Collection agency debt, if ignored for long enough, can become a default judgment that haunts your credit report for far longer than a mere collection account. While this doesn't mean you should necessarily make arrangements to pay the collection agency (since that can rest the debt collection statute of limitations and be dangerous) you should be aware of how default judgments occur so that you can successfully avoid one.
What Is a Default Judgment?
A default judgment occurs when a debt collector files a lawsuit against you for refusing to pay the debt it claims that you owe. When it files a lawsuit, it is legally required to serve you with a court summons notifying you of the impending lawsuit so that you can appear and defend yourself. If you don't appear at the hearing, the judge will enter a judgment in favor of the collection agency by default. This is known as a "default judgment."
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| If you don't defend yourself, the judge will rule against you. |
Collection agencies like default judgments because they prevent the company from having to actually hire representation and appear in court itself. That's right, nine times out of ten all the company does is submit paperwork to the court and sit back and wait for the default judgment to come rolling in.
Unless your state's laws require that you be personally served with a court summons should anyone attempt to sue you, you can rest assured that the collection agency will do everything it possibly can to ensure that you never realize that a lawsuit is underway. This usually includes such tactics as:
- Sending the court summons to an address you've never lived at.
- Sending the court summon to your old address
- Not sending a court summons at all
How a Default Judgment Hurts You
A default judgment shows up on your credit report. Although the FCRA states that a judgment remains on a consumer's credit record for seven years, this only applies in cases where the state's laws only allow creditors to enforce the judgment for seven years or less. If your state's laws allows a judgment creditor to enforce a judgment for, say, 10 years before that judgment expires, it will remain on your credit report for the full 10 year period. Renewals have no impact on the reporting period.
Not only will a default judgment probably cost you well over 100 credit points, depending on what your credit score was to begin with, it gives the collection agency the following rights in most states:
- Wage garnishment
- Property liens
- Bank account garnishment
Fighting a collection agency debt early on is crucial to avoiding a default judgment down the road.
i had a default judgment in michigan. i moved like 6 months after to texas and figured i was good and then when my taxes came in boom they took my whole bank account in texas. and at this time i was a texas resident for a year before they did so. so is that against the law???i thought texas was a garnishment free state.
ReplyDeletelouisV - once your wages are in your bank account, they are no longer wages they are garnishable accounts.
ReplyDeleteSo in other words I should show up?
ReplyDeleteSo in other words I should show up?
ReplyDeleteSo I guess it would be a good idea to show up for it. I just got a summons to show up for an unpaid hospital bill. What do I need to bring with me to the hearing?
ReplyDeleteI have had to go through a collection agency in order to get back money owed to me and it has taken almost two years to date of which this person has been in default of judgment since last year this time. The question I ask is how much longer could this take to start even receiving some form of payments? I find it hard to believe that this person can have so much time allowed to him before he starts hopefully paying back.
ReplyDeleteSorry it took so long for me to reply. Somehow your question slipped through the cracks. Once you have a judgment against someone, the court will NOT enforce it for you. You have to do that yourself. Go file the paperwork to start garnishing his wages or seizing his bank accounts. He won't start paying until you force the issue. A judgment gives you the right to do these things but you're the one who has to do them.
DeleteIs there any protection if collectors send summons to old or incorrect addresses?
ReplyDeleteYes. You can file a motion to dismiss the judgment based on the fact that you were never notified of the original lawsuit. State laws differ, so do some research or call an attorney licensed in your state to help you initiate this process. Best of luck.
DeleteLee,about 6 months ago my sister was to have a court hearing by phone with a collection agency. She called the court house and the collection agency never showed up. She talked to a secretary at the court house and the secretary said she would definately tell the judge that my sister called in, but the other party did not show up.
DeleteNow, she recieved a "judgement" about another court hearing that she did not know about (from the same collection agency). She is afraid they will garnish her wages and take her house away (she still owes on the house) She get Disability and works part time. She also get spousal support until 2014. She lives in Minnesota. She is planning on filing bankruptcy-already saw a lawyer, but can't do it till next month. Can they take her house away if she still owes $26,000? These credit cards add up to about the same amount. Also, while she was married, her exhusband used her SS# and her name to open these accounts. She got stuck with the credit cards from the divorce.
Your sister had a "get out of jail free" card – she did not open the accounts and was not aware of them. That's identity theft. If she filled out a police report at the time it occurred (or when she first became aware of the accounts' existence), none of this will stand. Federal laws protect victims of ID theft from judgments, credit damage, etc. It may be too late to go this route now, but her attorney can tell her for sure.
DeleteYes, the collection agency can take the house with a judgment. The less she owes on the house, the more likely it is that the collector will try to seize it. Only owing $26,000 sounds dangerous indeed. She is right to be nervous.
The good news here is that they can't garnish her disability or alimony They also can't seize disability and alimony payments from her checking accounts. Disability and alimony are exempt from garnishment.
I never personally received a summons,it was sent to the address that is my home of record,in other words.i receive my mail there. I now understand that a unsecured credit card account has been turned into a judgement against
ReplyDeleteMy question is,if you are a incorporated company Anonyous Doing business as company,how can you still be personaly sued
ReplyDeleteI'm a reporter with The Huffington Post seeking to speak to anyone to whom this has happened. Please contact me at hunter@huffingtonpost.com.
ReplyDelete