How to Deal with Being Sued on Unpaid Debts

By: Jonathan Cohen

Today’s New York Times ran an article citing a statistic that roughly 90 percent of lawsuits on credit card debts are flawed. Common flaws in these lawsuits include an inability by the credit card company to prove that the person being sued owes the debt. Another common flaw is balances that are higher than what the actual amount in dispute is. I think that we will see reforms with credit card debt collection in the coming months and years along the lines of foreclosure reform after the robo-signing issues. Ultimately, when credit card companies or other unsecured creditors bring suit against a debtor, they will be able to document that the debt is the consumer’s account and that the balances owed are accurate.

From Non-Payment to Judgment

In New Jersey, creditors are quick to sue for nonpayment of debts. In my experience, roughly 9-12 months after non-payment on a debt (typically credit cards, medical debts, or vehicle balances), the creditor will bring a suit in Special Civil Part for amounts under $15,000.00 or in regular civil court for amounts over $15,000.00. Judgment is entered several months after the suit is filed.

The path works like this: first, a debtor will stop payment on their debts or be unable to pay the minimum of what the creditor is requesting on a monthly basis. After about 90 days, the debt will go to a collection company. If the debt isn’t settled then, it will go onto another collection company. Finally, a law firm in the business of suing on debts like the ones listed above will sue the debtor for the balance. You can file an answer for $26.00 in the county courthouse where the suit was filed. In the answer, allege that the amount claimed to be owed is inaccurate, ask to see the documentation as to how the total amount owed was arrived at, ask for proof that the debt is in fact yours. This can slow down the process of the creditor getting a judgment or force the creditor to refile their suit correctly or put the debt back into collections.

Bottom Line. You Owe Money to a Creditor

Let’s not forget the larger problem, that the majority of people cannot afford to settle the debts and that the underlying debt is theirs even if the amount owed at the time of suit is in dispute. If the amount in dispute is $18,000.00 but you really owe $14,000.00 and have other unpaid debts that you cannot afford to pay, battling the card companies is a waste of your time. Regardless of how long you could battle a credit card company on a balance owed, you still owe a balance. In my practice, clients come to me with several of these lawsuits at a time. By the time they come to me, a judgment may have been entered against them, and the creditor then has the ability to levy all of their personal bank accounts without notice and take the levied funds to pay the creditor. If the levy does not satisfy the creditor in full, then the creditor will apply for a wage garnishment and garnish wages until the debt is paid in full.

Filing bankruptcy immediately stops these lawsuits and can return levied funds and garnished funds and make sure that the debts are wiped out permanently. After filing bankruptcy, a creditor who was owed money before the filing cannot come back after the filing and try to collect again on the debt. This finality is a wonderful provision in the bankruptcy code and rests on Supreme Court case law.

Relief Though Bankruptcy

I have seen firsthand the relief that retaining a bankruptcy lawyer provides. One of the most satisfying parts of my job is taking over my client’s worry and anxiety, allowing them to get back to living decent lives. I had a client recently who spent all of his free time when he wasn’t working a demanding job appearing in Special Civil Court on lawsuits on debt. The client was relieved to know that he no longer had to deal with the stress and anxiety of these suits and was leaving them in my hands. Ultimately, his debts and these suits were wiped out in bankruptcy. He kept his home, car, and retirement investments. He was able to get rid of the debts that were burdening him down and keep his assets.

As always, call or e-mail me to set up a time for a free confidential consultation. At that time I will explain how bankruptcy works, answer your questions, and go over costs, fees, and my payment plan.

Hang in there!

Jonathan Goldsmith Cohen, Esq.