Facing a Collections Judgment

Being served with a lawsuit from a creditor can seem like the beginning of a nightmare. When you are already struggling with financial problems, you may feel like you are out of options and may be tempted to just ignore the suit. However, hiding your head in the sand will not solve anything and can actually make the situation worse. Knowing how to defend against collections lawsuits can help you start to sort out your financial situation.

What is a collections judgment?

A collections judgment is an order from the court finding that a person owes a creditor money. When a creditor obtains a judgment, that creditor becomes a secured creditor, rather than an unsecured creditor. The judgment gives the creditor the right to use more collection actions against a person than they are able to use without the judgment, such as garnishing wages and bank accounts or putting liens on property. Judgments also negatively affect your credit rating, and they can stay on your credit report for up to seven years if you do not pay them.

How can you defend against a judgment?

In order to obtain a judgment from the court, the creditor needs to file a lawsuit. In many cases, people do not know what to do when they are served with notice of a lawsuit from a creditor. People often ignore these suits, so the creditors obtain default judgments from the court because people did not file answers to the lawsuits.

The first step to challenging a collections suit is to answer the suit. Additionally, you should demand that the creditor prove what you owe by producing the original signed debt agreement and the balance on the account from the beginning to the present. In some cases, if the debt is old, you can raise the defense that the statute of limitations has run on the time the creditor can legally collect the debt. If the creditor has violated federal or state laws governing debt collections, you may want to file a counter-suit against the creditor when facing a collections lawsuit.

How can bankruptcy help with judgments?

If a creditor has already obtained a judgment against you, you may want to consider filing bankruptcy as a way to help you deal with your financial difficulties. When you file bankruptcy, creditors can no longer garnish wages or bank accounts or undertake any other collection actions. The debt discharge that occurs at the end of a successful bankruptcy case can give you a fresh start and help you move forward with your life, rather than continuing to be mired in debt and stress.

If you have questions about collections judgments, speak with a seasoned debt relief attorney who can discuss your specific circumstances with you and advise you of the best way to proceed.