The game is automatically lost if they don't show up. If you don’t respond to the lawsuit by filing an answer within the time given, the creditor will ask the court to enter a default judgment against you.Ī default judgment is a legal forfeiture, the same way your favorite football team forfeits a game if they don’t participate. Many debt collection lawsuits are filed in small claims court. How long you have depends on state law and the type of court the case is filed in. You’ll have a certain amount of time to respond to the lawsuit.
Most states require that is done by having a process server deliver the summons and complaint to you. They have to notify you that you're being sued. At this point, the party suing you becomes the plaintiff. While there’s nothing to prevent collection agencies from being annoying, the FDCPA doesn't allow them to harass debtors or be abusive.Īfter some time-how long depends on each lender’s internal policies-the creditor will hire a law firm to file a debt collection lawsuit against you. After a certain period of non-payment, banks and lenders routinely sell their claims to debt collectors.Įither way, if they’re not the original lender, they are subject to the Fair Debt Collection Practices Act (FDCPA), a federal law that applies to third-party debt collectors. While the collection agency works for the creditor, other debt collectors work for themselves. Eventually, creditors usually end up hiring a collection agency to continue the debt collection efforts.Ĭollection agencies are not the only type of debt collectors you may encounter. They’ll report the missed payment to the credit bureaus, which will cause your credit score to drop. In that case, several things will happen as your account goes into collections.įirst, your default interest rate will take effect, and the lender may charge you fees for defaulting. Suppose you’re in a situation where keeping up with monthly payments on your credit card debt and medical bills is impossible, and you end up defaulting. Not making a payment by its due date is considered a default. We’ll close with an overview of what collection actions are available to judgment creditors, what it means to be judgment proof, and how bankruptcy can help. This article covers what happens if you default on a debt, how you can make sure you don’t forfeit your chance to prevent a judgment, and what this all does to your credit. It’s important to keep in mind that there are options. It’s not like a judgment would make it easier for you to pay the debt. If you’ve fallen behind on your medical bills or credit cards, you might be worried about getting sued and having a court judgment entered against you. Why It’s Best To File Bankruptcy Before a Judgment Is Entered.What Does It Mean To Be Judgment Proof?.
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