As a bankruptcy attorney I have had countless clients come to me having had their wages garnished, never even knowing a judgment on a collection lawsuit had been entered against them some time in the past. This type of surprise can be devastating – causing a client to be unable to make a monthly mortgage payment or car payment due to a garnishment taking a 25% cut of their disposable wages. As an Alabama attorney, I am obviously going to speak about amounts, time periods and procedures applicable to collection lawsuits in Alabama. However, EVERY state will have its own amounts, time periods and procedures that apply to collection lawsuits so be sure to determine what is applicable in your state.
Don’t Ignore the Lawsuit
The first rule in dealing with collection lawsuits is this – if you are notified by the court system that you have important papers waiting to be picked up – GO PICK UP THE PAPERS! Oftentimes the Sheriff’s Department or the county Constable will send out a notice that you have important documents waiting at their offices. They do this in order to save time having to send out a deputy to serve you with the lawsuit. Ignoring this notification will not make the collection lawsuit go away. Instead a deputy will eventually come out to your home to serve the lawsuit. As an agent of service the deputy, by law, must serve the lawsuit on you or someone in your household who is 18 years of age or older. However, sometimes the lawsuit will merely be taped to your door. Once this is done, the time to answer the lawsuit begins to run whether you are aware of it or not. In Alabama, that time is either 14 days or 30 days depending on whether the lawsuit was filed in the district or circuit court.
The Judgement Lien
At the expiration of 14 or 30 days from the date the return of service indicates the lawsuit was served, if no answer to that lawsuit has been filed, the creditor can request the court enter a default judgment against you. It is the judgment, default or otherwise, that gives the creditor the opportunity to seize your money, real property or personal property. A garnishment can be served on your employer to attach your wages or on your bank to attach to the money in your bank account. Also a little known collection tactic is the recorded judgment. If the creditor records the judgment certificate obtained against you in the record room of the county in which you own property (where deeds and mortgages are recorded), a judgment lien will attach to ANY property you own that is located in that county. This includes your home or land but also includes all your personal property in that county, ie. cars, boats, motorcycles, household goods, furnishings and appliances, among other things. Once a judgment lien has become attached with the recording of this document, the creditor can actually have the Sheriff force a sale of your property. Even if the creditor does not go to this length, the recorded judgment can lie in wait for a time when you are attempting to sell your home or land, or simply refinancing, and you will discover the “judgment lien” must be paid before the sale or refinancing can move forward. A judgment lien is good for an initial 10 year period from the date of the judgment but can be “revived” for another 10 year period after that. It is for these reasons that it is important not to ignore if a creditor is threatening to take you to court.
One final word of warning. Every city and town in Alabama has several local loan companies that have turned topredatory lending methods as their business model of choice. Years ago, the local mom and pop lending companies played an important role in the local commerce and in assisting people in the community with lending needs. That role has virtually disappeared with the advent of these predatory lenders. When these local lenders file a collection lawsuit and the customer contacts the lender to work out an agreement in lieu of the lawsuit going forward, it has been my experience that the lender will not dismiss the lawsuit – as the customer believes is going to happen – but instead takes a default judgment against the customer which is unknown to the customer. If the customer gets behind again in the agreement worked out to avoid the lawsuit, the local lender simply files the garnishment on wages or bank accounts. This can result in a nasty surprise to the customer and create financial havoc. If you have reached this type of agreement with a local loan company, it is best to check with the court system to insure the case is being dismissed as agreed upon by the loan company.
An experienced bankruptcy attorney can help a person who has been served with a collection lawsuit. If you are considering a filing for bankruptcy relief and wish to consult with a qualified bankruptcy attorney about your options, please contact one of our locations nearest you in Alabama, Mississippi or Tennessee for a free, confidential consultation.