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My Credit Card Company Sued Me. What Should I Do?

When you have to fight off creditors who have just sued you, sometimes bankruptcy is your best option, rather than litigating

When you have to fight off creditors who have just sued you, sometimes bankruptcy is your best option, rather than litigating

Writtten by Craig D. Robins, Esq.

When you owe a substantial amount on a credit card and fall many months behind, it is almost inevitable that the credit card company will sue you. Most suits are brought by local high-volume collection law firms on Long island that bring such lawsuits by the thousands.

Many of my Long Island bankruptcy clients tend to contact me for the first time right after they are sued, as they are uncertain about what to do.

The Credit Card Lawsuit

The suit is commenced when a process server personally serves you with papers called a “summons and complaint.” Sometimes the papers will be left at your door and mailed to you. Commencement of a lawsuit often prompts consumers to consider bankruptcy as the best way to deal with the lawsuit.

Should I Answer the Complaint?

New York law gives you 20 days to answer the complaint if it is served on you personally, or 30 days if it is left for you.

Once you are served, it is important to take action. If you do not do anything, the creditor will be entitled to get a default judgment against you.

If a creditor gets a judgment, it can freeze your bank account, garnish your wages and put a lien on any real estate that you own. The judgment can also be reported on your credit report as a public record, even if you later file for bankruptcy.

Answering the complaint involves filing a document with the court called an “answer” and serving a copy of it on the attorney for the creditor. In the answer you can dispute any of the allegations in the complaint. If you file an answer, the creditor cannot get a default judgment, but it will still proceed with the case and seek a judgment later on.

Sometimes filing an answer is the best way to get additional time to determine your best debt solution.

Filing for Bankruptcy as a Remedy

If you qualify for bankruptcy, the lawsuit will be immediately stopped by the filing of the bankruptcy petition.

If the creditor has already gotten a judgment, you can negotiate with the creditor for the payment of the judgment. Sometime it is possible to engage in debt negotiation and pay a very discounted amount.

 Even if the creditor obtains a judgment against you, it is just as dischargeable as the same debt prior to entry of judgment. However, the judgment can be reported on your credit report.

Also, if the creditor obtains a lien against your real estate, the bankruptcy will not, by itself, remove the judgment lien. In many cases, however, you can bring a special motion in the bankruptcy proceeding to remove the judgment lien.

Will Bankruptcy Stop Wage Garnishments and Frozen Bank Accounts?

Yes. As soon as a bankruptcy petition is filed, wage garnishments will come to a halt and frozen bank accounts can be unfrozen.

Is Bankruptcy the Best Debt Solution?

The decision to file bankruptcy should be based on an overall assessment of your entire financial situation, after analyzing all of your debts and assets. This is best done by a qualified bankruptcy attorney. Other debt relief options include debt negotiation.

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