Archive for the ‘default judgments’ Category

Living Below Radar, Best Time for Hardship Settlement Offer

Wednesday, September 18th, 2013

Question: I am living below the radar, not paying off any debts. I believe that several debt collection lawsuits have been filed against me, which I have ignored. I am not sure if they have gotten judgments against me or not, but there is nothing in my name and all my transactions are in cash, even my income is entirely cash-based. Is there a good time to come out of the shadows and deal with this and, if there is a good time, when and how? Thanks.

My response:
You appear to be following a mish-mash of (a) my “Don’t Pay a Dime Strategy” in which the debtor does not pay the debts in the hope that the creditor or debt buyer will miss the statute of limitations and (b) some other advice you found somewhere commonly referred to as “Judgment Proof.” I am not a fan of your current strategy, because anyone with a house, bank account, or a job that pays more than the minimum wage in California, would not be judgment proof or would be subjected to massive judgments once they get a job, bank account, or real property.

The result is the debtor ends up overpaying to resolve old debts, because the judgment creditor (the person or entity who has a judgment for money) gets a judgment for the full balance, plus accrued interest, court costs, and sometimes attorney’s fees. Defending my clients from debt collection lawsuits has saved my clients so much in most cases. If you’ve ever experienced a small bulb growing into a large flower, you can relate to how these debts blossom and bloom from a simple credit card balance to a default judgment. For the judgment creditor, it’s a sweet smelling, colorful flower. To the judgment debtor, it’s a Venus fly trap!

I have posted several blogs about timely responding when served with a debt collection lawsuit. I have also explained how default judgments are obtained without the debtor knowing about it and what can be done to resolve those old default judgments. I have blogs and legal guides on Avvo.com that explain how to settle and what documentation is essential. Please review my postings, which are organized by several categories.

Great question on when is a good time to settle old debts, including old default judgments. Of course, right now is a great time to settle old debts, especially if the debtor has no assets and very low or no income. When the judgment creditor is unable to collect most or all of the judgment and the debtor could be a candidate for Bankruptcy Chapter 7, that’s when the debtor can propose a “hardship settlement offer,” because they have an actual financial hardship. The offer works best if the debtor has access to additional funds to make an offer that is greater than what their assets and income can provide. For example, since retirement funds are beyond reach of civil judgments, borrowing from a 401-k, a family member, or on an open line of credit, are ways to get the funds for a hardship settlement offer.

How you come out is up to you, but this can be done between the debtor and the debt collection agency directly or the debtor may want to use outside resources. Perhaps there is a family member who is comfortable doing this or hire a debt collection DEFENSE attorney to negotiate. The key is not paying too much for the settlement process, to leave enough to propose an attractive settlement amount. Too little and the debt collector will reject the offer and wait.
Robert Stempler
www.StopCollectionLawsuits.com
Twitter @RStempler
Facebook: www.facebook.com/SoCalConsumerLawyer

Ignoring a Debt Collection Lawsuit That Was Not Personally Delivered

Tuesday, September 10th, 2013

Question: Is it possible a debt collection company can sue the debtor on an unpaid credit card if they have moved to a new address? I have not received the lawsuit papers personally, but I learned from the California Superior court’s online case summary that a debt collection lawsuit has been filed and it states they served me. Can’t I ignore this?

My response:

Yes, the debt collection company can sue for an unpaid debt, even after the debtor moved to a new address, but the lawsuit must be filed in the proper court. In particular, the lawsuit can be filed where the defendant lives when the lawsuit was filed or where the defendant lived when they first entered into the agreement for the credit card.

After that, the debt collection lawsuit must be served in one of the ways permitted by the California Code of Civil Procedure. I explain in other blog postings the two main ways that a defendant can be served in Superior Court on a lawsuit: personal service and substitute service. Substitute service requires a reasonable number of attempts (typically, at least three) at the defendant’s residence or place of business. In your situation, did they try to serve you at your new address or where you work or do business a reasonable number of times? Do they know your new address or did you give that to them at any time?

As the videos on my home page explain, ignoring a debt collection lawsuit is one option of several. I’d recommend exploring carefully each of your options and then call a debt collection DEFENSE attorney (which is what I do) to narrow what options are most appropriate for you and your situation. Putting off dealing with a lawsuit is not suitable for most people, in my opinion.

The way I would compare a defendant’s putting off dealing with a debt collection lawsuit and letting it become a default judgment is that it is similar to not going to the doctor for treatment and anti-biotics of an infected wound. How long before the untreated, festering wound gets worse? How long before the infection spreads and can harm other body parts or even cause the patient to become seriously sick all over?

An unpaid default judgment can be difficult to set aside and is subject to the review by a judge, if after the proper motion is filed. A judge might conclude that the defendant was aware of the judgment and failed to promptly file a response when aware of the lawsuit or promptly file to set aside a default judgment. Thus, an older default judgment becomes almost impossible to set aside and it not only grows with interest at 10 percent per year, but other costs can be added, possibly attorney’s fees. A judgment also impacts, for most people, their personal credit scores for many, many years, making it hard to qualify for credit, property, and sometimes insurance and a job.
Robert Stempler
www.StopCollectionLawsuits.com
Twitter @RStempler
Facebook: www.facebook.com/SoCalConsumerLawyer

Can a Judgment Lien Stop the Escrow of My House?

Monday, March 11th, 2013

Question: I sold my home and it is now in escrow with the buyers. I just learned from the escrow company that an old judgment that I discovered on my credit report years ago must be paid in full with interest, because of a lien that they filed against my house. Is this true and is it legal?

My response:
When a plaintiff wins a judgment for money, such as an unpaid credit card debt, against the defendant, if the judgment is not fully satisfied very soon after entry of judgment, then the judgment creditor’s attorney usually obtains an “Abstract of Judgment,” which is California Judicial Council Enforcement Form # EJ-001 (“Abstract”).

When the Abstract is recorded with the County Recorder or County Clerk’s office, a lien exists over all real property in that county, including a residence. From that point forward (excluding bankruptcy discharge, in many instances), until the judgment is satisfied in full or the judgment creditor records a release of lien, any sale of real property or attempt to refinance property in the name of the judgment debtor(s) becomes an opportunity for the judgment creditor to be paid.

I know of no title company that would insure the title to a property (which is required by the bank for financing a purchase or refinancing), unless all Abstracts that name any of sellers involved are satisfied in full or a release of lien recorded. Buyers also may be unable to obtain real property financing, if they have an outstanding recorded Abstract. Escrow companies facilitate this payoff process by contacting the judgment creditor’s collection attorney for a written payoff demand. When the collection attorney receives this request, they are supposed to compute how much is due and send a letter of the correct amount, including costs and accrued interest. The escrow company then will deduct the appropriate amount and pay this to the creditor’s attorney, who must provide the documentation that can be recorded to show the judgment has been fully satisfied and the Abstract released.

There are some exceptions to this rule, such as the homestead exemption amount ($75,000 or more, depending on the situation of the occupants and owners, such as age or disability). The homestead exemption protects equity when applied towards purchase of another home within six months. See Cal. Code of Civil Procedure, Section 704.720. My blog posting explains the homestead declaration and links to a sample homestead form.

One point about this process is that there is often abuse by the judgment creditor’s attorney.  In particular, there is the temptation to inflate the amount, such as by improperly adding attorney’s fees, demanding excessive fees and costs, and other such nonsense. This might be considered a violation of the Fair Debt Collection Practices Act (FDCPA). Obviously, the damages would be the inflated amount, as this is an attempt to collect more than the amount allowed by law. However, inflating the amount could also make it impossible for the Abstract to be satisfied in full, if the amount is so high that the transaction cannot be closed and the judgment creditor is not willing to sign a release of lien. Thus, damages could also be claimed for preventing the sale or refinancing from being completed.

While you might not have time to consider trying to vacate and set aside an old default judgment, especially if you are in the middle of escrow and need to complete that promptly, please read my blog postings about setting aside a default judgement. If the summons and complaint were not properly served on the defendants, the court lacked jurisdiction over the defendant(s), and even an old default judgment can be set aside by a special type of complaint in equity. Here’s one blog posting in particular, that concerns an old default judgment.

Robert Stempler
www.StopCollectionLawsuits.com
Twitter @RStempler

Facebook: www.facebook.com/SoCalConsumerLawyer

Victim of Identity Theft Crime Has Default Judgment

Thursday, January 10th, 2013

Question: I was the victim of identity theft. A credit card collection company is now suing me on one of those debts and has a judgment in my name. I had nothing to do with it. This was not mine! I’ve contacted the collection lawyers and told them that this was not my debt and that it was identity theft. They have sent me an affidavit of fraud to fill out and return, but I find it little confusing and I am not sure what I should do about this lawsuit or what to expect.

My response:
I need to see the document that they sent you, the file from the court case, and your identity theft papers, such as a police report and FTC Identity Theft Complaint. With an estimated 10,000 identity theft crime rings around the country, it is not surprising that there are so many victims of identity theft, both consumers and small businesses. Here’s a link to the crime story on NBCNews.com.

Many identity theft victims end up being sued on the unpaid debt and a percentage of those debt collection lawsuits end up as default judgments. A default judgment can appear on the victim’s credit report and can result in attempts to garnish the victim’s wages and levy their bank account for the judgment amount plus interest. In particular, because the theft was perpetrated using an address that was not the victim’s correct address, the summons and complaint might be served at that address, so that the victim would have no idea that a lawsuit was filed and being pursued in court.

I have successfully set aside default judgments for lack of proper service and also default judgments against victims of identity theft. Properly defending a debt collection lawsuit or setting aside an invalid default judgment requires promptly taking action in the court case and documenting those efforts, so that the judge or the collection lawyers don’t challenge based on the defendant doing nothing after learning of the lawsuit or default judgment. I have discussed this subject in several other blog postings. I also have a list of steps to take for identity theft victims on Avvo.com.

If you have a police report documenting the crime and this account, as one of the false accounts obtained, then you can expect that the default judgment will be set aside and the case dismissed against you. Perhaps the collection agency will try to pursue the identity thief, but more likely they will not have the resources to learn their identity and whereabouts. Also, if the company learned from you that this was identity theft and continued to prosecute the case against you, then you may have recourse for damages and attorney’s fees, under California law and the Fair Debt Collection Practices Act. I’d suggest you retain experienced counsel to represent you, to reduce your frustration and ensure that the T’s are crossed and the I’s dotted.

Robert Stempler
www.StopCollectionLawsuits.com
Twitter @RStempler

Facebook: www.facebook.com/SoCalConsumerLawyer

Identity Theft Victim Exploring Credit Protection Alerts

Wednesday, December 5th, 2012

Question: I am the victim of identity theft of a credit card that I had no idea was opened using my name and Social Security Number. I cannot believe how many hours I have spent trying to resolve this and it is still far from over. I found out about it when my wages were being garnished by the Sheriff, who was ordered to do it by the Superior Court of the State of California. A judgment was entered several years ago, but I had no idea and I was never served with the papers or even made aware of it by the debt collection lawyers who sued me. I cannot believe how much of a hassle this is, making many phone calls to rude debt collectors, who repeat the same mantra: You must pay your debts. I have and I do. What should I have done differently? Would I have been able to stop this, had I subscribed to Lifelock or another company that is supposed to warn me of changes to my credit and protect me?

My response:
You could probably have found this on to your credit and take protective measures yourself a long time ago. In Consumer Reports magazine, their January 2013 issue, page 13 advises consumers “Don’t get taken guarding your ID.” The article explains that American consumers spent $3.5 billion a year for identity theft products, but suggests that DIY measures are as effective, and can be done for free or very little. In comparison, a paid monitoring service runs from $120 to $300 per year and the marketing hype “can be deceptive” for these ID theft products. Also, be aware of the fine print warnings that come with such services.

First, as explained in the Consumer Reports’ article, this type of ID theft, “new account fraud,” is uncommon. Though I have represented a number of consumers who were the victim of new account fraud, the number is small compared with how many consumers I have represented on debts that they recall opening and charging.

Second, the article states that the credit monitoring is flawed in two key ways. One flaw is false warnings to the consumer, such as emails or text messages to the consumer more often than needed. The other flaw is that it can take too long to appear on your credit, such that a consumer would not be aware of it for weeks or months after the fact.

In my blog posting from a while back (Make Your New Year Bright), I suggested visiting www.annualcreditreport.com at the start of the new year and check their credit for free, then dispute errors found. I also have a legal guide on Avvo.com for victims of identity theft, which also included checking credit as an initial step and suggests a security freeze, if the consumer learns that their credit has been compromised. The article in Consumer Reports recommends a security freeze and going to www.annualcreditreport.com three times a year, and get only one of the three credit reports at each visit, such that you end up with a different free credit report with each visit, to cover you throughout the year, at intervals of four months. That’s a great idea and totally free, no subscription, though it does require keeping track and having reminders when to make a new request and which credit report to obtain from Experian, Equifax, or Trans Union.

Consumers Reports proposes one other alternative to high-priced subscription services: a monthly alert for $5 at www.myidalerts.com. At $60 per year, it is not an excessive price, and perhaps they have periodic sale prices or discount coupons for signing up for a long term, but for some people is still too expensive, given how low the risk of new account fraud.

Many creditors and financial institutions will be (if they are not already covered) required by the Federal Trade Commission to put into place protections to prevent identity theft “red flags,” in particular to spot suspicious activity and prevent escalation into a “costly episode.” Here’s the link to the proposed regulation, recently issued by the FTC: http://ftc.gov/opa/2012/11/redflags.shtm

The most important thing a consumer can do is to check their credit at least once a year and examine each credit report closely for errors and inquiries of their credit reports that they did not initiate or are unrelated to their legitimate creditors or debt collection agencies collecting on unpaid legitimate accounts, then complete the dispute process, preferably in writing.

The other thing that Consumer Reports did not mention in this article, but other articles suggest at www.ConsumerReports.org, is to be proactive in protecting your passwords and sensitive personal information from persons who should not have access to it. shred all papers with a cross cut or confetti shredder, and protect yourself from online and telephone scams. The consumerreports.org site has more information on this as does my friend, attorney Mari Frank’s web site: www.identitytheft.org.

Robert Stempler
www.StopCollectionLawsuits.com
Twitter @RStempler

Are Capital One’s debt collection lawyers playing fast and loose against consumers?

Friday, September 28th, 2012

Question: I heard that a big lawsuit was filed recently in New York (ABC News), because Capital One’s debt collection lawyers were illegally harassing people for the money, allegedly.  Is this also happening in California, from what you’ve heard?

My response:
Yes, I have been counsel in a fair number of cases recently in which California collection law firms contacts were harassing of the consumer.  In particular, my clients complained of receiving many calls at work, though the employer prohibits personal calls and the consumer told the collection agent to stop.  Also, too many and too much harassing calls to the consumer, by the in-house collectors. Another complaint I have seen is filing lawsuits after the statute of limitations has expired, which I discuss in other blog postings, because they fail to find out when the period expires.

I have also seen debt collection law firms jump the gun in trying to get a default judgment. Many debt collection law firms find that they’d much rather try to enforce a default judgment, than have a defendant who opposes the lawsuit. Thus, the firm may try to file the request for entry of default as soon as possible, to be within a day or two of expiration of the consumer’s time to file a response to the credit card lawsuit. Perhaps the papers cross in the mail, but for a debt collection law firm to be this eager–in my mind–reflects a disregard for the consumer’s rights, under California procedural law and the Fair Debt Collection Practices Act (FDCPA). It also is a violation, because the collection agency ends up contacting my clients directly, which violates the FDCPA and the Rules of Professional Conduct.

Clearly, these collection law firms must adopt better procedures, so that these violations do not occur. Sadly, the economic downturn has created a more aggressive debt collection environment and attracted inexperienced lawyers into serving as debt collectors, without having the minimum procedures to comply with the FDCPA. Thus, violations of the FDCPA are more likely to occur.

There is one bright spot in all of this and that is the increased use of recording and monitoring debt collection calls. If more calls are recorded and monitored, then at least there is a better chance that a harassing collection agent can be disciplined or fired, before their victims are ready to file a class action lawsuit against the debt collection lawyer.

Robert Stempler
www.StopCollectionLawsuits.com
Twitter @RStempler

How long to file papers in court, after receiving the summons and complaint via U.S. Mail?

Thursday, September 13th, 2012

Question: No process server ever approached me, but gave the summons and debt collection complaint to my wife.  A few days later, another copy arrived in the mail. I still have the envelope with the postmark. Do I still need to respond within 30 days and from when?

My response:
Under the California Code of Civil Procedure, which governs in Superior Court cases, the defendant must file their response in court not later than 30 calendar days from the date of personal service, which occurs when the server hands the summons and collection complaint personally to the defendant.

Substitute Service occurs after satisfying due diligence in trying several times to perform personal service on the defendant.  After due diligence, the process server hands the summons and collection complaint to an adult member of the defendant’s household or the person who appears to be in charge at the defendant’s place of business, then mails another copy of the summons and collection complaint to the defendant at that same address.

In this case, the process server has performed Substitute Service on you, which adds 10 calendar days, making a total of 40 days from the date of mailing for the defendant to file his or her response in court.

Some defendants receive only a copy of the summons and collection complaint by U.S. Mail and no one at their home or place of business advised them that they were served.  In those cases, you should still go on the premise that you have only 40 calendar days from the mailing date in which to file a response in court, to prevent a default judgment from being entered. Please see other blog postings about default judgments.

Robert Stempler
www.StopCollectionLawsuits.com
Twitter @RStempler

Never Served, but Now Something Came by Mail, a Request for Entry of Default Judgment

Saturday, August 18th, 2012

Question:
What does it mean when the collection lawyers sent me a Request for Entry of Default Judgment? The only thing that I received from this law firm before now were a couple of letters, which I did not call back, because I didn’t have money to settle.  The papers show they have filed a lawsuit in the courthouse near me, which the online case summary shows they claim they served the summons and complaint by mail on me a couple of months ago. I thought that the law requires personal service of lawsuits, something called “due process”?

My response:
You are correct, there is a Constitutional principle known as Due Process, which requires that a defendant be given notice of a pending lawsuit, preferably by personal service on the defendant. However, California civil procedure permits alternative forms of service, if the process server declares that they tried several times to serve you personally at home or at work, but you were never present.  This is known as due diligence.  After due diligence, they can hand the summons and complaint to someone who is an adult at the defendant’s house or apparently in charge at your workplace and then mail a copy to you at that address.  This is known a substitute service.

If you have been substitute served, rather than the usual 30 days to respond in writing to the lawsuit, California civil procedure adds 10 days from the date of mailing, giving you or your defense attorney a total of 40 days from date of mailing to file in court your response.  One point about substitute service: it must be delivered to someone at your residence or work address, or it is invalid and can be challenged, but act promptly and consult with experienced counsel on that, as there is no standard DIY form to set aside a default judgment.

Now that a couple of months have passed since the process server said he or she substitute served you, the debt collection lawyers have sent you a copy of the Request for Entry of Default, which they have also probably sent to the Clerk of the Court to be filed.  If the Clerk files it, then it becomes an enforceable judgment against you, unless you set aside the default judgment, satisfy the default judgment by paying money to settle in full with the plaintiff, or file bankruptcy to have it discharged.

A California judgment must be renewed every 10 years, or it expires, but many collection agencies keep track of judgment expiration dates and renew it until satisfied in full or discharged in bankruptcy.  Thus, I would suggest you deal with it now, if possible, as it can remain out there forever and pop up and be very annoying and vexing at the most inconvenient times.

Robert Stempler
www.StopCollectionLawsuits.com
Twitter @RStempler

Options following Entry of A Default Judgment by Credit Card Bank

Friday, July 6th, 2012

Question:
I was sued by Capital One on an outstanding credit card debt.  The debt collection attorney filed a request to enter default judgment for $7000. The Court granted a judgment and I believe that they are now trying to get into our bank account.  What are my options at this stage of the case?  We have no real estate or assets, except for Social Security.  What happens to this on our credit report if we don’t file bankruptcy and are unable to pay it?

My Response:
The picture that you have painted, so far, is someone whom experienced lawyers would likely term “judgment proof,” with sufficiently low income to qualify for a Chapter 7 Bankruptcy.

Following entry of this default judgment, here are your options:
a. Promptly file motion to set aside the default judgment within the proper time limits, to be able to defend the court case on its merits. The Courts insist that the defendant file this motion soon after learning of the default judgment, if they had not been served or had actual notice.
b. May a large payment or several payments towards the default judgment, until they file a satisfaction of judgment. Borrow the settlement funds, if needed. You may should have an understanding in writing of how much in settlement payments or a fixed sum this would be, or you may end with a misunderstanding of how much it will cost to satisfy this judgment in full.
c. Do nothing, which would let them to try enforcing their judgment against whatever they can find to lien, that is not exempt, though it does appear to me that your bank account is exempt if it is only from Social Security benefit deposits.
d. File bankruptcy.  If you qualify for a Chapter 7, then this and your other unsecured debts would be discharged.  If you don’t qualify for a Chapter 7 for whatever reasons, then you could file a Chapter 13 Repayment Plan Petition and make payments through the trustee and pay it off over several years, interest free.

The benefits of resolving this judgment soon are that you don’t want this $7000 judgment sitting out there gaining (accruing) interest at the rate of 10% per year, which is $700 every year in your case, plus possible other costs and attorney’s fees, as applicable to the judgment.

Also, if they enforce this judgment by levying your bank account, it can be very embarrassing to have your checks bounce and to go to the store with a debt card that is refused, if they enforce a levy and the bank accepts it.  You may be entitled to all your money back, by filing a claim of exemption, but having bounced checks is considerably damaging to your reputation. Plus, and unpaid judgment can be appear on your personal credit reports until paid.

Robert Stempler
www.StopCollectionLawsuits.com
Twitter @RStempler

Struggling with Wage Garnishment for A Default Judgment on a Credit Card Debt

Sunday, April 15th, 2012

Question
For two years, my husband’s wages have been garnished at $100 per paycheck, which is what a judge ordered. His paycheck is  twice a month and his take home pay is under $2,000.  We don’t know what we can do, but now we got notice from our bank that they are also levying out bank account. If our bank account is taken after his check is deposited, we cannot pay our rent on the first, and we have two children. With interest, the judgment is just under $10,000 at this time.

My response:
This is a horrible situation for you that you have been held under this suffocating wage garnishment for two years, when you clearly cannot afford it.  I don’t know why a judge would have you pay that much, given your family needs and that you are already living on the edge, financially.

Looking back, perhaps this credit card default judgment could have been set aside, if you were not served. However, now that more than two years have elapsed, it is very doubtful that a judge will set it aside, because the courts expect a defendant to promptly file the papers to set aside an invalid default judgment reasonably soon after learning about it. You and your husband have known about this for two years, so I don’t see trying to set it aside a a productive pursuit for you, at this late date.

Looking forward, I think you need to immediately file a claim of exemption with the financial statement Judicial Council Forms. Hopefully, you are able to show the judge that this money has already been garnished and you have nothing else available and you need it for your necessities (rent, food, utilities, medical) and children’s expenses.

Looking further down the road, you should file bankruptcy to discharge this and any other debt. At $200 per month, you are barely paying $100 per month in principal, after the Sheriff’s fee for the wage garnishment.  Thus, you will not have this paid off for another 8 years. It makes no sense to suffer for eight more years and to have the debt collection law firm cause you to appear in court to fight off a bank levy, which also costs you bank charges.  After the bankruptcy, you can put that extra $200 per month to use helping your family, perhaps starting to save for emergencies, education, and other future events.

Robert Stempler
www.StopCollectionLawsuits.com
Twitter @RStempler