What to Do When You've Been Sued by a Credit Card Company

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So, the onerous knock at the door has finally come.  An off duty Sheriff’s officer or other court appointed process server has just “served” you with a “Summons to Appear” and a Complaint to Collect on a past due credit card.  What should you do?

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The first thing NOT TO DO is panic. 

 

The second thing NOT TO DO is ignore the Summons and Complaint.

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THINGS YOU NEED TO KNOW:

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SMALL CLAIMS, case number reads like “2014-SC-12345”   If the Summons and Complaint are for a “Small Claims” law suit (in Illinois the amount being sought is less than $10,000, the summons will contain what is called a “date-certain” appearance date.  You can be properly served with a Small Claims, “date-certain” summons and complaint up to three calendar days before the specified appearance date.

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ARBITRATION or LAW, case number reads like “2014-AR-12345” or “2014-L-12345” If the Summons and Complaint are for an “Arbitration” lawsuit (the amount being sought is between $10,000 and $50,000 or for a “Law” lawsuit (the amount being sought is $50,000 and above) the summons will instruct that you need to file an “Answer” to the Complaint within 30 days of being served with the Summons.

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FAILLURE TO APPEAR OR “ANSWER” THE COMPLAINT.  If you choose to ignore either the date-certain appearance or “Answer” the complaint within 30-days, several very bad things will happen:

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• A default judgment will be taken against you

• You will have a judgment appear on your credit profile for 10 years from the date the judgment was entered (a “Judgment,” particularly an “unsatisfied judgment” is worse than a bankruptcy on one’s credit profile)

• You may be subject to arrest for contempt of court for failure to appear or answer, what is called a “body attachment”

• The Judgment creditor will initiate a “Citation to Discover Assets” proceeding against you.

• The Judgment creditor will initiate a Third-Party “Citation to Discover Assets” proceeding against your employer and/or the bank where you do business.

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CITATION TO DISCOVER ASSETS.  A Citation to Discover Assets is the consequence of a creditor taking a judgment against you, whether by failing to appear or answer or by trial on the merits or admission that you owe the debt and is the “collections” vehicle employed to satisfy the judgment amount.

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CITATION TO DISCOVER ASSETS AGAINST YOU.  A separate Summons will be issued that once again requires to appear in court to answer questions.  This Summons will specifically state, in all capital letters that FAILURE TO APPEAR WILL RESULT IN ARREST.  When you appear, you will be asked to provide the name and address of your employer (because they want to garnish your wages!), the name and address of the bank where you do business (because they want to freeze your bank accounts – and can freeze up to three times the amount of the judgment!) and the location of any valuable property you own (because they want to seize your property and sell it to satisfy the judgment amount!).

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CITATION TO DISCOVER ASSETS AGAINST YOUR EMPLOYER.  Your employer will be dragged into your troubles with a court order to detail how much you make, how often your get paid and eventually order to start garnishing your wages.  Garnishment will be 15% of gross (before taxes and all other withholding other than child support).  Up to THREE (3) judgment creditors can garnish at the same time!

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CITATION TO DISCOVER ASSETS AGAINST YOUR BANK.  The bank where you do business, where your paycheck is electronically deposited, will also be dragged into your troubles with a court order to freeze 100% of the money in your account (even money that came from other sources, like your spouse’s paycheck) and up to 3 times the amount of the judgment.  Eventually your bank will be court ordered to turn the money over to the judgment creditor and, if they froze more than you owed, you will get the difference back, but not until after you’ve started bouncing checks and couldn’t pay your rent or utilities!

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WHAT YOU SHOULD DO?

As stated before, don’t panic and don’t ignore the Summons and Complaint.  You should make every possible effort to appear at the hearing and/or answer the complaint.

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SMALL CLAIMS.  Appear at the hearing at least 15 minutes ahead of the scheduled time.  Find your way to the court clerk’s table and check in.  This will put the court on notice that you are present and eliminates the possibility of being arrested for contempt of court.  When your case is called, step up to the bench in front of the Judge and clearly state your name for the record.  The Judge will ask the obvious questions:

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Do you admit or deny that you owe the money complained of in the lawsuit?

Be careful in answering!  Do you really owe that amount of money?  Did the creditor correctly calculate the interest, late charges and collection costs?  Are they charging you for attorney fees that were not earned?  Ask yourself if your answer of “Your Honor, I admit that I owe them money but I do not think the amount is correct” is truthful, then do not admit to owing the entire amount.

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Once you admit that you owe the money or the creditor has established the correct amount of the debt owing is accurate, a judgment will be taken and statutory interest of 9% APR will go into effect.  Once you admit that you owe the money of the creditor has established the correct amount of the debt is current, their right to garnish wages, freeze bank accounts and seize property goes into effect.

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The creditor has seven (7) years to collect on the judgment.  If they have not collected all of it with 9% interest, they can ask the court for another 7 years.  They can ask for such an extension 2 times, for a total of 21 years!!

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So, be careful!  Just because they can’t collect now or can only collect a small amount on the debt, doesn’t mean they are going to go away … they may seek you out years down the road, just when your financial life is finally where you’ve wanted to be.

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