Many people wait much too long to file for bankruptcy. It is a good idea to file before you are sued, but once you are sued, you can certainly still file. In fact, most of the unpleasant things that happen when you are sued can be taken care of once you file a bankruptcy case.
It Starts With Collection Letters…
When you fall behind in your payments, credit card companies begin sending you letters. First they ask you to call them, saying they can help get you on track again. Then they demand payment. Then they threaten you (in a nice way, of course). After that, most of them send your file to an outside collection agency which sends you various letters trying to collect. Finally, your case is referred to a lawyer who will send a few letters and then sue you in a local court.
If You’ve Been Sued in New York
If you live in the City of New York, you will be sued in the New York City Civil Court in your borough. If you live on Long Island, you will be sued in District Court. In other jurisdictions, you will be sued in your local “lower” court, meaning not the court where large cases are brought.
Most Folks Don’t Respond
Most of the time, the defendant, meaning the person being sued, does not respond to the suit and the creditor receives a judgment by default. In many cases, the defendant does not respond because they never receive the papers telling them they are being sued. This is because a wrinkle in the law allows the creditor to sue by delivering papers to your “last known address,” which may be somewhere you previously lived. The creditor is under no obligation to try and determine if you still live there. For this reason, it might be a good idea to always let the creditor know when you move so that they will know to sue you at your new address. At least you will know you are being sued.
Another reason cases go by default is that process servers sometimes do not serve the papers properly. There have been many instances of what is often called “sewer service,” meaning the process server throws the papers away and files false papers saying he served you properly.
When you are sued and do not know it, often you will find out about it when your bank account is frozen or when you received papers for an income execution, which is also referred to as a garnishment.
If your bank account is frozen, or you receive garnishment papers, a bankruptcy will un-freeze your bank account and will immediately stop the garnishment. Filing a bankruptcy will also stop any other lawsuits against you that may be at a stage prior to either of these things happening.
If you are not ready to file for bankruptcy, there are a few things you can do, although it is often only staving off the inevitable. In many instances you will stave off the inevitable for a while, and expend money you could have kept if you had filed bankruptcy sooner.
When you are sued, and actually do find out about it at the beginning, you can put in an answer at the court out of which the lawsuit comes. You do not need a lawyer to do this. You can go to the court, and show your papers to the clerk, who will assist you in putting in the answer. Once you do this, it will stop the action from proceeding to judgment right away.
When you put in an answer, the court will schedule your case for a hearing at a future date, usually a few weeks later. When you go to this hearing, you will find hundreds of cases on the calendar, but eventually yours will be called by the clerk. When it is, you will be able to meet with the lawyer for the creditor and work out an arrangement if one is possible. Sometimes the court will adjourn the case for a future date. There is no magic in going to court – eventually, even if you can delay proceedings for several months by asking for adjournments, if you do owe the money, the court will eventually give the creditor a judgment.
As noted, sometimes you find out about the case after the judgment has been entered. You find your bank account frozen, or you get garnishment papers. If this happens, you can still go to the court and ask to have the judgment vacated. The court will give you papers to fill out so that you can get an Order to Show Cause, and you will have a court date in a few weeks. During this time, your account will be un-frozen and the garnishment will be suspended, but as was said when you put in an answer, eventually the creditor will get a judgment and freeze your account or garnish your salary again.
Bankruptcy Can Help
If your financial life is at such a state that you are being sued, your bank accounts are being frozen and your salary is being garnished, it is time to consult with a bankruptcy lawyer and find out how bankruptcy can help you. We offer free consultations which give you the opportunity to come in and find out what you can do, and if you do decide to file, we can get your bank accounts freed and stop the garnishment.
Allan Bloomfield practices bankruptcy law in Forest Hills, Queens. Contact Allan today for a free consultation.