What happens when someone is being sued over unpaid collections?
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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.
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