What happens when someone is being sued over unpaid collections?
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Either they get taken to court, or they settle out of court.
Everything that happens after “they get taken to court” depends on the specifics of their case.
Everything that happens after “they settle out of court” depends on the terms of their settlement.
So you’re at the sandbox with your friend. Youv Once, Sam and Alex were playing soccer in the park. Sam thought Alex was being too rough and shouted, “That’s not fair!” Feeling upset, Sam asked Mr. Johnson, their favorite grown-up, for help.
Mr. Johnson listened to both sides. He told them it was important to play fair and respect each other’s feelings. Sam and Alex shook hands and promised to play nicely from then on. They learned that asking for help can make things better and enjoyed their games more after that.
You have a bill you haven’t paid.
The person who you owe money to starts a lawsuit against you to recover that money. You likely don’t defend the lawsuit because you have no defence and you’d just be wasting more money.
The person who you owe money to obtains a Court judgment saying you owe that money.
Having the Court judgment allows them to pursue civil enforcement steps they could not do before such as garnishing your wages or confiscating your property.
Suing just means to take someone to court to pursue legal action.
In the case of unpaid bills, usually the suing party is going to get permission from the legal system to start garnishing wages and other methods to reclaim cash from the debtor. Depending on the local laws, you might be able to force someone to sell assets, a boat or a recreational property.
Wage garnishing is where you go to someone’s employer with a legal order and the employer takes a chunk out of that person’s wages and sends it to you instead.
It depends, among other things, on jurisdiction, on the amount owed and on the nature of debt. But if it goes to court and you lose, one or more of the following may apply:
* The court may order the bank to freeze your account until you pay
* The court may order the bank to remove funds from your account
* The court may order your employee to transfer part of your salary into a downpayment account.
* Debt collectors may go to your house and take goods (including the house itself) so that they can be auctioned off to pay.
* You may go to jail.
* The creditor may just have to deal with the loss.
A lot of my clients lacked, shall we say, a “degree of sophistication,” so I’ll give it a shot. A lawsuit over unpaid bills in this:
The suit starts with a complaint. A complaint says you owe me some amount of money and this is why. The formal response is called an answer. Typically, an answer merely says, no I don’t. As such, a lawsuit begins by someone saying, “yeah, you do/did” and is responded to by saying “no I didn’t/don’t.”
Thereafter, the matter proceeds with a judge, or in many instances, a magistrate (not a “judge” in the truest sense of the term, but still a court official) presiding. The two parties then engage in “discovery,” which is a managed and formal exchange of information that is relevant to the issue at hand. You can’t just not give up relevant information because you don’t want to do so. Instead, you can be forced (or compelled) to do so. This is equally true for both sides. In addition, you may be forced to provide statements or testimony. This is true for both sides. If you don’t, no one is going to put you in jail. However, not providing such information could be construed against you and it could cause either side to lose its case.
Nothing is final until there’s a judgment against one side. Neither party can do anything about the issue until a judge or magistrate decides that you are permitted.
As such, if someone says “you owe me money” that person cannot legally do anything to get the money until a court says they can. You can’t just start taking stuff, selling stuff, taking wages, or otherwise without court permission to do so.
If you do nothing about a lawsuit, eventually the other party will ask the court to “find you in default” for your failure to do anything. This can’t happen anywhere in the US in less than a month and, realistically takes probably between 60-120 days before a court will do so. Of course, this all assumes all the formal procedure is done properly. Honestly, IN MANY COLLECTION ACTIONS THE FORMAL PROCEDURE IS NOT FOLLOWED CORRECTLY!!! CarMax, hospitals, credit cards, landlords, among others do not have proper documentation to pursue their claims because they often don’t have proper documents. Many sue for good reason, but just because someone sues, it doesn’t mean the one suing (the “plaintiff”) is correct.
It also means, if someone does sue you, don’t just not respond. Do something about it. In many instances, a person can get a more tolerable resolution via a court than just accepting what the plaintiff wants.
While this is more advanced than pre-school level, a civil case (which is anything that isn’t criminal) is vastly different from the typical criminal case that we see on TV. Civil cases usually involve money, not a person’s freedom, so courts/judges often want to find a way to get those things resolved/settled without trial.
A judge hears the case by the collection agency and the person whom they claim owes them.
The judge then rules either in the collection agency’s favor and the person has to pay some or all of the debt, or the judge rules against the agency and the agency has to stop hounding the person for the money.
If the person doesn’t show up for trial, the collection agency automatically wins.
More specifics than this is outside the scope of a 5 year old’s ability to track. Money and legal matters are complex and have trillions of variations and nuances.
When you are sued over unpaid debts, the trial is called a “civil” trial. In civil trials, there is a plaintiff (the person suing for relief) and the defendant (the person being sued).
The plaintiff starts by filing their initial case with the courts. As part of this filing, they are required to notice the defendant about the proceeding. This notice is called “service”. When someone says they were “served”, they mean that a civil process server provided notice of the pending lawsuit against them.
Once you receive notice, you will either have to hire an attorney to respond. The proceedings can go two ways from here:
**If you do not respond**, the plaintiff can request something called summary judgement. In the absence of your response, the judge will rule in favor of the plaintiff. Most people who find themselves in this position are not able to hire an attorney, so summary judgements are very common. We’ll get to the outcome of that, but first let’s talk about what happens…
**If you hire an attorney and respond**, your lawyer will likely recommend that you attempt to settle with the plaintiff. However, because you are already at a point where you have failed to pay, the plaintiff is unlikely to be generous at this stage of negotiation.
Unable to reach a settlement agreement, the case would proceed. Both sides have to undergo a process called “discovery” where each side are able to demand documents and records related to the case. Each piece of evidence is recorded and submitted to the courts.
Eventually, a trial would be held, and a judgement reached. If you win, great. You don’t owe the debt.
If you lose, a judgement against you is reached. Once there is a judgement against you, the plaintiff now has the court’s backing in pursuing repayment. Typically, a plaintiff will immediately follow-up by requesting a court order to either garnish your wages or to seize your assets.
A “wage garnishment order” is sent to your employer. They are required to withhold money from your paycheck and issue a check to the plaintiff. This happens before you ever see the money, so the plaintiff is pretty much guaranteed to get something through this method. If you stop working, your employer is obligated by the court order to notify the plaintiff. From there, they’ll request employment records regularly to determine if you start working elsewhere. Then the garnishment restarts.
Asset seizure usually occurs at the bank. With an order in hand, the plaintiff will contact your bank and have them transfer your entire balance over to their account. Your bank will not give you a heads up, and they cannot refuse. The court order “compels” them to carry out the action.
If you are otherwise insolvent (have no assets, and are unable to pay your bills), you can file bankruptcy. In a bankruptcy proceeding, most debts (like CC, auto loan, or personal loans) can be discharged, even if it has been awarded in a judgement. Certain types of debt cannot be discharged though. Federal student loans as well as judgements resulting from fraud cannot be discharged, for example.
It’s also worth noting that filing bankruptcy stops all current court proceedings. So if a lender is about to sue you, or if you have been provided service, you can visit a bankruptcy attorney, file a bankruptcy petition, and the proceedings will be put on hold.
Ultimately though, the outcome of bankruptcy means you leave the process with very little assets (there are allowances that vary by state). The big upside is that you escape the debt. So if you owe tens of thousands of dollars in CC debt or other loans, bankruptcy can be an option for relief.
It’s really a big lulz tbh. Also if you avoid being served for a period of time the lawsuit will get thrown out due to failure to serve
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