Although politicians may claim the great recession is over, there are still millions of Americans struggling to pay their bills, including credit card debts. Recently on our forum a debtor asked, “I received a summons and complaint from my credit card company, and they said they have filed a lawsuit against me. Is this legal and what are my options?”
Lawsuits and unsecured debts
If you fail to make payments on your credit card debts the credit card company does have the legal right to file a lawsuit against you. But because the credit card debts are unsecured debts they will not have any collateral or property to immediately repossess to repay the debts. Instead, the credit card company will have to take you to court, prove the debt is valid, and obtain a judgment against you. This judgment will give them the legal right to pursue repayment of their debts.
What assets can they seize with a judgment? This will depend on your state’s laws. In fact, some states have very strict laws about how a credit card company can collect debts after a judgment. For example, in the state of Texas credit card companies cannot garnish your wages to repay credit card debts.
Credit card companies can, however, try to seize your paycheck after it has been deposited into your bank account by requesting a Writ of Garnishment from the court. If it is granted, the bank account funds can be frozen and paid to the creditors.
What can the credit card company do?
Another option for credit card companies, if they are not allowed to garnish your wages, is to record a summary of the judgment in the county real property records. After this is requested the county will put a lien on your non-exempt real estate that you own. Not only will the public have notice of the lien, but if you attempt to sell the property you will be forced to repay your debts to have the lien cleared before ownership of the property can be transferred to a new buyer.
What can I do about the judgment?
If you have been sued for credit card debt and the court has issued a judgment against you, you do have several options. For example, if a judgment has been issued but there have not been any liens associated with the judgment, it may be easy to have this debt dismissed by filing for Chapter 7 bankruptcy.
If a lien has been attached to your property the debt will be more difficult to eliminate. Several options include selling the property and paying the lien, allowing the creditor to take the property and sell it to pay the lien, or request your attorney file a Complaint to Avoid a Judgment Lien, which may allow you to remove a lien from exempt property during the bankruptcy process.
Some debtors may also choose to avoid bankruptcy, and instead, choose another debt settlement option. In some cases, a credit card company may be willing to negotiate a reduction in your balance owed, especially if they understand that you may file bankruptcy and they may be left with nothing.
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