In these uncertain financial times, many consumers like you have incurred a sizeable sum of debt on their American Express, Visa, and MasterCard credit cards, hospitals and medical providers, or even personal loans. In general, the debt was incurred due to some financial hardship such as unemployment, a divorce, a major illness that is physically limiting, or other similar circumstances. Regardless of the reason, you simply cannot afford to make all of your payments to your creditors, and, as a result, you have fallen behind on your payments. You have fallen so far behind that the collection agencies have stopped sending harassing letters and making intimidating phone calls, because your creditors have come to the realization that you are not going to pay them. Unfortunately, the next step is that the creditor files a lawsuit against you for breach of contract, and you are served with a summons to answer a complaint filed in the court. Now that this has happened, what’s your next move?
Whatever choices you are considering, do not ignore the problem. It is a common and easy mistake to make but even though you may believe, or at least hope, that if you ignore the lawsuit it will go away on its own, it will not. If you do not respond to a complaint filed in court within 20 days of receipt of the summon, the Plaintiff has the right under Massachusetts law to petition the court to enter a default judgment against you, which basically states that you decided not to defend against the claim and, by your silence, you have admitted that everything in the compliant is true and accurate. If a default judgment enters, then the Plaintiff will next request an execution be rendered, which will increase the judgment by 12% each year as interest, until the balance and interest is paid in full. Moreover, the collection agency can use this execution to have a lien placed against your house, seize your tax refund and money right out of your bank account, and even have your employer send a portion of your weekly wages to the creditor.
So how do you, as a person who cannot afford to pay everything back, ensure this default judgment and execution does not happen to you? The first thing you should do is seek the advice of a lawyer who practices consumer debt and bankruptcy law. However, if you choose to not retain counsel, you will have four options.
First, you can file an answer to the complaint by objecting to some, if not all, of the allegations and require the Plaintiff to prove each and every element of the breach of contract. Second, as a Defendant, you can challenge that the collection agency has the right to sue you and make them prove that they in fact own the debt they are trying to collect. This type of challenge is done by requiring the Plaintiff to demonstrate by way of notices, assignments, and other paperwork, that everything has been done appropriately.
If you choose not to answer the complaint, you can try to negotiate with the collector and settle the matter for a lump sum of money, or even a monthly payment. The crucial element in doing this is to make sure that if you do settle the account, it is settled in full and no deficiency or uncollected part of the debt can be sold to yet another collection agency.
Fourth and finally, if you are incapable of settling the matter with your creditor, and don’t believe you can successfully fight in Court, you can file for bankruptcy protection. If you file a bankruptcy, any attempt to collect a debt against you will be stopped as soon as you file your bankruptcy case. The provision of the law that stops the case is called the automatic stay. Presuming your bankruptcy goes through and you receive your discharge of debt, you will not be obligated to pay back any unsecured obligation.
So to summarize, if you take delivery of a summons to answer a complaint, you should take a very proactive approach to resolving it or a judgment and execution can, and in all likelihood will, follow you for the next twenty years.
The forgoing article on how to handle a breach of contract suit by an unsecured creditor was written by Attorney Michael Goldstein.