This is a common debt related question because creditors often sue via a law firm, who issue a summons for a debt collection action. The short answer: talk to an debt defense attorney immediately. The good news is that the matter can almost always be settled out of court, with some arrangement made that is a compromise between the parties. This is, however, not as a good do-it-yourself project.
How Debt Defense Works – An Overview
The compromise reached between your lawyer and the creditor may mean that you are eligible for a significant discount if you can pay in one lump sum. If you have no available cash for a lump sum payment, you can probably get monthly payments that will work for you. As a last resort, if neither of these options work for you, you can evaluate whether it may make sense to file for bankruptcy.
When you hire an attorney to work on your behalf, try to find one who has an existing relationship with the law firm for the creditor. For example, I work with all the major collection law firms in Denver, CO on a regular basis. I have settled many debts with each firm. The largest firms (Machol & Johannes, LLC; Siverman /Borenstein, PLLC; Farrell & Seldin) are law firms I deal with almost weekly, and a hundred more monthly. That means I know just who to call and how to get you a deal that you can live with.
Please feel free to call me for a free evaluation on your situation.
How Debt Defense Works – More Detail
If you want a little more detail about what can you do when you have been served with a summons, read on…
If you have received a summons, it likely means that you have not paid your debt in quite some time and the creditor is tired of asking you to pay your bill. Instead, they have filed a law suit against you in an attempt to eventually force you to repay your debt. How do they do that? Assuming you have no valid defense to their claim (usually you do, indeed owe the debt), the creditor will obtain a judgment against you. This judgment gives the creditor rights which vary from state to state. In most states, the creditor can then garnish your bank account or wages, and they can place a lien on any real estate you may own. You can get an idea of what the specific garnishment rules are in your state by contacting a debt attorney in your state or by internet research.
In Colorado, a creditor can generally garnish 25% of your wages, although some exceptions apply. But you don’t want it to get to that. You need to make a decision whether you can pay the debt or whether you cannot. If you cannot, it would be wise to consult a bankruptcy attorney and seek their advice. If you are unable to pay the amount in full, there is almost always an option to make monthly payments to the creditor. Also, if you have a lump sum of money to offer the creditor that is less than the full amount owed, that can work sometimes too.
Let’s say you are being sued for $10,000 for failure to pay a credit card debt. Your options might look something like this: 1) consider a bankruptcy if you have more debt than just this card and you have relatively low income 2) pay in full 3) pay a monthly payment of something in the neighborhood of $300 per month (interest rate to be negotiated, if any) 3) a lump sum payment of some amount that you have which the creditor agrees to take.
Attached to every summons is a Complaint (the lawsuit) and an Answer form for you to reply to the Complaint. It is generally wise to file an answer to the complaint. You want to see a breakdown of the calculations the creditor has used. If you disagree with the amount they claim you owe, for example, you can write “I disagree with the amount owed” on your Answer form, sign it and file it with the Court where the complaint was filed. There is usually a fee to file an Answer, so bring your checkbook. You can usually file your Answer on or before the return date listed on the Summons.
If you file an Answer, the Court will set the matter for trial at some point in the future, probably 30-90 days down the road. During that time period, you can attempt to negotiate with the creditor, and if those negotiations breakdown, you can go to trial and force them to prove that you indeed owe the amount they claim.
In general, I recommend you contact experienced legal counsel to guide you after you receive a summons.