"I'm Freaking Out--I've Just been Served with Legal Papers From My Creditor!"

February 6, 2012

Thumbnail image for FreakingOutLlawsuit.jpgAt the Law Office of Linda C. Garrett, a Solano County, California-based, online consumer, bankruptcy and family law practice, I receive approximately three to four calls per week from consumers regarding creditor lawsuits. Every individual is highly stressed and emotionally overwhelmed. The callers' most common fears include wage garnishment and bank levies. There are other fears and concerns, but these are the most common.

Is this you?

The purpose of this blog is to help the reader understand something that the creditor does not want you to know . . . you, the consumer, have legal rights and lots of them!!! The problem, unfortunately, is that consumers don't know they have legal rights; or, if they know they have rights, they don't know what they are. As a result, ignorance breeds fear, stress, anxiety and depression. Typical questions from a distressed caller include:

1. Should I file bankruptcy?
2. Should I defend against the lawsuit?
3. Will they take my house?
4. Will they take my car?
5. Will they take my retirement?
6. Can they take my Social Security?
7. What can I do if I can't afford to hire an attorney to represent me?
8. Can they levy my new wife's bank account--that's solely in her name?

Just this week, I received calls from two individuals who were served with court pleadings from their respective creditors. Standard legal pleadings from creditors include a Summons, Complaint, Civil Cover Sheet and other general documents. The female was in tears and visibly upset; and male was so distraught and full of anxiety that he said, "I feel so depressed that I feel like I want to jump off a bridge." Because the male caller's anxiety was so high, it took some time for me to calm him down so that he could hear and understand what I was saying to him. I said to him what I said to anyone in his situation, "Creditors are fleas!"

Once a consumer understands their legal rights and legal options, they begin to calm down. When I am hired by a client, I feel it is my job to not only educate them, but empower them!

For many, a common solution is bankruptcy. But what happens when a consumer cannot file bankruptcy? There are many reasons when bankruptcy is not a viable solution. Some reasons include: 1) don't qualify due to an earlier bankruptcy discharge; 2) don't have any other debt; 3) job-security clearance would be jeopardized; 4) type of job they have prevents them from filing bankruptcy; 5) hold a legal position as a financial fiduciary (or intent to apply as a financial fiduciary).

There are many non-bankruptcy options available to a consumer who, for whatever the reason, cannot file bankruptcy to eliminate the credit-card debt or creditor judgment. Alternative options include:

1. Filing an answer to the Complaint--especially if they have legitimate legal defenses
2. Offering a lump-sum settlement
3. Offering to make small monthly payments
3. Challenging a wage-garnishment order
4. Challenging a bank levy
5. Proving to the lender that the consumer is completely insolvent and/or judgment proof

It would not be practical for me to explain in detail the various options outlined above. It is important for you to know that you have options--and that these alternative options do work for many individuals.

Many attorneys who exclusively practice bankruptcy law would state that bankruptcy is the only option. I strongly disagree--based on professional experience. Time after time, I have worked with clients to prevent collection efforts by creditors and their attorneys when bankruptcy was not an option.

The Story of Mary

Back in 2008, Mary called me asking me to legally represent her regarding a creditor lawsuit. In talking with Mary, I learned that bankruptcy was not an option. In speaking at length with Mary, I learned that, beside the creditor lawsuit, she had approximately $35,000 in additional credit-card debt, her home was recently foreclosed upon by her lender and that she had approximately $36,000 in student-loan debt. Mary was 65 back in 2008. In speaking with Mary, I also learned that Mary was recently terminated from her government job. As it turned out, Mary was released because she was, a few months earlier, diagnosed with an illness that prevented Mary from working. The condition was permanent. At age 65, Mary lost her home to foreclosure, and her job due to physical disabilities. Mary moved into senior housing after she lost her home. I worked with the creditor's lawyer and not only explained but proved that Mary was not only completely insolvent, but judgment proof. Since Mary's only income was Social Security, which the creditor's attorney knew was legally untouchable by his client, he dropped the case and all collection efforts. The other good news is that Mary's loan servicer, Sallie Mae, also discharged her student-loan debt. ( I had also learned that reps at Sallie Mae were also starting to take aggressive action against Sallie. As a result, I contacted Sallie Mae and also provided them with proof of Mary's physical disability. This resulted in Sallie Mae discharging Mary's student loans!)

Today, I still keep in contact with Mary. She is doing great and has made many friends at her seniors-only residence apartments. Today, Mary enjoys life knowing that she doesn't have to worry about any of her creditors or that her social security income will be taken from her by creditors.

As I hope Mary's story illustrates, a consumer has options.

How I Can Help

1. Undertake a financial analysis of your situation - to determine the level of exposure you would have (or not have) if creditors sought to collect on their judgment;
2. Discuss the pros and cons of filing an Answer to the creditor's complaint;
3. Explain whether settlement is an option;
4. Explain whether challenging a wage garnishment is a practical solution based on your financial situation;
5. Explain whether challenging a wage garnishment is a practical solution based on your financial situation;
6. Explain the legal documents to you. (Can't tell you how many times people have told me, "I have a hearing in 30 days."

Feel free to contact me to set up a consultation.