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Collection Letters / Lawsuits / Judgments / Garnishments – How Much Time?

Many times, clients come to me for bankruptcy counseling after they have defaulted on their debts. The phone calls have already become relentless. They’ve received letters offering to assist them through this tough time. The letters come from the creditors themselves, collection services, as well as debt consolidation companies and bankruptcy attorneys. Other times, clients come to me dragging a load of debt – maybe 10 to 20 credit cards – and they are current on most or all of them, having been making the minimum payments on each.

The question on everyone’s mind is, “How long do I have before they attach a lien to my house or repossess my car or, the worst, garnish my wages?” Well, I want to calm your fears a little bit. If you’re current or if you are just a couple of months behind on a credit card bill, you have time to take action. The process goes like this:

You miss a payment. The phone calls begin. They are annoying and increase to the point of harrassment. In the second month, you’re likely to start to get the letters mentioned above. You’ll get a letter from the creditor. The next month, or the third month, you may get a solicitation letter from a debt consolidation company, along with another letter from the creditor, along with the constant telephone calls. The system is designed to unnerve you into calling for a payment plan. However, there is not much you can do. Usually a payment plan only helps if you’ve been out of work or through a tough time, and now you’re in a better financial position.

After a three or four months, the larger more systematic creditors, just send your account to a collection agency. The collection agency usually services the account, but some of them buy the accounts. Starting at about six months delinquency, creditors and collection agencies start to refer your accounts to the collection attorneys. The collection attorneys will apprise you of the transfer of the matter to them by a letter threatening a lawsuit. Even then, however, there is plenty of time before you are in danger of garnishment.

A lawsuit begins with a summons and complaint being served on you. You are afforded due process of law – a time period within which to answer the complaint. In NY, this time period is 20 days if you were handed the summons directly and more time if you were served by other means. If you file and serve an answer back, this delays the process. Even if you default by not filing and serving an answer, the creditor (now the plaintiff) must send more notices to you and ultimately make a motion for a default judgment.

Now, close to a year later, the creditor has obtained a judgment. Its attorneys will then look for your bank accounts and other assets. Even though you’ve had a year to prepare, you haven’t done anything. Your bank account is frozen or they’ve found where you work. You can still file a bankruptcy petition and rid yourself of this agony. In fact, if the circumstances are right, even if the creditor has filed a lien against your residence, you still may be able to strip the lien off the house. Speak to a bankruptcy professional today. All is seldom lost.