I get calls every month from people who say they are surprised that they have received a summons!

Let’s see….

• You took our loans or charged up credit cards.
• Due to circumstances beyond your control, you have not been able to make the minimum required payments due each month.
• You received several calls, letters or emails from the creditors, but ignored them.
• Someone knocks on your door and hands you a SUMMONS!

SURPRISED?   Now what?

First…DON’T PANIC!

• You are not going to jail!
• You will not have to go to court!
• They are not going to garnish your next paycheck (UNLESS YOU IGNORE THE SUMMONS)
• They are not going to garnish your bank account. (UNLESS YOU IGNORE THE SUMMONS)
• They are not going to come take all of your belongings!
• At least….NOT YET!

If you have secured loans…where there is collateral (home, car, boat, RV, motorcycle, etc.), the situation is different!

If you default on a loan where there is collateral, the creditor or collector may decide to repossess the item! Be AWARE!

OK, but in this article, I’m taking about UNSECURED DEBT:

• Credit cards
• Personal loans
• Medical bills
• Personal line of credit
• Store cards, etc.
• Auto Repo

To prevent a summons and the start of the “legal” process, you need to understand the basic process and/or option a creditor or collector has.

The Summons Process

• After attempting to contact you (remember all those calls, letters and emails?)

• The creditor or collector may retain an attorney to

• You will receive a SUMMONS. This is usually hand delivered, but can be left with someone at your residence. Sometimes the server will deliver to your place of employment.
• The summons will state something to the effect that you have 20 or 30 days after receipt of the summons to ” ANSWER THE CLAIM.”
• An answer is your side of the story that you would file ONLY if you can PROVE WITH DOCUMENTATION, that you do not owe the amount of the claim
• If you owe the debt, there is no reason to spend the time or money for an answer. YOU DO NOT NEED TO GO TO COURT.
• Contact the attorney for the plaintiff (the creditor). If you are employed and receive normal W-2 wages, you need to try and work out a repayment plan so they do not proceed with the legal action.

So, what can you do or could you have done to

PREVENT THE SUMMONS?

FIRST OPTION:

Contact the creditor/collector and try to work our a “catch up” plan to start repaying the debt you owe.

The problem with this option is that you most likely cannot afford the payments.

The same is true with a Debt Management or Credit Counseling Program.

Not a bad idea IF YOU CAN AFFORD THE PAYMENTS!

SECOND OPTION:

Once your account has been charged off (the creditor has kind of “given up” on collecting the debt on their own), the account is usually placed with a DEBT COLLECTOR.

Now you can try to SETTLE the account for LESS THAN THE FULL BALANCE.

The process is time consuming and stressful, but usually (not all the time), the collector will agree to a SETTLEMENT AGREEMENT.

This agreement is usually for 40%-70% (in some cases even lower) of the balance due.

Of course, the collector wants the amount of the settlement in a LUMP SUM, but I doubt you have that kind of money. If you did, you probably would not have gotten behind in the first place! RIGHT!

Yes, you can also negotiate TERMS/MONTHLY PAYMENT PLAN on the settlement.

Again, they want the monthly amount as large as possible and the length of the plan to be as little as possible. You have to negotiate strongly to get a plan that fits your budget. Not easy!

 IF ALL ELSE FAILS….BANKRUTPCY MAY BE YOUR ONLY OPTION

If you failed in trying to work out a reasonable repayment plan.

If you failed in trying to negotiate a reasonable settlement.

Then you may the assistance of a Bankruptcy Attorney to protect you from:

• Bank Levies
• Wage Garnishment

Bankruptcy is a “scarry” word to most people, but bankruptcy laws are to help us protect ourselves from creditors and/or collectors devastating our lives.

Contact several attorneys in the area where you live.

The initial appointment (may be by telephone only) should be FREE. If not, keep looking!

To wrap up…

When you find yourself in a financially stressful situation whereby you are falling behind or simply cannot make the required monthly payments due, DO NOT IGNORE THE OPTIONS YOU HAVE FOR REPAYMENT OR SETTLEMENT!

Be pro-active…don’t “hide you head in the sand” so to speak.

For more information…click below:

Photo credit

Being unable to keep up with your debt payments is very stressful. 

Now you get served with a SUMMONS and you are really stressed out!

 For the sake of this article, I'm talking about credit accounts that are     UNSECURED:

   Credit Cards

   Store Cards

   Medical Bills

   Personal Loans

   Pay Day Loans

When you apply for a credit card, store card or any other unsecured account, you are agreeing to the terms to repay this debt.

If you fail to make at least your minimum payments when due, your account will become subject to all collection efforts by the creditor.

These include:

• Phone calls (lots of phone calls)
• Emails
• Mail
  

If these methods do not get you to start making payments again, then the creditor may elect to retain the services of an attorney to file a CLAIM.

Once the CLAIM is filed with your county's courthouse, a SUMMONS is prepared and sent out.

The SUMMONS is usually hand delivered by a courier who is paid to delivery it.   

The idea of the claim/summons is to get your attention...and it works!

Over the years, most of our clients who received a summons call us almost in a panic!

It is because they do not really understand the language of the summons and think all kinds of incorrect thoughts.  

For example...

The summons will state something like:

"You have 30 days to APPEAR and give an ANSWER".

Sounds like you have 30 days to show up in court, but it doesn't.

This language means that if you have undeniable proof that you do not owe what the Plaintiff (creditor) is CLAIMING, you have 30 days to submit to the court your legal ANSWER.

Most of the time you (the defendant) in the claim owes the amount claimed and so giving an ANSWER would be useless.

SO WHAT HAPPENS IF YOU DO NOT GIVE AN ANSWER?

If you continue to read the summons, it says something to the effect that if you do not give an ANSWER, then the Plaintiff may petition the court for a DEFAULT JUDGMENT.

Once a judgment has been awarded to the PLAINTIFF/CREDITOR then they have the legal right to pursue all legal methods to collect on the debt, such as:

               Wage Garnishment

               Bank Levy

               Lien on your home 

Before I continue, let's address those basic 3 options above.

If you are employed and receive W-2 income (income reported by law to the IRS), then a wage garnishment could be sent to your employer.

Your employer has not choice but to comply with the garnishment order or face severe fines!

The employer must send 25% of your NET, AFTER TAX paycheck to the Plaintiff/Creditor until the debt is 100% repaid.

This can be devastating  to someone already have a tough time making ends meet!

Let's say you earn a gross monthly income of $5,000 and after tax, you are bringing home $3,500.

25% of the $3,500 would be $875, leaving you with only $2,625 to pay bills!

That's almost 50% of you gross income!

I'm going to tell you how to prevent that in a minute..

But what about a BANK LEVY?

Sometimes the Plaintiff's Attorney/Debt Collector with send out several bank levy notices to banks in your area.  They use your Social Security number and in most case, will locate your bank.

Now, you go to the store and pull out you debit card to pay, but it is declined.

Calling the bank, you learn that your account has been frozen by the Levy!

Again, devastating!

Yes, the attorney for the Plaintiff/Creditor may choose to file for a lien on your home.

However, this is not used as much as options 1 and 2.

Even if there is a lien placed on your home, it DOES NOT mean that you have to sell your home right now to pay the debt!

It means that if you do not take care of this judgment debt before you sell your home in the future, the title company is forced to repay the lien in order to release the title.

So here is the big question...

HOW CAN YOU PREVENT ALL OF THIS?

DO NOT IGNORE THE SUMMONS!

The creditor wants some kind of repayment plan rather than have to deal with the expense of paying the attorney for the other options.

You should be able to negotiate either a SETTLEMENT, REPAYMENT PLAN, or a STIPULATED AGREEMENT.

While negotiating with debt collectors or attorneys for the creditor can be intimidating, it can be done.

Photo Credit

Over the last 15 years, I have come across all kinds of so-called "credit repair" suggestions and/or scams.

One of these is called "Pay-to-Delete".  The basic idea is that if you have an account that is past due, charged off, or in collections, you can offer to pay 100% of the balance in exchange for the creditor or debt collector promising to delete that account from your credit report.

Sounds OK, but also sounds "a little to good to be true". 

The major crediot reporting bureaes are "for profit" businesses that collect data on all of us about how we use credit.  This includes:

How many accounts/credit cards you have

What type of credit accounts you use

How much debt you have

How you pay...on time, late, etc.

Judgments

Bankruptcy

The credi bureaus, mainly the big three:

Equifax

Experian

TransUnion