If you are ever involved in a collection lawsuit and wonder what happens if you do not respond, you are not the only one. You will likely face severe consequences if you fail to respond to a collection lawsuit. The issue does not go away if you fail to answer. Instead, it leads to a default judgment, whereby the court proceeds to make a judgment without entertaining your opinion and makes a ruling in favor of the creditor. This default decision can lead to your bank account being frozen, legal claims being placed on your properties, and your wages being garnished. It is crucial to resolve the litigation early enough. The best way to do this is to respond and seek legal help.

When you answer a collection lawsuit, you do not admit that the debt is genuine or that you are behind in payment. This is a worry many have. However, your response enables you to assert your rights and present your side of the story before the judge. Responding is crucial because it allows you to challenge the debt’s validity or dispute the amount in question.

California Debt Collection Lawsuit: What You Need to Know

A debt collection lawsuit is a legal process through which a creditor or a debt collection agency takes you to court to recover the money you owe. This is often a result of your failure to repay debt, which includes credit card debts, hospital bills, personal credit loans, or car loans. If you do not pay, the creditor has the option of suing you for a judgment, confirming the debt, and allowing the creditor to collect the amount owed.

The debt collection process begins when the creditor files a complaint with the court, explains the debt, and provides evidence supporting the claim. After that, you will receive a summons containing information about the lawsuit and the date you should respond to the lawsuit. If you fail to answer or put up a defense, the court will give the creditor a default judgment.

You can expect the lawsuit to go through the following process:

 Initial Contact

 When a debt collector first contacts you, they should send you a validation notice within five days. The notice contains the creditor’s name, the amount the creditor claims you owe them, and how you can contest the debt in writing. This contact is crucial because that is when you can confirm the authenticity of the debt and, if necessary, challenge it.

Creditors could hire debt collection agencies or purchase the debt from the creditors. That is why, in these situations, you deal directly with the debt collection agencies and not the creditor.

The Creditor Sending a Demand Letter

 The creditor will write you a letter demanding payment of the debt and informing you that they will take legal action against you. This is the final letter written and sent to the debtor before the creditor files the lawsuit. The creditor could sue you if you fail to pay the debt or disagree with a settlement.

 Filling a Complaint

If you do not reply or try to negotiate a settlement with the creditor, he/she will file a complaint in court. This legal document also contains full debt details. These include the total amount, interest, and other costs. Subsequently, you will receive a copy of the complaint and a summons, formally informing you that the case is underway.

Responding to the Complaint

You must act quickly when you receive a summons and complaint in a debt collection lawsuit. You usually have approximately thirty days to file a written response with the court. This response can be an opportunity to answer the creditor’s claims.

Your response is an excellent place to object to any allegations raised against you and/or offer up any defense you may have. For example, you could argue that:

  • The debt is not yours.
  • You have already paid off the debt or
  • The total being claimed is wrong.

Court Process

If you disagree with the debt, you will be taken to court. Both sides produce witnesses and documents to support their claims. After considering the material, the judge decides based on the arguments presented.

Issuing a Judgment

If the court rules in favor of the creditor, you will be liable for a judgment enabling the creditor to recover the amount owed to him/her. This determination creates the debt in law and could attract additional costs like interest and court costs.

Taking Collection Actions

 The creditor could go further to recover the debt after receiving the judgment. They could:

  • Place liens on your property
  • Withdraw cash from your bank accounts, or
  • Garnish your salary

Understanding California Default Judgments

The law also allows courts to make ‘automated decisions’ if you do not respond to a lawsuit within the set timeframe. As has been mentioned previously, this is the default judgment. The court comes to this conclusion, strictly relying on the creditor’s evidence. This means the court would pass judgment on the case without your input or a full trial.

After the court’s judgment, you will be known as the ‘judgment debtor’ while the creditor will be referred to as the ‘judgment creditor.’ Default judgments are in the creditors’ favor. This judgment gives the creditor the right to collect it.

The creditor can then proceed to obtain an abstract of the judgment. This document summarizes the court's ruling. The creditor takes the abstract judgment to the court that gave the initial decision. Thus, the verdict becomes an official part of the legal paperwork with such an action and is included in the records. The creditor could also file the abstract with the county clerk's office or recorder. This step places a legal claim on your property in that particular county.

The recording of the abstract has significant implications. It raises an official legal challenge against your personal assets or real estate, which is a complication if you want to sell or refinance the asset. Should you decide to purchase any, your future assets could be attached by a judgment lien filed in your county, thus exposing your current assets to the creditor. Moreover, this lien can be reflected on your credit report and negatively affect your credit score and chances of securing new credit.

It is worth noting that it is illegal for creditors to use aggressive tactics to recover the outstanding balances owed to them when the debts are unsecured debts without a court order. Unsecured debts include personal loans, credit card debt, or medical expenses. Creditors can seize your pay when they have a judgment lien or take money from your bank account. Despite this, you can protect your assets. California offers safeguards for your assets through bankruptcy exemptions for the following:

  • Real estate — A creditor can obtain a judgment lien against any real estate, including a parcel of land or your house. However, unless there is equity, creditors generally avoid foreclosure because it is a costly affair. In most circumstances, they only get the balance after the mortgage payment has been made. Although California's homestead exemption offers substantial protection, a judgment lien could result in foreclosure. Many houses previously at risk are better protected thanks to increasing exemption amounts.
  • Motor vehicles — Creditors could also place a judgment lien against the car owned by the defaulter. They do so by reporting it to the Department of Motor Vehicles.
  • Personal property — Creditors rarely take personal property as security unless the property is valuable. However, due to the exemptions, you can retain several personal effects.

Judgment liens can create significant financial challenges. You can manage or reduce the burden of the monetary implications through the following strategies:

  • Paying off the obligation — The most straightforward means of removing a judgment lien is paying the obligation in full. Once the obligation is met, the creditor has to provide a lien release. This action unconditionally discharges your title and removes the lien from the records.
  • Bankruptcy protection — This protection could help if you can no longer afford to pay your debt. Bankruptcy is a form of lien avoidance, the process by which it is possible to release some judgment liens. Bankruptcy could assist you in starting a new financial life and protecting your items.
  • Appreciating your choices — Understanding your circumstances, particularly your financial situation, is a prerequisite to choosing the right course of action. Discussing your options with a bankruptcy lawyer is advisable to determine the best one.

Courts have been equally inclined to support debtors who sought to have the liens stripped off properties worth little or with zero equity. This might seem quite paradoxical, but it shows the complexity of bankruptcy law. Talk to a bankruptcy lawyer when you have a lien on a property without value. An attorney is better placed to evaluate your case and advise on removing the lien.

The Fair Debt Collection Practices Act (FDCPA)

Regardless of any action taken by creditors, including pursuing a debt collection lawsuit, you have certain protections under the Fair Debt Collection Practices Act. This law offers several protections to consumers against unfair and abusive debt collection practices. These include the following:

Communication Restrictions

The FDCPA lays down specific guidelines to protect your rights and privacy when dealing with debt collectors. One crucial regulation limits their calling hours. If you consent to be called at different times, the debt collectors cannot call you either before 8 in the morning or after 9 in the evening of your time zone. This precaution ensures that they do not disturb you at odd times of the day or night and they do not infringe on your personal time.

The communication restrictions extend to electronic communications. It is unlawful for debt collectors to post information about your debt on social media platforms. They can communicate with you through these platforms, although they will not if you have forbidden it. When communicating with you electronically, debt collectors must provide a means to opt out of further communication. This will enable you to control when and how you get your debt information.

However, some debt collectors violate these provisions even with these clear demarcation lines. They could attempt to shame you into paying them back by announcing your debt on social media, thus exposing your financial troubles to the public, or by making constant threats through emails or text messages. In other situations, they could:

  • Pretend they are from law enforcement or government agencies
  • Ignore your request to stop sending you messages
  • Provide wrong information about you
  • Send you too many of the messages, or
  • Even send you uninvited auto-dialed or prerecorded messages

All these are illegal.

The FDCPA also protects your workplace privacy. Debt collection agents must comply if you request them not to call your workplace. This clause allows you to separate your debt issues from the workplace and prevents workplace interference.

The law also limits the details debt collectors can convey to other parties regarding your debt. They can only disclose details of your financial status to you, your spouse, or your lawyer. This safeguard protects your privacy by preventing a third party from getting sensitive information.

Prevention of Harassment and Abuse

FDCPA shields you from being harassed by debt collectors using deceptive debt-collection tactics. Collection agents are prohibited from using abusive or threatening language to the debtor. They cannot perform any actions construed as harassing to ensure that they maintain polite and professional interactions.

The debt collectors are also supposed to provide accurate information about a debt. They cannot give any false or misleading information about the debt or any legal proceedings that could be taken. This regulation protects you from being given the wrong debt figures and shields you from dishonest business practices. You can dispute a debt and request the debt collector to verify the information. The debt collector cannot continue with any other collection process after you ask him/her for this verification and furnish the needed information. This ensures they will not work on the debt or communicate with you again unless they verify the validity.

Find a Bankruptcy Attorney Near Me

Ignoring a collection lawsuit is risky because it can lead to a default judgment, which grants creditors the authority to use forceful means of collection. Being proactive and aware of your legal rights is vital to safeguarding your financial status. A bankruptcy attorney can advise whether you are dealing with debt or have become the subject of collection litigation.

At Los Angeles Bankruptcy Attorney, we will help you understand the possibility and implications of bankruptcy and file for bankruptcy if necessary. We urge you to contact us at 424-285-5525 if you plan to file for bankruptcy or need help in debt collection litigation. We will help you assert your rights and secure a fresh start.