Many clients wait until they get served by the sheriff with a collections lawsuit before seeking help with their financial problems. The awful knock on the door inspires fear and more stress about a client’s trouble. My initial reaction when fielding such a desperate call is, “Do not panic, we can go over your options and figure out the best response for you.”
First things first, just because a collections lawsuit is served by the sheriff does not mean the sheriff is going to come back to take your property or haul you off to jail. Both of those two things may be hinted at by collections agencies (often illegally), but are simply not going to happen because of a lawsuit.
After a complaint is served, you generally have 30 days to respond to the complaint and explain why you do not owe on the debt. Most of the time, the debt is owed. If you do not respond, the creditor can get a default judgment which is a court order that indicates you owe the money. This judgment can help the creditor collect the money owed through wage garnishment or seizing assets depending on your circumstances. Collecting in this manner, however, is another legal process which will take additional time after the court awards the creditor a default judgment.
The good news is that the process can be halted immediately with the filing of a bankruptcy case. When you file a bankruptcy case, the court issues a “automatic stay” which halts any collection activity, including lawsuits, until the bankruptcy court can review your case.
The bottom line is that getting served with a collection lawsuit is not the end of the world. It is, however, an indication that you should determine your best course of action by seeking the advice of a professional. For those of you in Western North Carolina, I would be happy to speak with you during a free initial consultation.