If you have received a summons or complaint regarding a debt collection lawsuit for a credit card or other debt, you can’t ignore it. A lawsuit from a creditor will not go away if you ignore it. Further, ignoring a lawsuit can ruin your credit and put you into a much worse financial position. Ignoring a debt collection lawsuit can do a lot of damage to your credit score. Moreover, creditors can enforce a judgment for up to 20 years in New York and New Jersey. This means that once a creditor gets a judgment against you, they will be able to garnish your wages, freeze your bank account or put liens on your property.
A Creditor Can Garnish Wages If a Judgment is Entered
Once a debt collector gets obtains a judgment in court, they will hire a lawyer to garnish your wages. A garnishment will be sent to your employer and money will be taken out of your check each week. A creditor is allowed to withhold 10 percent of your gross wages in New York and New Jersey. Gross wages it the amount that you are paid before any takes are taken out. A wage garnishment can put someone who is already barely making ends meet, in an even worse financial situation.
A Creditor Can Freeze a Bank Account with A Judgment
A debt collector can freeze or restrain any money that is in your bank account once a judgment is entered. People often wonder why a creditor is allowed to restrain more than what the judgment is for. Typically, a creditor has the right to freeze two times as much as the judgment amount. When a bank account is frozen, your banking institution will not release any money to you until the creditor is paid. Keep in mind that social security, disability, public assistance, veteran’s benefits, pension, retirement account payments, child support, and spousal support, are exempt from being frozen. This means that creditors will not be entitled to this money.
Defenses and Counterclaims to a Lawsuit Against a Creditor
If a debt collection lawsuit has been served upon you, you have the right to defend yourself as long as you have a valid argument. Some defenses you may have against a creditor are:
- That you were never served with a lawsuit
- The amount owed is not your debt
- The lawsuit was not brought in a timely manner
Keep in mind, that if a lawsuit was not brought within the statue of limitation you may have an action under the Fair Debt Collection Practies Act. Under the Fair Debt Collection Act, creditors must abide by certain types of laws. If they don’t, the creditor can be sued for violating the fair debt collections act.
Settling a Judgment
If you have no valid defenses to a lawsuit from a creditor, you may be able to settle the debt. Debt collectors may be willing to take less than what is owed to settle the debt. A good debt settlement lawyer will be able to help you, to ensure that the agreement is fair and reasonable. A debt settlement lawyer will look through the settlement agreement to make sure that the lawsuit will be dismissed once the payment is recieved. If the creditor does not dismiss the lawsuit or the proper documentation is not recorded, the creditor may attempt to argue that the settlement payment was only a payment towards to the balance. Many creditors often won’t work to settle the lawsuit with consumers. An experienced debt lawyer can reduce the settlement and qork quickly to ensure that your interests are being handled properly. It is important to keep in mind, that any debt settled for over $600 will have tax consequences. The IRS treats the forgiven debt as taxable income. Thus, the creditor may send you a 1099 at the end of the year for taxes owe on the debt.
Bankruptcy Can Get Rid of A Judgment
If you can’t settle the account and you have other debts, filing bankruptcy may be something to look into. A Chapter 7 bankruptcy, can eliminate your debt complely so you don’t have to pay anything back to your creditor. A Chapter 7 bankruptcy, allows you to start over. Once a bankruptcy petition is filed creditors can no longer go after you. This means a debt collection lawsuit, wage garnishment, or frozen bank account will stop immediately.
If you have questions about a lawuit from a creditor, you can call our lawyers today. Our debt lawyers handle matters in Staten Island, New York, New Jersey and the five boroughs. Our lawyers have helped many individuals get out of debt and start over. You can contact our office at 973-979-9078 or email us at karra@klkbankruptcylawyer.com.