on a written contract within four years of breach and on an oral contract within two years of breach. But you might have lost your statute of limitations defense if you have acknowledged the debt in writing after enforcement is barred by the statute of limitations or paid any portion of the debt after enforcement is barred by the statute of limitations.
Second, the interest rate on the debt might be "usurious" - in excess of your state's limit on interest rates.
Third, you might have made payments on the debt that were not credited to your account. If so, copies of your receipts and canceled checks can be used to prove your payment.
Finally, the property you bought on time might be defective - entitling you to "offset" the debt with the cost of repair. This may be a good defense if the seller made express representations about the quality of the goods that are not true, or even if the seller said nothing - if the goods are not fit for ordinary use or for a specific purpose that the seller knew about.
What if I am sued in small claims court?
If you are sued in small claims court, you are not allowed to hire a lawyer to represent you at the hearing. If you wish, though, you may consult with a lawyer before the hearing to find out your legal rights.
In some communities, there are free small claims court advisers. Call the clerk of the small claims court to find out about this.
Can I be sued for my spouse's debts?
Sometimes. Certainly. There are many types of agreements you might be able to make with your creditors to alleviate your financial problems.
For example, if you have temporary financial difficulties, you might ask the creditor to take less than the full monthly payment (perhaps interest only) for a limited period of time.
If the size of the payment is a problem, you might be able to arrange with the creditor to reduce the amount of the monthly payment and extend the term of the loan.
You could offer to pay a significant portion of the debt now in exchange for forgiveness of the balance. The creditor might feel "a bird in the hand is worth two in the bush". This is especially true when a settlement now allows a collection agency to close its books on a debt, take its percentage as a fee, and stop running up any more expenses for debt collection.
For more information on debt and bankruptcy visit
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