Imagine this: after months of struggling to make ends meet amid a global pandemic, one day your county sheriff knocks on your door and serves you with legal papers. One or more of your creditors are suing you. They are no longer interested in working with you and want to be paid. The summons and complaint advise you that you have twenty days to respond to the lawsuit or a judgment may be entered against you. It also advised that you should seek legal advice because your rights may be impacted. In recent months, this scenario has been entirely too common. Indeed, many of my clients have shared how this same scenario has played out for them. Many more have scheduled free consultations to discuss their options. Often, these folks describe how stressed, frightened, and hopeless they feel.
When folks come see me with a scenario like this one, they often ask “how did we get here? Our creditors were working with us!” The unhappy fact is that the global pandemic caused by Covid-19 has brought our economy to its knees. Many creditors were able and willing to offer temporary assistance for debtors impacted by the pandemic and offered forbearances, grace periods, and loan modifications to help ordinary people stay afloat in these trying times. As the pandemic raged on, and our economy struggled to recover, creditors were increasingly stretched thin and were eventually unable or unwilling to continue without getting paid. Credit card companies, mortgage lenders, banks who provided personal or signature loans, and debt collectors all began pursuing enforcement on overdue balances. One way they pursue overdue balances is through lawsuits for unsecured debts.
At this point, folks usually share with me that feel like their creditors kicked them while they were down and they feel the most hopeless. Quite naturally, their next question is “what are my options?” Essentially, there are three. First, you can do nothing. The Court will enter a default judgment against you for the full amount claimed plus attorney fees and court costs. When this judgment is entered, it may cause a lien against real property like your home (this is called a “judicial lien”). This judicial lien will encumber your real estate for at least five years – longer if the creditor properly revives the judgment lien. This judicial lien will act like a mortgage for as long as it is valid against you. For those reasons, doing nothing puts your property at risk and I do not advise this course of action. Second, you could defend the lawsuit if you have a legitimate defense like fraud or mistaken identity. Unfortunately, an inability to pay, whether or not it is pandemic-related, is not a valid defense. If you choose to defend the lawsuit, DO NOT DELAY. You should immediately contact a qualified attorney to determine your options. Unsuccessfully defending against the lawsuit carries the same risk of default judgment as not defending the lawsuit.
Finally, you have an option to seek protection in bankruptcy. This is by far the most common solution for folks facing a debt collection lawsuit. There single biggest benefit of Bankruptcy in these scenarios is called the “Automatic Stay.” In the majority of situations, the Automatic Stay prevents your creditors from taking action to collect a debt you owed them prior to filing for Bankruptcy protection. That means, it will prevent a filed lawsuit from going to hearing and prevent the entry of a judgment. If the lawsuit has already concluded and a judgment was entered against you, Bankruptcy will stop collection activity and prevent losing your money or property to satisfy the judgment. In some situations, Bankruptcy may help to undo the judgment lien recorded against your real property.
If you have been sued by your creditors attempting to collect a debt, the experienced, proven, and trusted bankruptcy attorneys at Mooney Law stand ready to assist you and answer your questions. Consultations for bankruptcy are always free at Mooney Law. To schedule a FREE PHONE consultation, call us today at 833-MOONEYLAW or at 717-200-HELP. You can also visit the firm website at https://www.mooney4law.com.