Frequently Asked Questions about Debt Collection Defense.

Question:  I have no money to pay a judgment. I am judgment proof.  Is it necessary to oppose the lawsuit?

Answer: The term “judgment proof” is sometimes used to describe a debtor that has no assets, or who only has income or property that is completely exempt under California’s exemption statutes.  For example, you may be judgment proof if:

  • You have no savings in the bank, and only a few weeks’ worth of recent income
  • You own a house, but owe more on the mortgage than the house is currently worth, or you have equity in the house that is less than the amount that is exempt under CCP Section 704.730 (currently $75,000 for single person, $100,000 for married couple or family, $175,000 if you or your spouse is age 65 or older).
  • You own a car that is worth $2,900 or less (CCP Section 704.010)
  • Your weekly income is less than $217.50 (30 times the federal minimum wage), or your income is exempt under CCP Section 704.080 or 704.120 (Social Security benefits, disability benefits, unemployment benefits), and is direct-deposited into your bank account, and not mixed with other funds.

The above is for sake of example only. Any property you own that is not exempt under a California exemption statute can be seized and sold to pay a judgment, including: a car or truck with a high resale value, a second vehicle, bicycles and other sporting goods, musical instruments, antiques, collectibles, etc.

If you do not own any real estate, do not have savings in the bank, do not own a new or valuable car, and 100 per cent of your income is exempt, then you are probably judgment proof.  However, there are still at least four good reasons to defend a suit filed by a debt buyer.

1.  A debt buyer that has acquired old debt has spent just a fraction of the amount that is being claimed in the complaint, sometimes just a few cents on the dollar. Why should they get a judgment for 100 per cent of the original debt, plus costs and interest?  By allowing a default to be taken, you have lost the right to challenge the legal merits of the lawsuit. A judgment is usually not reversible, it’s good for 10 years, and can be renewed when that period expires.

2.   In most cases you must claim exemptions in order to avoid a levy or garnishment.  Some debtors fail to file the exemption paperwork in time, and this could result in a levy or a garnishment of wages, despite the fact that your income or property is exempt. You must be vigilant in order to protect your rights.

3.  A creditor who has obtained a default judgment can serve you with a notice to appear in court for an examination under oath, to determine if you have any assets. If you fail to appear for the examination, you may be punished for contempt of court.

4.  You may be judgment proof today, but in the future, your circumstances may change. You may develop new sources of income; you may inherit property, or get married and acquire community property. You may lose that money or property if a debt buyer or other creditor gets a judgment, and it remains unpaid.

 

Question: Would it be better for me to file a bankruptcy case to get rid of this debt, or to oppose the lawsuit?

Answer: The answer to this question would be determined by an analysis of your recent income, your current income, your property, and all of your debts.  However, if the debt that is the basis of the lawsuit is your only delinquent debt (or one of a few small debts), and the plaintiff is a debt buyer, opposing the lawsuit may be the most simple and effectiveapproach.

 

Question: Would it be possible to settle this debt, rather than spending time and money to fight the lawsuit?

Answer: Yes, it may be possible to negotiate a compromise settlement, an amount less than the amount claimed.  You will be in a better position to negotiate if you file an answer to the complaint and demonstrate that you are prepared to litigate the case.  During a free consultation, I can provide you with information about the cost of a basic defense case and the approximate fee for negotiating a settlement.

 

Question:  Who is the company suing me?  I’ve never heard of them.

Answer:  If you were sued by one of these companies, you have been sued by a debt buyer.

Arrow Financial Services LLC

Asta Funding Inc.

B-Line, LLC

CACH, LLC

Cavalry Portfolio Services, LLC

Cavalry SPV I, LLC

eCast Settlement Corp.

Encore Capital Group, Inc.

Midland Funding, LLC

NCO Portfolio Management, Inc.

Persolve, LLC

Portfolio Recovery Associates, LLC

Pride Acquisitions, LLC

Recovery Associates, Inc.

Sherman Financial Group, LLC

Unifund Corp.

Leave a Reply