As an Asheville bankruptcy attorney, I hear from many clients after they get served by the sheriff with a collections lawsuit. A suspicious knock on the door inspires fear and more stress about a client’s financial trouble. My initial reaction when fielding such a call is, “Don’t panic, you have options, lets get you on my calendar for a free consultation as soon as we can.”
A collections lawsuit served by the sheriff is the first step a creditor takes through the legal system to get paid on a debt. You still have time to assert your rights and defenses.
After a complaint is served, you generally have 30 days to respond to the complaint, and doing so is called an “Answer.” Most of the time, the debt is owed, and folks are better served spending time protecting their assets than contesting whether the debt exists. If you do not respond to the complaint, the creditor will be issued a “default judgment” by the Judge in the case, which is a court order that indicates you owe the money.
This default judgment can help the creditor collect the money owed. However, wage garnishment on simple unsecured debts (credit cards, medical debts, personal loans, repossessions, etc.) is not permissible in North Carolina. Seizing assets is also more difficult because consumers have a right to protect a significant amount of their property by claiming their exemptions. The creditor is required to serve you with a “Notice of Right To Claim Exemptions,” before trying to execute on any property to satisfy a default judgment.
The good news is that the collection process can be halted immediately with the filing of a bankruptcy case via the “automatic stay.” Most of the time, the creditor will file a voluntary dismissal when they get notice of a bankruptcy case which discharges your responsibility to pay that debt.
Getting served with a collection lawsuit can be intimidating, but all is not lost. It is, however, an indication that you should determine your best course of action by seeking the advice of a bankruptcy attorney. For those of you in Western North Carolina, I would be happy to speak with you during a free initial bankruptcy consultation.
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