Question: I live in Encino, Ca. I was walking out to my car today and a man served me with a lawsuit from one of my credit cards. It says on the front page that the Court is in Van Nuys. What happens now?
Answer: Creditor lawsuits are scary. Getting sued is one of the most common reasons people turn to a bankruptcy attorney. The good news is, bankruptcy can resolve the credit card lawsuit for you.
Now, to answer your question I’ll start by explaining what can happen next. Once you’ve been sued you have 30 days to file an answer. When one party sues another they file a complaint, which in this case alleges that you have defaulted on your credit card agreement. The credit card company lists its damages (unpaid fees and interest) and is asking the Court to make a legal determination that you owe them money. If you answer, you are telling the Court that you do not agree and now the Credit Card company has to prove their case to the Court. If you don’t answer the lawsuit within 30 days, then the credit card company can seek a default judgment. Just as the name implies, it means you lose by default because you didn’t exert any defense to the claims in the complaint.
If a creditor obtains a judgment against you, they can then ask the Court for a number of common enforcement options. The most common enforcement measures that creditors obtain are garnishment orders, bank levies, and liens on real property. If a creditor obtains a garnishment order, they are entitled to take 25% of your pay until their judgment amount is paid. If they obtain a bank levy, they can seize funds in your bank account up to what is owed. There are exemptions you can claim in some circumstances to limit the amounts claimed in a levy, but they can be complex and difficult for laypersons to claim properly. If a creditor wishes to obtain a lien against your home, they can record an abstract of the judgment they obtained. Although there is a process for sale of real estate due to a judgment lien, it is so costly and rare it’s virtually never used. Judgment liens, however, have to be satisfied and paid for you to obtain new mortgage financing or to sell the property. So although they may not create an immediate problem, they don’t go away either.
A bankruptcy case halts a creditor lawsuit in its tracks immediately. If the creditor has not obtained a judgment against you yet, then the case would be dismissed without one being entered. If they have already obtained a judgment, it is discharged and becomes unenforceable. All garnishments or bank levies will immediately cease upon filing bankruptcy.
If the creditor has already obtained a judgment lien against your real property, there is a motion that a bankruptcy attorney can file during a bankruptcy case that can potentially remove the judgment lien from the property.
If you have been sued by a creditor and are wondering what to do, contact our experienced Encino bankruptcy attorneys today. Here at the Bodie Law Firm we offer a free consultation and can go through all your options to resolve the lawsuit. And don’t forget to Like us on Facebook, Follow our Twitter and G+ page for even more Bankruptcy news and updates!